Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
March 28, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Offer to surrender treated as admission – Inability to produce evidence under Rule 46A of the Rules - the finding returned is based on the facts which were before the CIT(A) - writ petition dismissed - HC
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Assessees were entitled to the benefit u/s 80IB(10) even where the title of the lands had not passed on to the assessees and in some cases, the development permissions may also have been obtained in the name of the original land owners - AT
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Transfer pricing adjustments - the discount and incentive passed by the assessee to its dealers and distributors on effecting the sales was required to be excluded from the total AMP expenses for the purposes of determination of ALP in respect of AMP expenses - AT
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The chargeability of interest u/s. 234A, 234B and 234C of the Act does not fall within the domain of the Special Court (Control of offences relating to transactions in securities) at 1992 - AT
Customs
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Issuance of SCN when assessments were provisional - even if short-levy is disputed, notice issued, adjudicated, the finalization of provisional assessment or assessment process as per the document can be a separate subject and in both cases issues involved will be different. - AT
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Denial of benefit of Project Import Concession under CTH 9801 - import of raw materials in excess quantity - import of raw material after finished goods (transformers) manufactured and dispatched - demand confirmed - AT
Indian Laws
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Selection of IAS officer - Once a candidate comes into the zone of consideration and satisfies all the requirements he cannot be told that merely because he is junior in the seniority, his name will not be forwarded for consideration - SC
Service Tax
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Refund of unutilized CENVAT - Export of IT enabled servcies - amount claimed is in accordance with the Notification which requires refund to be sanctioned on the basis of proportion of exports to the total turnover only - AT
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Benefit of Notification No.12/2003-ST - As per the agreement entered into between the parties, it is 'service of supply of food', under Outdoor Catering Service - prima facie case is against the assessee - AT
Central Excise
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Refund - period of limitation - duty was paid under protest on persuasion of department - Scope of section 11B - one year, is not applicable to his case as the duty was paid under protest - HC
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Improvement in the quality of imported plywood by dipping the imported plywood into a boiling hot chemical solution not to be held as manufacturing activity - AT
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Valuation of goods - sound delivery charges recovered by the appellants were not to be added to the assessable value, the bifurcation of the same into freight, insurance and transit breakage, by the Commissioner (Appeals) was not justified - AT
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Duty demand - admission by assessee to Income Tax department as regards undisclosed/suppressed sales turnover cannot be held to be on account of clandestine removal of their final products, in the absence of any other corroborative evidence - AT
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Classification under 8479 or 8448 - (1) Wire mounting equipment: (2) Roll-O-Dress - lickering mounting machine; and (3) Flat mounting machine - classified under Chapter Heading 8479.00 - AT
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Cenvat Credit - Inputs or capital goods - 100% credit at once - Just like other inputs, the Lithographic plate also is relevant only for a particular job which the printer undertakes and the job may be repetitive but the fact remains that the plate cannot be used for any other purpose - credit allowed as input - AT
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Duty demand - Destruction of goods by fire - prima facie, it cannot be treated as a case of removal of capital goods as such and the amount received by the applicants from the insurance company cannot be treated as if sale proceeds of capital goods cleared as such - AT
VAT
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Restriction on stock transfer outside state while availing exemption – it is a case of Violation/Breach of conditions of tax exemption and not the case of levy of tax on inter-state sale - decided in favor of revenue - SC
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Reduction of Rate of Tax - The claim of the assessee that “food colours“ and “food essences“ are “foodstuffs“ within the meaning of the notification was rightly rejected by High Court - SC
Case Laws:
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Income Tax
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2014 (3) TMI 815
Substantial questions of law not examined on merits - Held that:- The questions of law raised before the High Court are significant and needs to be decided by the High Court considering the provisions under Section 260A of the Act - The High Court in its judgment and order has merely quoted the judgment of Tribunal in extenso without deciding the substantial questions of law raised by the revenue - Matter remanded back to the High Court for proper consideration of the issues and provisions of Section 260A of the Act – Decided in favour of Revenue.
