TaxTMI Updates e-Newsletter
Dec 13,2018

Issue notice on the petition challenging the press release dated 18.10.2018 (challenging the treatment of FORM GSTR-3B and the last date for availing input tax credit); returnable on 9th January, 2019.

Offer to pay penalty under Circular No.41/15/2018-GST clause 2(l) - Release of detained vehicle in accordance with law - Interim relief pending returnable date

Offer to pay penalty under Circular No.41/15/2018-GST clause 2(l) - Release of detained vehicle in accordance with law - Interim relief pending returnable date - Whether the detained vehicle may be released in the interim in view of the petitioner's willingness to pay the penalty and cooperate, and subject to law. - HELD THAT: - The petitioner informed the Court of his readiness to pay the penalty referred to in Circular No.41/15/2018-GST (clause 2(l)) and to cooperate with proceedings. Having considered the submission, the Court directed that issue be noticed returnable on 11th December, 2018, and granted liberty to the respondent to release the vehicle in question in accordance with law during the interim. Where release prior to the returnable date is not possible, the respondent is to place the reason before the Court. The order is interlocutory and does not decide the merits of liability for tax or penalty; it authorises interim release subject to compliance with applicable legal requirements. [Paras 2]

Issue notice returnable on 11th December, 2018; respondent may release the vehicle in accordance with law in the meanwhile, and if release before the returnable date is not possible the respondent must state the reason.

Final Conclusion: Interim direction permitting release of the detained vehicle in accordance with law while issue is listed for hearing on 11th December, 2018; the order is interlocutory and does not adjudicate on merits.

Confiscation of goods - seizure and release of goods - proceedings under Section 67 of the UPGST Act - release of detained goods under Section 129 of the UPGST Act - invocation of Section 130 on default to pay tax and penalty - applicability of Sections 129 and 130 to goods in transit - interim stay of administrative notice and order

Interim stay of administrative notice and order - seizure and release of goods - Effect and operation of notice dated 01.09.2018 and order dated 10.10.2018 passed by Respondent No.3 shall remain stayed until further orders. - HELD THAT: - The Court granted an interim injunction restraining the operation of the impugned notice and consequential order issued by the Deputy Commissioner (State SIB), Range C, Commercial Tax Kanpur, in view of the pendency of earlier proceedings arising out of the search and seizure and the petition pending before the Court. The stay is a provisional protective measure taken pending filing of counter-affidavit and rejoinder and further consideration on merits; the Court did not decide the substantive questions regarding confiscation, seizure, release, or jurisdiction of the respondents to initiate fresh proceedings.

Operation and effect of the notice dated 01.09.2018 and order dated 10.10.2018 are stayed until the next date of listing.

Proceedings under Section 67 of the UPGST Act - release of detained goods under Section 129 of the UPGST Act - invocation of Section 130 on default to pay tax and penalty - applicability of Sections 129 and 130 to goods in transit - Liberty granted to parties to file pleadings for adjudication of the disputed questions concerning seizure, release and subsequent proceedings; timelines fixed for filing of counter-affidavit and rejoinder. - HELD THAT: - The Court directed respondent No.3 to file a counter-affidavit within three weeks and permitted the petitioner to file a rejoinder within two weeks thereafter. These procedural directions preserve the parties' rights to contest substantive legal contentions raised by the petitioner - including whether sections dealing with detention, release and confiscation can be invoked where goods were seized, later released by Court direction, or were not in transit - and provide for their adjudication on merits at a subsequently listed hearing. The Court did not adjudicate those substantive legal issues at this stage.

Respondent to file counter-affidavit within three weeks; petitioner permitted two weeks thereafter to file rejoinder; matter listed for further hearing.

Final Conclusion: Interim relief granted: the effect and operation of the notice dated 01.09.2018 and order dated 10.10.2018 are stayed until the next date of listing; respondent directed to file a counter-affidavit in three weeks and petitioner to file rejoinder in two weeks, with the matter posted thereafter for further consideration on merits.

Transfer pricing - arm's length principle - benchmarking of guarantee commission - determination of arm's length rate under Section 92CA(3) - liability to pay interest under Section 234B for tax on book profits under Section 115JB

Transfer pricing - arm's length principle - benchmarking of guarantee commission - determination of arm's length rate under Section 92CA(3) - Validity of the Transfer Pricing Officer's fixation of the arm's length rate at 3% for the bank guarantee and the resultant disallowance/addition. - HELD THAT: - The Supreme Court has perused the orders of the Tribunal and the High Court which affirmed the view favorable to the assessee. Having considered those concurrent findings, the Court found that the High Court rightly sustained the Tribunal's conclusion holding the benchmark fixed by the TPO (3% for the bank guarantee) to be correct. The Court declined to reopen the question in the present appeal, thereby accepting the application of the arm's length principle and the benchmarking exercise as approved below.

The High Court's decision affirming the Tribunal that the TPO's fixation of 3% as the arm's length rate for the bank guarantee is upheld; that question is not reopened in this appeal.

Liability to pay interest under Section 234B for tax on book profits under Section 115JB - advance tax - Whether the assessee was liable to pay interest under Section 234B for failure to deposit advance tax in respect of tax payable under Section 115JB. - HELD THAT: - The Supreme Court observed that this question requires an in-depth hearing and has not been finally decided in the present order. The matter was therefore reserved for fuller consideration and the appeal has been listed for hearing on this specific question in due course.

The question regarding interest under Section 234B in relation to tax payable under Section 115JB is not decided and is directed to be heard afresh; the appeal is listed on that question.

Final Conclusion: The Court affirmed the Tribunal and High Court in favour of the assessee on the transfer pricing benchmarking of the guarantee commission (3%), and reserved for full hearing the separate question whether interest under Section 234B is payable in respect of tax under Section 115JB.

Summary order. Delay condoned; notice issued; operation of the impugned order stayed until further orders.

Summary order. Special Leave Petition dismissed; delay condoned.

Summary order. Leave to appeal granted and delay condoned.