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2014 (3) TMI 814
Disallowance of Guest house expenses – Precedential value of Britannia Industries Ltd. Vs. CIT [2005 (10) TMI 30 - SUPREME Court] - Whether the Tribunal have erred in holding that the disallowance under the head "Guest House Expenses" could not be made – Held that:- The law as it has been laid down in Britannia industries has to be looked into as it is binding law being a judgement delivered by the Supreme Court - the intention of the Legislature appears to be clear and unambiguous and was intended to exclude the expenses towards rents, repairs and also maintenance of premises/accommodation used for the purposes of a guest-house of the nature indicated in sub-section (4) of Section 37. If the Legislature had intended that deduction would be allowable in respect of all types of buildings/accommodations used for the purposes of business or profession, then it would not have felt the need to amend the provisions of section 37 so as to make a definite distinction with regard to buildings used as guest-houses as defined in sub-section (5) of Section 37 and the provisions of Sections 31 and 32 would have been sufficient for the said purpose - both the Appellate Authority and the Tribunal committed error in deleting the order of the Assessing Officer who had disallowed the expenses of "Guest House Expenses" – Decided in favour of Revenue.
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2014 (3) TMI 813
Imposition of penalty u/s 271(1)(c) of the Act – Inaccurate particulars furnished for claiming deduction – Held that:- The assessee in this case furnished inaccurate particulars and sought to avoid liability to pay tax on that basis - It was not a bona fide mistake - The assessee did not establish by any cogent evidence that inaccurate particulars were furnished accidentally or by mistake - deduction was claimed knowingly on a wrong basis – thus, penalty was rightly imposed – but, the amount of penalty should be reduced by 50% considering that there is nothing to show any antecedent – Decided partly in favour of Assessee.
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2014 (3) TMI 812
Justification for taxability of LTCG – Date of acquisition of interest – Held that:- The assessee acquired possession of the plot on 12.12.2005 and sold through a registered sale deed dated 9.1.2008 - having regard to the findings recorded by the Tribunal, the assessee had acquired beneficial interest to the property at least 96% of the amount was paid i.e. by 3.10.1999 – Relying upon Madhu Kaul vs. CIT [2014 (2) TMI 1117 - PUNJAB & HARYANA HIGH COURT] – there is no need for interference in the order of the Tribunal – Decided against Revenue.
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2014 (3) TMI 811
Offer to surrender treated as admission – Inability to produce evidence under Rule 46A of the Rules - Whether the Authorities below wrongly construed the offer to surrender as an admission - Held that:- The Assessing Officer considered net profit at the rate of 5% and made addition accordingly on the amount of Rs. 11,12,052/- on the failure of the assessee to produce any documents regarding giving of such spare parts to the purchasers - the CIT(A) considered the additional evidence sought to be produced by the appellant and upheld the view of the AO - assessee contended that he has lead sufficient evidence to prove that the tractor’s parts were given to the purchasers of the tractors, as a farmers kit without any charges and the same could not be added to the income of the appellant - the entire evidence has been taken into consideration by the CIT(A) - the CIT (Appeals) has not accepted the plea raised by the appellant – the finding returned is based on the facts which were before the CIT(A) – thus, there is no substantial question of law arises for consideration – Decided against Assessee.
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2014 (3) TMI 810
Grant of stay on recovery - Legitimacy of demand – Held that:- The Special Bench found that the assessee in that case had incurred extremely high AMP expenses for promotion and development of the L.G. brand in India. The decision turned to a large extent on the facts of the case. Further the Special Bench observed in paragraph 9.7 that the first question which falls for consideration in such cases is whether there is any transaction between the assessee and the foreign AE building, in India, a brand the legal ownership of which vests in the foreign AE. The Special Bench in paragraph 9.09 also held that there can be no presumption about two parties acting in concert. It was necessary for the authorities to indicate some reasons at least before rejecting the application on the basis of the order of the Special Bench. The AO however, did not do so. None of the factors indicated in the order of the Special Bench have been adverted to. The ITAT also in its impugned order dated 20.01.2014 did not address itself to the relevant facts and issues. It merely rejected the application on the ground that the petitioner had not made out a case of irreparable loss which cannot be compensated in terms of money in the case stay is not granted. This Court in the case of KEC International Limited vs. B.R. Balakrishnan [2001 (3) TMI 32 - BOMBAY High Court] set out the parameters for considering applications for stay. These observations have been repeatedly referred to in subsequent judgments of this Court. In the case before us the petitioner has serious issues to urge, some of which have so far not been dealt with either in the assessment order or in the orders on the stay application. We would ourselves have considered the application for stay but we refrain from doing so for two reasons. Firstly, the entire material is not on record. The respondents may well rely upon further material in support of their case, especially in view of the order in L.G. Electronics. Secondly, the Tribunal has expedited the hearing. – Decided in favour of Assessee.
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2014 (3) TMI 809
Power tariff concession - Whether the Tribunal was right in law in holding that the Power Tariff Incentive received by the appellant from the Government is a revenue receipt liable to tax – Held that:- The decision in Sahney Steel And Press Works Limited And Others Versus Commissioner of Income-Tax [1997 (9) TMI 3 - SUPREME Court] followed - the basic test to be applied in judging the character of the subsidy - the character of the receipt in the hands of the assessee whether Revenue or capital has to be determined with respect to the purpose for which the subsidy was given and that the point of time at which it is paid, its source or its form were irrelevant - if the object of the subsidy was to enable the assessee to run the business more profitably then the receipt is on revenue account - on the other hand, if the object of the assistance under the subsidy scheme was to enable the assessee to set up a new unit or to expand the existing unit, then the receipt of the subsidy was on capital account. The condition is not contingent upon establishment of the unit, but, for the purpose of assisting the assessee in carrying out the business operation and the subsidy is given subject to strict compliance of the conditions given in Notification No.G.O.Ms.No.29, Energy (A2), 31.01.1995 – Thus, the receipt has to be treated as Revenue receipt, as it is contingent upon the commencement of the production and to enable the assessee to run the business more profitably – Decided against Assessee. Deduction u/s 80HHC of the Act - Scrap sales - Whether scrap sales to be included in the total turnover for the purpose of deduction u/s 80HHC of the Act – Held that:- The decision in Commissioner of Income-tax Vs. Ashok Leyland Ltd. 2007 (2) TMI 151 - HIGH COURT, MADRAS] followed - both sides agree that scrap sales is not to be included in the total turnover for the purpose of computing the deduction under Section 80HHC of the Act – thus, the order of the Tribunal set aside – Decided in favour of Assessee.
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2014 (3) TMI 808
Deduction u/s 80IA of the Act – Set off of loss and depreciation - Whether the depreciation and losses of the eligible business can be set off against the profits earned by the eligible business for the period anterior to the claim for deduction put forth under Section 80IA – Held that:- An assessee is given the benefit of 100% deduction of the profits and gains from the eligible business - The quantum of deduction is to be calculated when the claim for deduction is made - For the purpose of determining the quantum of deduction u/s 80IA(5), the revenue cannot take into consideration the loss and depreciation which is already set off against the income of the assessee from other source and compute the profit u/s 80IA - the Assessing Authority and the Commissioner committed a serious error in setting off the profit earned by the assessee u/s 80IA against the losses and depreciation of the eligible business which is already set off from other source before such a claim is put forth - thus, there is no error committed by the Tribunal in setting aside the order passed by the Assessing Authority as well as the lower Appellate Authority. Both the Assessing Authority and the Appellate Authority proceeded on the basis that the initial claim for deduction is made in the assessment year 2006-07 - the assessee contends that the claim for deduction was put forth for the first time in the Assessment Year 2008-09 and therefore, it is his specific contention that loss and depreciation incurred by the eligible business was set off against the income of the assessee from other source - for the first time, when the claim was put forth for the Assessment Year 2008-09, the Assessing Authority was not justified in setting off the profit from eligible business against the loss and depreciation which had already been set off against the income of the assessee - this aspect has not been carefully looked into by either of the Authorities and the finding to be recorded is based on the finding of fact – thus, the matter remitted back to the Assessing Authority to consider the claim of exemption u/s 80IA of the Act – Decided in favour of Revenue.