Registration under Section 12A - charitable purpose - general public utility - benefit to a section of the public - dissemination of knowledge and education - benefit to a class distinguished from specified individuals

Registration under Section 12A - general public utility - benefit to a section of the public - Whether the assessee society constituted for the advancement of the Anaesthesia specialty is entitled to registration under Section 12A of the Income Tax Act as engaging in objects of general public utility benefiting a section of the public rather than specified individuals. - HELD THAT: - The court applied the settled principle that an object beneficial to a section of the public qualifies as an object of general public utility provided the beneficiaries form an identifiable class united by an impersonal common quality rather than being specified individuals. Relying on Ahmedabad Rana Caste Association and the Bench decision in CIT v. Jodhpur Chartered Accountants Society, the court observed that the assessee society, though focused on the Anaesthesia specialty, aims to promote development of medical science, research, publication and seminars which disseminate knowledge and benefit all practitioners of anaesthesia in the relevant districts and, more broadly, the public at large through education and research. Merely being constituted for a particular branch of medicine does not confine the object to private or narrowly personal benefit; the activities described fall within the ambit of charitable purpose and general public utility entitling the society to registration under Section 12A. The court found the ITAT's conclusion in favour of registration to be consistent with the cited precedents and the facts of the case. [Paras 6, 7]

The ITAT order allowing the assessee's appeal and directing grant of registration under Section 12A is affirmed; the appeal is dismissed.

Final Conclusion: The High Court dismissed the Revenue's appeal and upheld the ITAT's direction that the Anesthesia Society is entitled to registration under Section 12A, holding that its objects constitute charitable purpose and general public utility benefiting a section of the public.

Set off of MAT credit against assessed tax - calculation of interest under Sections 234A, 234B and 234C after adjustment of MAT credit - treatment of brought forward MAT credit as advance tax/advance TDS - availability of MAT credit under Section 115JAA

Set off of MAT credit against assessed tax - calculation of interest under Sections 234A, 234B and 234C after adjustment of MAT credit - treatment of brought forward MAT credit as advance tax/advance TDS - Brought forward MAT credit under Section 115JAA must be set off against the assessed tax before computing interest under Sections 234A, 234B and 234C; such MAT credit is to be treated on par with advance tax/advance TDS for this purpose. - HELD THAT: - The Tribunal had directed that brought forward MAT credit be treated on par with advance tax and advance TDS and the Assessing Officer should compute interest under the relevant interest provisions after giving such credit. The High Court recognised that the substantial question of law is answered by the Supreme Court decision in Commissioner of Income Tax vs. Tulsyan Nec Ltd. which affirmed the principle in CHEMPLAST SANMAR LTD. The Supreme Court held that MAT credit admissible under Section 115JAA is to be set off against the tax payable (assessed tax) before calculating interest under Sections 234A, 234B and 234C, and therefore interest will arise only after allowing such set off. Applying that binding precedent, the Court upheld the Tribunal's direction and dismissed the Revenue's appeal. [Paras 5]

Appeal dismissed; MAT credit to be set off against assessed tax before computing interest and to be treated like advance tax/advance TDS for calculation of interest.

Final Conclusion: The Revenue's appeal is dismissed: pursuant to the Supreme Court authority affirmed by the High Court, brought forward MAT credit under Section 115JAA must be set off against the assessed tax before computing interest under the relevant provisions, and interest arises only after such set off.

Reopening of assessment - change of opinion - reassessment under Section 147 - fully and truly disclose all material facts - value of closing stock (work in progress)

Reopening of assessment - change of opinion - fully and truly disclose all material facts - value of closing stock (work in progress) - Reopening of assessment for Assessment year 1998-99 amounted to a change of opinion and not to a case of failure to fully and truly disclose material facts. - HELD THAT: - The Assessing Officer in the original assessment adopted figures from the assessee's profit and loss account and return, including claimed expenditure and admitted value of work in progress. While completing assessment under Section 143(3) the earlier officer held that certain indirect expenses should not be included in work in progress. A subsequent officer reached a contrary conclusion and reopened the assessment under Section 147. The reopening was not predicated on any allegation that the assessee failed to disclose material facts; the Assessing Officer's later conclusion merely disagreed with the earlier view on the correct valuation of closing stock (work in progress). In the absence of any finding of non-disclosure or concealment by the assessee, the court concluded that the reassessment was occasioned by a change of opinion and therefore impermissible as a valid ground for reopening. The Tribunal's affirmance of that conclusion was proper.

Reopening held to be a change of opinion; reopening/reassessment set aside on that ground.

Final Conclusion: The appeal is dismissed; the substantial questions of law are answered in favour of the assessee, holding the reopening to be a change of opinion and there being no failure to disclose material facts; no costs.

Deduction under Chapter VI-A (s. 80P) to be computed with reference to income and not gross receipts - application of the section 80AB principle - deduction allowable only to the extent of income computed in accordance with the Act - negative income / loss from specific activity disentitles assessee to a separate deduction under s. 80P - verification/remand to ascertain whether expenses were already allowed and consequential adjustment

Deduction under Chapter VI-A (s. 80P) to be computed with reference to income and not gross receipts - application of the section 80AB principle - deduction allowable only to the extent of income computed in accordance with the Act - negative income / loss from specific activity disentitles assessee to a separate deduction under s. 80P - Deduction under section 80P(2)(a)(i) in respect of MSEB commission income and interest on FDRs when expenses/cost of funds exceed the corresponding gross receipts. - HELD THAT: - The Tribunal applied the principle embodied in section 80AB that deductions under Chapter VI-A are to be computed with reference to the amount of income as computed in accordance with the Act and not on gross receipts. The distinction between "gross receipts" and "income" was emphasised: gross receipts are the full receipts, whereas income is the net amount after allowing the expenses attributable to that activity. Reliance on analogous authorities is noted to support that Chapter VI-A deductions are to be allowed on net income. In the present case the assessee itself conceded that expenses of Rs. 1,50,000 were incurred to earn MSEB commission of Rs. 1,33,390 and that cost of funds of Rs. 3,32,967 was incurred to earn interest of Rs. 3,01,034. Those expenses have been allowed (or are not disputed) by the assessing officer, producing a negative net income from those activities. When the net income from the specified source is nil or negative, there is no separate amount eligible for deduction under section 80P, and therefore the CIT(A)'s disallowance of an additional deduction under section 80P was upheld. [Paras 4, 5, 6]

Deduction under s. 80P for the MSEB commission and interest on FDRs is not allowable because the net result from those activities is negative after the allowed expenses; the view of the CIT(A) is upheld.

Verification/remand to ascertain whether expenses were already allowed and consequential adjustment - Whether the expenses claimed (Rs. 1,50,000 against MSEB commission and Rs. 3,32,967 cost of funds against interest) have in fact been allowed by the AO and, if not, whether they should be allowed. - HELD THAT: - The Tribunal observed that the CIT(A) had recorded that these expenses were allowed by the assessing officer. The Tribunal directed that the AO should verify the assessee's contention regarding allowance of these two specific expenses. If the AO has already allowed these expenses there would be no scope for any further deduction; if the CIT(A)'s finding is incorrect, the AO should allow the deductions to the extent of the expenses shown to have been incurred. The order of the Tribunal on this point was made for statistical purposes and limited to directing verification and consequential relief if warranted. [Paras 7]

Remand to the AO to verify whether the two claimed expenses were allowed; if allowed, no further relief; if not allowed, permit deduction to the extent established.

Final Conclusion: The appeal is partly allowed for statistical purposes: the Tribunal upholds denial of separate deduction under s. 80P for the MSEB commission and FDR interest because those activities produced negative net income after expenses, and directs verification by the AO whether the claimed expenses were already allowed, with consequential relief if they were not.

Disallowance under section 40(a)(i) - tax deducted at source - web hosting charges - royalty - Explanation 5 to section 9(1)(vi) - retrospective amendment - Double Taxation Avoidance Agreement

Disallowance under section 40(a)(i) - tax deducted at source - web hosting charges - Explanation 5 to section 9(1)(vi) - retrospective amendment - royalty - Double Taxation Avoidance Agreement - Deletion of addition made by the Assessing Officer by invoking section 40(a)(i) for failure to deduct tax at source on web hosting charges paid to Amazon Web Services LLC. - HELD THAT: - The Tribunal examined whether the payment for web hosting services constituted taxable royalty such that tax was required to be deducted at source and a disallowance under disallowance under section 40(a)(i) would follow. Applying the Tribunal's earlier decision in respect of preceding assessment years, it was held that Explanation 5 to section 9(1)(vi) was inserted by the Finance Act, 2012 with retrospective effect from 01-06-1976, and since the payments in question were made prior to the insertion, the provision could not be invoked to treat the payments as chargeable to tax in India for the purpose of requiring deduction of tax at source. The Tribunal further noted there was no corresponding amendment in the Double Taxation Avoidance Agreement between the jurisdictions to render the recipient taxable in India, and that the payments for cloud/web hosting services were not, in the first instance, in the nature of royalty. In view of these conclusions and the admitted similarity of facts, the impugned disallowance under section 40(a)(i) was not sustainable and was overturned. [Paras 4]

Addition of Rs. 46,28,457/- under section 40(a)(i) deleted and appeal allowed.

Final Conclusion: Following the Tribunal's precedent for the preceding years, the disallowance under section 40(a)(i) in respect of web hosting charges paid to Amazon Web Services LLC for AY 2012-13 is deleted and the appeal is allowed.

Additions under search and seizure proceedings framed u/s. 153A r/w. 143(3) - Incriminating material - Completed assessment at time of search - Assessment abatement due to search - Valuation of multi-storey building for estimation of unaccounted receipts - Weighted average rate for floor-wise valuation

Additions under search and seizure proceedings framed u/s. 153A r/w. 143(3) - Incriminating material - Completed assessment at time of search - Sustainability of additions made under post-search assessment framed u/s. 153A r/w. 143(3) for assessment years already completed on the date of search in absence of incriminating material. - HELD THAT: - The Tribunal found that for AY 2004-05, 2005-06 and 2007-08 the assessments were completed on the date of search (15.09.2010) and no incriminating material was found during the search in respect of these years. Applying the settled principle that additions under proceedings consequent to search can be sustained only if there is incriminating material linking undisclosed income to the assessee, and following the ratio of the jurisdictional High Court in earlier decisions including PCIT vs. Saumya Construction , the Tribunal held that the AO had no jurisdiction to make additions for the completed assessment years in absence of incriminating material. The additions estimated by the AO (and partly reduced by CIT(A)) were therefore held unsustainable and directed to be deleted for the said years. [Paras 7, 8]

Additions for AY 2004-05, 2005-06 and 2007-08 deleted; grounds of the assessee allowed for these years.

Additions under search and seizure proceedings framed u/s. 153A r/w. 143(3) - Assessment abatement due to search - Valuation of multi-storey building for estimation of unaccounted receipts - Weighted average rate for floor-wise valuation - Estimation and reassessment of on-money receipts from sale of multi-storey property for assessment years abated due to search, and appropriate floor-wise valuation rates. - HELD THAT: - For AY 2008-09, 2009-10 and 2010-11 the assessments were abated on the date of search and the AO based additions on loose papers and other incriminating material. While the existence of on-money for these years was not successfully controverted, the Tribunal held that the rates adopted for computation required adjustment in accordance with accepted principles of multi-storey valuation and the evidence on record. The Tribunal confirmed the rate of Rs. 30,042 per sq. mt. adopted by the CIT(A) for ground and first floors. For the second floor, having regard to the parties' respective weighted figures and adopting a balancing approach, the Tribunal directed the AO to adopt an approximate averaged rate of Rs. 24,000 per sq. mt. for second (and third) floor calculations and to recompute additions accordingly. For fourth and fifth floors the Tribunal directed adoption of an averaged rate of approximately Rs. 16,500 per sq. mt. and directed recomputation of additions for those floors. The Tribunal therefore partly allowed the appeals for these years and remitted the matter to the AO for recalculation in accordance with these floor-wise rates. [Paras 14, 15, 16, 17]

Appeals for AY 2008-09, 2009-10 and 2010-11 partly allowed; AO directed to recalculate on-money additions using confirmed and adjusted floor-wise rates as indicated and compute taxable consequences accordingly.

Final Conclusion: The Tribunal deleted the additions for AY 2004-05, 2005-06 and 2007-08 for lack of incriminating material in completed assessments; for AY 2008-09, 2009-10 and 2010-11 (abatement years) the Tribunal upheld the existence of on-money but adjusted the floor-wise valuation rates (confirming Rs. 30,042 for ground and first floors, directing approx. Rs. 24,000 for second/third floors and approx. Rs. 16,500 for fourth/fifth floors) and remitted the matter to the AO to recompute additions accordingly.

Admissibility of additional legal ground at appellate stage - assessment framed on non-existent entity - nullity of assessment - curative scope of Section 292B

Admissibility of additional legal ground at appellate stage - National Thermal Power Corporation principle - Additional ground that assessment was framed on a non existent company admitted for adjudication. - HELD THAT: - The Tribunal held that the contention that assessment was framed on a non existent entity is a pure question of law which may be raised at any stage of appellate proceedings so long as it does not require investigation of fresh facts, relying on the principle in National Thermal Power Corporation Ltd. The assessee's plea going to the root of the matter was therefore held to be fit for admission and the additional ground was allowed for statistical purposes. [Paras 8]

The additional ground is admitted.

Assessment framed on non-existent entity - nullity of assessment - curative scope of Section 292B - Whether the assessment framed in the name of Dalmia Cement Ventures Ltd. is void for being made on a non existent entity was remanded for verification and fresh adjudication. - HELD THAT: - The Tribunal noted authorities holding that framing assessment on a non existent entity goes to jurisdiction and may render the assessment void ab initio and that such defect is not curable by Section 292B in cases amounting to a jurisdictional error. The assessee had produced a letter dated 22/09/2014 allegedly informing the Assessing Officer about the merger; but the record did not conclusively show filing of that letter during assessment proceedings. Because the factual question whether the Assessing Officer had knowledge of the merger during assessment is determinative of whether the assessment is void, the matter was directed to be restored to the file of the Commissioner (Appeals) for verification. The Commissioner (Appeals) was to call for records or a remand report from the Assessing Officer, afford the assessee opportunity of hearing, and decide the question of nullity in accordance with law. [Paras 19, 20]

Matter restored to the file of the Commissioner (Appeals) for verification of the alleged intimation and fresh decision on nullity of the assessment.

Final Conclusion: The additional ground challenging assessment on a non existent company is admitted; the Tribunal has restored the matter to the Commissioner (Appeals) to verify whether the merger intimation was on record during assessment and to decide afresh on the nullity of the assessment; both appeals stand allowed for statistical purposes pending that adjudication.

Disallowance of deduction under Section 10AA - treatment of interest on capital and partners' remuneration in partnership firms - interpretation of partnership deed for mandatory payment - application of Section 80-IA read with Section 10AA(9)

Disallowance of deduction under Section 10AA - treatment of interest on capital and partners' remuneration in partnership firms - interpretation of partnership deed for mandatory payment - application of Section 80-IA read with Section 10AA(9) - Whether the first appellate authority was justified in deleting the assessing officer's disallowance of part of the Section 10AA deduction on account of non-provision of interest on capital and partners' remuneration. - HELD THAT: - The Tribunal examined the assessing officer's reliance on ITAT Rajkot (Meridian Impex) and found the facts of that decision distinguishable because there a partnership deed originally provided for payment of interest/remuneration which was later amended and not placed on record; whereas in the present case the partnership deed undisputedly contains no clause providing for payment of interest on capital or remuneration to partners. The Tribunal further relied on the jurisdictional High Court's decision in Alidhara Taxspin Engineers to the effect that mere incorporation of interest/remuneration in accounts does not make such payments mandatory. Given the clear terms of the partnership deed in this case that no interest or remuneration is payable, the firm could not be compelled to make such charges and the assessing officer's disallowance of part of the Section 10AA deduction on that ground was unsustainable. Consequently the first appellate authority was correct in deleting the disallowance made by the assessing officer under the provisions invoked. [Paras 6, 7]

Deletion of the disallowance by the CIT(A) is confirmed and the assessing officer's order sustaining disallowance is set aside.

Final Conclusion: The Revenue's appeal is dismissed; the deletion of the disallowance of deduction under Section 10AA by the first appellate authority is upheld on the ground that the partnership deed contains no obligation to pay interest on capital or partners' remuneration and thus the assessing officer's consequent adjustment was erroneous.

Rejection of books of account - best judgment assessment under section 144 - application of presumptive profit rate under section 44AD - reasoned estimate based on past profit history - allowance of depreciation after estimation of net profit

Rejection of books of account - best judgment assessment under section 144 - Assessing Officer's rejection of the assessee's books of account and resort to best judgment assessment under section 144 was sustainable. - HELD THAT: - The Tribunal noted that the Assessing Officer recorded specific defects in the handwritten cash book, discrepancies in share application monies, lorry hire charges and other malpractices which rendered the books unreliable. The mere fact of audit by a chartered accountant does not by itself establish correctness of accounts. On this basis the AO was justified in rejecting the books and making assessment under section 144 read with section 145(3). [Paras 9]

AO's rejection of books and initiation of best judgment assessment under section 144 was upheld.

Application of presumptive profit rate under section 44AD - reasoned estimate based on past profit history - The rate of net profit to be applied in best judgment assessment should be a reasoned estimate based on the assessee's past profit history rather than mechanically adopting the presumptive rate of section 44AD. - HELD THAT: - While the AO applied an 8% net profit rate (by reference to section 44AD), the Tribunal observed that when past assessment records and immediately preceding years' assessments are available, the AO ought to consider the assessee's historical profit percentages and afford opportunity to the assessee to cite comparable cases. The Tribunal examined the assessee's profit percentages for the preceding years, computed an average of approximately 2.74% (four years) and noted the immediately preceding year at 3.90%, and on that basis and in the facts of the case found the CIT(A)'s adoption of 4% as a fair and reasoned estimate to be appropriate. The Tribunal therefore declined to interfere with the CIT(A)'s reduction of the estimated net profit rate to 4%. [Paras 10]

CIT(A)'s reduction of estimated net profit rate to 4% based on past profit history was sustained and AO's mechanical application of 44AD rate was disapproved.

Allowance of depreciation after estimation of net profit - Depreciation is to be allowed separately after determining net profit by estimation. - HELD THAT: - Relying on precedent and administrative guidance, the Tribunal held that where income is computed by applying an estimated net profit rate, depreciation must be allowed separately (i.e., from the net profit so determined) unless required particulars are not furnished. The Tribunal directed that the assessed net profit at 4% is to be reduced by allowable depreciation in computing assessable income. [Paras 11]

Depreciation to be allowed separately from the estimated net profit; assessable income to be computed accordingly.

Final Conclusion: Revenue's appeal is dismissed; AO's rejection of books sustained, but CIT(A)'s estimate of net profit at 4% based on past profit history is upheld and depreciation is to be allowed separately.

Depreciation allowance under section 32 - application of income for charitable purposes under section 11(1)(a) - double deduction - prospective operation of section 11(6) - registered charitable trust under section 12A

Depreciation allowance under section 32 - application of income for charitable purposes under section 11(1)(a) - double deduction - prospective operation of section 11(6) - Whether depreciation is allowable where capital expenditure has been treated as application of income for the objects of a registered charitable trust under section 11(1)(a). - HELD THAT: - The Tribunal considered whether allowing depreciation on assets whose acquisition cost was treated as application of income under section 11(1)(a) results in an impermissible double deduction, having regard to section 11(6). Relying on the decision of the Hon'ble Supreme Court in Rajasthan and Gujarati Charitable Foundation Poona, the Tribunal held that an assessee entitled to claim application of income for charitable purposes may nonetheless claim depreciation under section 32. The Supreme Court rejected the contention that granting depreciation would amount to an unacceptable double benefit and observed that the limiting provision in section 11(6) operates prospectively from assessment year 2015-16. Applying that precedent to the facts of assessment year 2011-12 for a trust registered under section 12A, the Tribunal found no error in the CIT(A)'s direction to allow depreciation and concluded that the Revenue's addition was not sustainable.

The Tribunal confirmed the CIT(A)'s order allowing the depreciation claimed and dismissed the Revenue's appeal.

Final Conclusion: For assessment year 2011-12 the Tribunal upheld the appellate authority's allowance of depreciation to the registered charitable trust despite the capital expenditure being treated as application of income, following the Supreme Court's precedent and noting that the restriction in section 11(6) is prospective from AY 2015-16; Revenue's appeal dismissed.

Characterisation of income from sale of shares as short term capital gain or business income - organized commercial activity - rule of consistency - segregated investment and trading portfolios - holding period criterion for trading versus investment

Characterisation of income from sale of shares as short term capital gain or business income - rule of consistency - segregated investment and trading portfolios - Income of the assessee from sale of shares totalling Rs. 1,14,79,724 is to be treated under the head short term capital gain or as business income. - HELD THAT: - The Tribunal examined the factual matrix and found that the assessee had long carried on share transactions while maintaining two distinct portfolios for investment and trading. A majority of the shareholding was for substantially long periods and, except for intra day transactions (already offered as business income), the assessee consistently treated disposals as capital transactions in past and subsequent assessment years which were not disturbed by Assessing Officer. Mere predominance of share gains in the impugned year, without any change in facts or demonstration of coordinated commercial trading, did not justify recharacterisation as business income. Applying the rule of consistency and having regard to the assessee's segregated portfolios and past acceptance by the revenue, the Tribunal accepted the assessee's claim that the amounts (other than specified short holding sales) were short term capital gains.

Assessee's contention that the principal part of the gains are short term capital gains is accepted; they are not to be treated as business income.

Holding period criterion for trading versus investment - characterisation of short term disposals as business income - Whether the amount of Rs. 4,17,413, arising from sale of shares held for less than 30 days, should be treated as business income. - HELD THAT: - The assessee conceded that intra day and shares sold within a short period were trading in nature and offered such receipts as business income. The authorised representative further agreed that amounts from shares held for less than 30 days may be treated as business income. Having regard to this concession and the holding period distinction relied upon by the parties, the Tribunal directed that the specified amount be assessed as business income by the Assessing Officer.

The sum of Rs. 4,17,413 attributable to sale of shares held for less than 30 days shall be assessed as business income by the Assessing Officer.

Final Conclusion: Appeal partly allowed: the Tribunal upheld the assessee's claim that the bulk of the share sale proceeds constitute short term capital gains (applying rule of consistency and recognizing segregated portfolios), but directed that Rs. 4,17,413 arising from shares held for less than 30 days be assessed as business income.

Duty exemption for capital goods under STPI/EOU scheme - export obligation under bond - use and non-removal condition for duty free goods - computation of duty on depreciated value of capital goods on removal - recomputation/remand for verification of documentary evidence - benefit of Notification No.67/95 Cus. (N.T.), dated 1.11.1995 regarding payment of interest

Duty exemption for capital goods under STPI/EOU scheme - export obligation under bond - use and non-removal condition for duty free goods - Entitlement to duty exemption under Notification Nos.140/91 Cus. and 1/95 C.E. in view of compliance with export obligation and conditions of use - HELD THAT: - The Court upheld the finding of the lower authorities that the appellants had not complied with the conditions of the notifications and the bond. Inspection revealed that the registered premises were in possession of another entity and bonded capital goods were not available except limited items, and the appellants did not produce documentary evidence before the authorities to show fulfilment of export obligation. The Commissioner (Appeals) recorded a specific finding that export obligation was not achieved. On these facts the denial of exemption and confirmation of duty/interest was sustained. [Paras 6, 8]

Denial of exemption confirmed and duty/interest demand sustained insofar as non fulfilment of conditions and export obligation is concerned

Computation of duty on depreciated value of capital goods on removal - recomputation/remand for verification of documentary evidence - Whether duty liability should be computed on depreciated value of capital goods and whether the appellants' submitted worksheet required fresh adjudication - HELD THAT: - Although the Commissioner (Appeals) recorded that no depreciated value calculation had been submitted, the appellants had, by letter, placed a worksheet showing depreciated values which was acknowledged by the Commissioner (Appeals). The Tribunal found that these submissions had not been considered and therefore remanded the matter to the original authority for examination of the worksheet and other documents and for recomputation of duty liability on depreciated value, if warranted. [Paras 7, 8]

Matter remanded to the original authority for examination of the depreciated value worksheet and for fresh computation of duty liability

Benefit of Notification No.67/95 Cus. (N.T.), dated 1.11.1995 regarding payment of interest - Applicability of Notification No.67/95 Cus. (N.T.), dated 1.11.1995 (interest) and related penalty questions - HELD THAT: - The Tribunal directed that while deciding the remanded issue the original authority should also consider whether the appellants are entitled to the benefit of Notification No.67/95 Cus. (N.T.), dated 1.11.1995 with regard to payment of interest and should examine issues relating to imposition of penalty. These matters were not finally adjudicated and were sent back for fresh decision by the original authority. [Paras 7, 8]

Referral to the original authority to consider entitlement to Notification No.67/95 Cus. (N.T.) benefits on interest and to decide penalty issues afresh

Final Conclusion: The Commissioner (Appeals)'s denial of exemption under the notifications was upheld for non fulfilment of bond/export conditions; however, the matter is remitted to the original authority for fresh examination and recomputation of duty on depreciated value based on the worksheet submitted and for consideration of entitlement to Notification No.67/95 Cus. (N.T.) regarding interest and for fresh decision on penalties.

Reclassification of imported goods - Reliance on laboratory test reports - Revaluation and enhancement of assessable value - Confiscation and redemption under Section 125 - Penalty under Section 112(a)

Reclassification of imported goods - Reliance on laboratory test reports - Revaluation and enhancement of assessable value - Reclassification and enhancement of value of the imported consignment as Aluminium alloy ingots (LM 24 grade) based on NML test reports upheld. - HELD THAT: - The Tribunal accepted that the reclassification and revaluation were founded solely on test reports furnished by the National Metallurgical Laboratory (NML). NML was treated as a reputed and recognized national testing authority whose conclusions merit credence. The appellants did not challenge the NML reports or seek retesting despite alleged variations in the two samples' chemical analyses; having failed to take those steps, they could not impugn the laboratory conclusion. On this basis, the Tribunal found no reason to interfere with the original authority's reclassification of the goods and the consequent enhancement of value. [Paras 5]

Reclassification and enhancement of value upheld.

Confiscation and redemption under Section 125 - Penalty under Section 112(a) - Quantum of redemption fine and penalty reduced in view of enhanced value, differential duty liability and demurrage suffered by the appellant. - HELD THAT: - The Tribunal noted that the enhancement of value amounted to an increase of about Rs. ten lakhs producing a differential duty liability, and it took into account the appellants' representation of demurrage incurred while goods remained uncleared. Weighing these factors, the Tribunal exercised its power to moderate the financial sanctions: the redemption fine previously imposed was substantially reduced and the penalty under Section 112(a) was also reduced to reflect the overall circumstances. [Paras 5]

Redemption fine reduced from Rs.14,00,000 to Rs.3,00,000; penalty reduced from Rs.2,50,000 to Rs.1,00,000.

Final Conclusion: Appeal partly allowed: reclassification and revaluation of the imported goods upheld; redemption fine and penalty substantially reduced as ordered by the Tribunal.

Classification of imported goods - component/part versus complete equipment - eligibility for exemption under Notification No. 6/2006-CE (Entry 8B) - strict construction of exemption notifications - burden on the assessee to establish entitlement to exemption

Classification of imported goods - component/part versus complete equipment - eligibility for exemption under Notification No. 6/2006-CE (Entry 8B) - burden on the assessee to establish entitlement to exemption - Whether the imported membrane elements are classifiable as 'water purification equipment' under Chapter Sub heading 84212190 and thereby eligible for exemption under Notification No. 6/2006-CE (Entry 8B), or are components classifiable under CTH 84219900 and not eligible for the exemption. - HELD THAT: - The Tribunal examined the plain language of Entry 8B which grants exemption only to products falling under Chapter/Sub heading 842121 described as 'Water purification equipment' based on specified technologies (including Reverse Osmosis using thin film composite membranes). While membrane elements form a crucial part of filtration systems, the Tribunal accepted the appellate authority's analysis that a membrane by itself does not perform the full function of a water purification apparatus. The impugned order correctly distinguished between an entire water purification apparatus and a component part; the membrane element is a part/component of filter equipment and, on its characterisation, merits classification under CTH 84219900 rather than under the more specific CTH 84212190 claimed by the appellant. The Tribunal applied the principle that exemption notifications are to be strictly construed and the onus lies on the assessee to satisfy that the imported goods fall within the four corners of the notification, a position consistent with the authority relied upon by the Revenue. The appellate authority's reasoning was factual and legal and did not warrant interference.

The classification of the imported membrane elements as components (CTH 84219900) and consequent denial of benefit under Notification No. 6/2006-CE (Entry 8B) is upheld; the appeal is dismissed.

Final Conclusion: The Tribunal affirmed the findings of the Commissioner (Appeals) that the imported membrane elements are components not qualifying as 'water purification equipment' under Entry 8B of Notification No. 6/2006-CE and, applying strict construction of exemption and the burden on the assessee, dismissed the appeal.

Classification of services - place of provision of services in a Special Economic Zone - port services versus supply of tangible goods - service tax liability on Goods Transport Agency (GTA) services - remand for fresh adjudication - consideration of evidence in adjudication - reliance on precedent later overruled

Place of provision of services in a Special Economic Zone - consideration of evidence in adjudication - Whether the services claimed to have been rendered in the Navi Mumbai SEZ were correctly treated for service tax purposes and whether the adjudicating authority should examine the evidence on that question afresh. - HELD THAT: - The tribunal observed that the appellant sought opportunity to produce evidence that the services were rendered in the SEZ (certificate dated 30.6.2007 related to Dronagiri while works were at Ulwe) and that the adjudicating authority had not conclusively resolved that factual issue. Given the factual character of the dispute and the appellant's request to place additional material, the tribunal held that the matter requires fresh consideration by the adjudicating authority with regard to the evidence on record and any further evidence the parties wish to produce. The tribunal therefore set aside the impugned findings on this point and remanded the issue for de novo adjudication, keeping the question open for decision after evidence is considered.

Remanded to the adjudicating authority for fresh adjudication on whether the services were rendered in the SEZ, with liberty to consider existing and additional evidence.

Classification of services - port services versus supply of tangible goods - consideration of evidence in adjudication - Whether the services rendered by the appellant are correctly classifiable as port services rather than as supply of tangible goods, and whether this classification should be reconsidered on evidence. - HELD THAT: - The appellant contested the adjudicating authority's classification of certain services as supply of tangible goods and maintained they fall under port services. The tribunal noted that classification is a determinative question of fact and law dependent on the material placed before the authority. Since the appellant sought opportunity to place evidence supporting classification as port services, the tribunal concluded that the adjudicating authority should re-examine the classification issue afresh, considering the evidence on record and any additional evidence produced during the remand proceedings. The tribunal did not decide the classification on merits but left all issues open for de novo decision.

Remanded to the adjudicating authority to decide classification (port services v. supply of tangible goods) afresh on the basis of evidence.

Service tax liability on Goods Transport Agency (GTA) services - reliance on precedent later overruled - remand for fresh adjudication - Whether the amount relating to service tax on GTA services that was set aside by the Commissioner should be re-examined in view of subsequent overruling of the precedent relied upon. - HELD THAT: - The Revenue challenged the Commissioner's decision to drop demand relating to GTA services, submitting that the Commissioner had followed precedents which were subsequently overruled. The tribunal recorded the Revenue's contention that the legal position has since changed and that the matter should be reconsidered by the adjudicating authority in light of binding or persuasive higher forum decisions. Rather than adjudicate the question on precedent or law itself, the tribunal found it appropriate to remit the issue to the adjudicating authority for fresh consideration of the legal position and evidence, so that the authority may decide the GTA-service demand afresh applying the then-applicable legal principles.

Remanded to the adjudicating authority to re-decide the GTA service tax demand afresh, taking into account the subsequent developments in law and evidence.

Final Conclusion: The impugned order is set aside and both appeals are allowed by way of remand; all issues (SEZ location of services, classification as port services v. supply of tangible goods, and service tax on GTA services) are remitted to the adjudicating authority for fresh de novo consideration of the evidence and applicable legal principles, with all issues kept open.

Manufacture versus service - job work - Business Auxiliary Service - limitation under Section 73(1) of the Finance Act, 1994 - CBEC Circular dated 15.07.2011 - suppression, wilful misstatement and fraud - genuine interpretation of statutory provision

Manufacture versus service - job work - Business Auxiliary Service - CBEC Circular dated 15.07.2011 - Whether polishing of stainless utensils performed by the appellant as a job worker is a manufacturing activity or a service taxable as Business Auxiliary Service. - HELD THAT: - The Tribunal noted as an undisputed fact that the stainless utensils are not marketable unless polished. The CBEC Circular dated 15.07.2011 recognises that polishing may be regarded as part of manufacture in appropriate circumstances. However, the appellant in this case performed polishing only as a job worker for the principal manufacturer and did not undertake manufacture of the excisable goods in its own factory. Applying these facts to the legal distinction between manufacture and service, the Tribunal concluded that when the activity is performed by a job worker not engaged in manufacture at its premises, the activity constitutes a service and is leviable as Business Auxiliary Service. [Paras 6]

Polishing by the appellant as job work is a service leviable to Service Tax under the category of Business Auxiliary Service.

Limitation under Section 73(1) of the Finance Act, 1994 - genuine interpretation of statutory provision - suppression, wilful misstatement and fraud - Whether the adjudged demand could be sustained despite the show cause notice being issued beyond the normal period of limitation. - HELD THAT: - The Tribunal observed that there was genuine ambiguity in the law, evidenced by the CBEC Circular, which led the appellant to treat the polishing activity as not attracting Service Tax. Because the controversy involved a bona fide or genuine interpretation of statutory provisions, the conditions necessary to invoke extended limitation on the ground of suppression, wilful misstatement or fraud were not satisfied. The show cause notice having been issued beyond the normal limitation period prescribed, the Tribunal held that the demand could not be sustained and therefore could not survive judicial scrutiny. [Paras 6]

The adjudged demand is barred by limitation and is set aside.

Final Conclusion: The appeal is allowed: while the polishing job work by the appellant is characterised as a service taxable as Business Auxiliary Service when performed by a job worker, the adjudged demand (for 2005-2006 to 2006-2007) is set aside on the ground that the show cause notice was issued beyond the normal period of limitation in circumstances of a genuine interpretation of the law.

CENVAT credit - Reversal of CENVAT credit under Rule 6(3) and Rule 6(3A) of CENVAT Credit Rules, 2004 - Exempted service - Insurance Auxiliary Services - Eligibility of credit on common input services - Reverse Charge Mechanism - Extended period of limitation - Remand for verification of excess reversal

CENVAT credit - Exempted service - Insurance Auxiliary Services - Reversal of CENVAT credit under Rule 6(3) and Rule 6(3A) of CENVAT Credit Rules, 2004 - Whether appellants are entitled to retain CENVAT credit on input services used for taxable output services despite denial of credit insofar as input services are used for exempted output services - HELD THAT: - The Tribunal held that the lower authorities failed to apply the CESTAT's earlier direction that, while denial of credit on services exclusively used for exempted output services may be correct, the appellants are nevertheless entitled to the CENVAT credit attributable to input services used in providing taxable output services. The adjudicating and appellate authorities did not verify or quantify the portion of credit legitimately attributable to taxable outputs and did not consider the claim that the appellants had already reversed more credit than was due. The matter therefore requires reassessment by the original Authority to determine eligibility of credit on input services used in taxable outputs in light of the Tribunal's earlier order. [Paras 6, 7, 8]

Referred back to the original Authority for fresh examination and verification of the appellants' entitlement to CENVAT credit attributable to taxable output services.

Remand for verification of excess reversal - CENVAT credit - Whether the appellants had reversed CENVAT credit in excess of what was required and are therefore entitled to refund or adjustment of the excess reversal - HELD THAT: - The Tribunal noted that the appellants contended they had reversed a larger amount of credit than required and had produced workings and ST-3 returns to support the contention. The lower authorities merely recorded absence of documentary proof without properly verifying the computations. The Tribunal directed that the original Authority should verify the correctness of the claimed excess reversal and decide accordingly. [Paras 6, 7]

Remanded to the original Authority to verify the appellants' claim of excess reversal and pass an appropriate order after considering the submitted records.

Extended period of limitation - Whether extended period of limitation is invokable against the appellants by reason of suppression or positive act with intent to evade duty - HELD THAT: - The Tribunal observed that although penalty under Section 78 had been dropped by the original Authority invoking provisions of Section 80, no finding was recorded on whether there was positive suppression of facts or intent to evade duty so as to justify invocation of the extended period. The matter therefore needs fresh consideration by the original Authority to determine invokability of the extended period in the facts of the case. [Paras 6, 7]

Remanded for fresh consideration by the original Authority on whether the extended period is invokable.

Final Conclusion: The appeal is allowed by way of remand. The matter is sent back to the original Adjudicating Authority to (i) determine eligibility of CENVAT credit attributable to taxable output services, (ii) verify the appellants' claim of excess reversal, and (iii) decide whether the extended period of limitation is invokable; the Authority shall pass a suitable order within three months and the appellants shall furnish supporting records within 30 days.

Summary order. Rectification applications seeking correction of the Tribunal orders dated 28.02.2018, 13.03.2018 and 26.04.2018 dismissed for lack of justification.

Assessable value - Rule 6(b)(i) of the Central Excise (Valuation) Rules, 1975 - Rule 6(b)(ii) of the Central Excise (Valuation) Rules, 1975 - comparable uncontrolled sale / comparable price - captive consumption - valuation under Section 4(1)(b) of the Central Excise Act, 1944 - adoption of solitary sale as basis for valuation

Rule 6(b)(i) of the Central Excise (Valuation) Rules, 1975 - comparable uncontrolled sale / comparable price - captive consumption - Applicability of Rule 6(b)(i) rather than Rule 6(b)(ii) for fixing assessable value where identical goods sold in the market were also used captively by the manufacturer - HELD THAT: - The Tribunal found, on the material before it, that the same variety of yarn manufactured by the appellant was both sold in the market and consumed captively. Where such comparable market sales exist, valuation must be determined under Rule 6(b)(i) by adopting the price of comparable goods. Reliance was placed on the Supreme Court's decision in Essel Propack Ltd which permits adoption of the available comparable sale - even a solitary sale - as the basis for valuation when that is the only comparable price available for the period in question. Applying that principle, the authorities below correctly used the appellant's market sale price of comparable goods to determine assessable value for captively consumed goods and to compute differential duty and penalty. [Paras 5, 6]

The goods were properly assessed under Rule 6(b)(i) by adopting the comparable market sale price; the impugned order is upheld and the appeals are dismissed.

Final Conclusion: The Tribunal dismissed the appeals, upholding the adjudication which adopted the appellant's comparable market sale price under Rule 6(b)(i) for valuation of captively consumed yarn, in line with the Supreme Court precedent allowing adoption of the available comparable sale.

Transfer of right to use - non-exclusive trade mark licence - taxability of licence versus transfer - tests in Bharat Sanchar Nigam Ltd. for transfer of right to use - retention of right to further transfer or use - precedential effect of earlier inter partes decision

Transfer of right to use - non-exclusive trade mark licence - taxability of licence versus transfer - tests in Bharat Sanchar Nigam Ltd. for transfer of right to use - retention of right to further transfer or use - Whether the transactions constituting permission to use the trade mark amounted to a taxable transfer of right to use or were merely licences not chargeable to tax. - HELD THAT: - The Court applied the five-condition test laid down by the Supreme Court in Bharat Sanchar Nigam Ltd. to determine whether a transaction amounts to a 'transfer of right to use'. On the material before it the essential fourth and fifth conditions - exclusion of the transferor from use for the period and inability of the owner thereafter to transfer the same rights - were not satisfied because the assessee continued to retain and effect further permissions to use/transfer the trade mark and allowed simultaneous use by multiple parties. The existence of those retained rights and subsequent further transfers by the assessee meant the permission amounted to a licence and did not constitute a taxable transfer of right to use under the statutory scheme. The Tribunal's deletion of tax on that basis was correctly upheld. [Paras 10, 11, 12]

Permission to use the trade mark in the facts of these cases was a licence and not a taxable transfer of right to use; the revisions are dismissed on this ground.

Precedential effect of earlier inter partes decision - division bench decision - effect of stay by Supreme Court - Whether the subsequent division bench decision in M/s G.D. Goenka (P) Ltd. v. State of U.P. displaces the earlier inter partes single-judge decision relied upon by the assessee in these revisions. - HELD THAT: - The Court observed that the controversy in the present matters had already been decided between the parties in an earlier assessment year on essentially identical facts, with reasoning that the retained rights prevented the transactions from being treated as transfers. Although the revenue relied on the division bench decision in M/s G.D. Goenka (P) Ltd., the Court noted differences in factual matrices and that the division bench order had been stayed by the Supreme Court. The earlier decision between the parties therefore continued to govern these cases and the division bench pronouncement did not lead to a different result in the present facts. [Paras 3, 5, 9, 10]

The earlier inter partes decision remains binding for these cases; the division bench decision does not alter the outcome here (and is subject to a Supreme Court stay).

Final Conclusion: Both revisions filed by the revenue challenging deletion of tax on permission to use the trade mark for A.Y. 2007-08 are dismissed: on the facts the transactions were licences not taxable transfers of right to use, and the earlier inter partes decision governs these matters (the division bench decision relied upon does not displace that result and was stayed by the Supreme Court).

Transfer of property in goods (intangible/incorporeal) - situs of sale of intangible goods - inter-State sale under Section 3 of the CST Act - place of contract not determinative of situs - mobilia sequuntur personam (situs approximated by situs of owner) - non-competition fee not a sale of goods - penalty not leviable for bona fide mistake

Situs of sale of intangible goods - transfer of property in goods (intangible/incorporeal) - mobilia sequuntur personam (situs approximated by situs of owner) - inter-State sale under Section 3 of the CST Act - Situs of sale on transfer of a trade mark or patent (intangible, incorporeal goods) and whether such transfer is an inter State sale. - HELD THAT: - The Court held that a transfer of a trade mark or patent in the present cases is a transfer of property in goods (not a mere transfer of right to use), and the situs of such intangible goods is to be approximated by the situs of their owner (mobilia sequuntur personam). Given that the transferor's principal place of business was in Kerala and the transferee's principal place of business was in another State, the agreement of transfer occasions movement of the intangible goods from Kerala to that other State and therefore falls within the concept of inter State sale. The place of execution of the agreement (Gujarat/Pondicherry) does not determine situs; Section 4 of the CST Act cannot be used to convert every agreement executed in a State into a sale within that State where the goods are not situated. Consequently Section 3 of the CST Act applies and the transfer is assessable as inter State sale. [Paras 20, 21, 22, 23]

Transfer of trademark or patent effected by the assessees whose principal place of business was in Kerala is an inter State sale assessable under the CST Act; place of contract (where agreement executed) is not determinative of situs.

Non-competition fee not a sale of goods - Whether the non competition fee received by the transferor constituted a sale of goods liable to tax. - HELD THAT: - The Court found that the non competition fee paid by the transferee to the transferor pursuant to an agreement (under which the transferee manufactures goods under the transferred trade mark) does not amount to a sale of goods. The fees are paid by the purchaser outside the State to the assessee within the State and do not represent a transfer of property in goods. [Paras 24]

Assessment to the extent it taxed the non competition fee is set aside.

Penalty not leviable for bona fide mistake - Whether penalty for alleged tax evasion should be sustained where the assessee acted on a bona fide misunderstanding of precedent. - HELD THAT: - The Court recorded that the assessees had followed the course they did based on a bona fide misunderstanding of authority (2 0th Century Finance Corpn. Ltd.) and that there was no deliberate evasion warranting penal consequence. Accordingly, though tax liability was adjudicated on merits where applicable, imposition of penalty was not justified and was set aside in the relevant petitions and revisions. [Paras 24, 25]

Orders imposing penalty are set aside; revisions by State challenging reduction of penalty are rejected to the extent indicated.

Final Conclusion: The transfers of trademark and patent by the petitioners (whose principal place of business was in Kerala) are inter State sales assessable under the CST Act; assessments taxing non competition fee are set aside; penalty orders are quashed on the ground of bona fide mistake, and related revisions are disposed as indicated, with liberty to aggrieved parties to pursue any other statutory appeals within 30 days.

Summary order. Operation of the impugned judgment and order passed by the High Court stayed until further orders; notice issued.