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2014 (3) TMI 807
Addition made in account of country liquor – Net profit @15% applied – Held that:- When the sale vouchers have not been maintained or issued then certainly provisions of Section 145(3) can be invoked by the Revenue - The assessee cannot contend that when all other things are fully proved and only because sale vouchers are lacking then book results cannot be rejected - the authorities have rightly rejected the trading results by invoking the provisions of Section 145(3) of the Act - when the trading results have been rejected, books of accounts have been rejected then a fair estimate is required to be made - there was no other alternate with the AO to have adopted an average gross profit rate, which has been upheld by the CIT(A) and ITAT – relying upon Chhabildas Tribhuvandas Shah v. CIT [1964 (9) TMI 8 - SUPREME Court] - where GP rate is applied or trading addition is made or addition is on the basis of appreciation of evidence, no substantial question of law arise – thus, there is no merit in the appeal – Decided against Assessee.
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2014 (3) TMI 806
Cancellation of block assessment u/s 158BC of the Act - Whether the Tribunal committed error in rejecting the Revenue's appeal confirming the decision of the CIT(A) – Earlier order of the ITAT was not challenged by the revenue - Held that:- In the order dated April 26, 2013, all that the Tribunal has done is to confirm the decision of CIT (A) when it was found that there was no dispute about non-issuance of notice u/s 143(2) of the Act to the assessee - The Commissioner only followed the direction and when found that no such notice was issued - The Revenue, if at all, was perturbed by the directions of the Tribunal in the order dated May 16, 2008, should have challenged the same - Admittedly, this was not done. In that view of the matter, there was consequential order passed by the Commissioner (Appeals), which was in term confirmed by the Tribunal – the contentions of the revenue could not be accepted because it would lead to challenge the order, which was not done – Decided against Revenue.
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2014 (3) TMI 805
Disallowance of depreciation on investments – Held that:- Whether the method adopted by the assessee for valuation of investments for Income tax purposes was consistently followed by the assessee in the earlier years also has not been considered - the assessee has been claiming deduction only for income tax purposes (without making appropriate entries in the books of account), the assessee would be entitled to claim deduction of only the incremental amount of provision - the assessee has not furnished any details to show that the claim made by it represents only the incremental amount of provision for depreciation on investments - this aspect also requires verification at the end of the AO – thus, the order of the CIT(A) set aside and the matter remitted back to the AO for fresh adjudication – Decided in favour of Assessee. Restriction of deduction claimed u/s 36(1)(viia) of the Act – Held that:- The word(s) defined under the Act should be assigned the same meaning and hence no other meaning can be ascribed to it - when the section specifically states the amount of deduction is required to be computed at a figure not exceeding 7-1/2% of the total income, the AO was not justified in computing the amount of deduction at 7-1/2% of the income generated out of the rural advances - CIT(A) was also not justified in confirming the action of the AO – thus, the order of the CIT(A) set aside and the matter is remitted back to the AO for verification – Decided in favour of Assessee.
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2014 (3) TMI 804
Disallowance of deduction u/s 80IB of the Act - Business of Developing & Building Housing Projects and sale of flats and villas – Approval taken from the local authority – Held that:- The decision in Commissioner of Income-tax Versus Radhe Developers [2011 (12) TMI 248 - GUJARAT HIGH COURT] followed - the terms of agreement of sale entered into between the parties the condition must be revealed that the owner of the land has received part of sale consideration and in lieu thereof he had granted development permission to the assessee - this condition is satisfied that the assessee developer was given possession and assessee has undertaken the construction as per plans approved by Local Authority - The assessee developer has paid fees to the Architects and Engineers. The assessee has carried out and admitted the members - The land owner has agreed to give necessary signature, agreements, and even power of attorney to facilitate the work of the developer - the assessee has undertaken the entire task of development, construction and sale of the housing units to be located on the land belonging the original land owners - as per the sale agreement the developer was given full power of attorney and the land owner was given Rs. 95 lakhs in consideration of the property – the assessees were entitled to the benefit u/s 80IB(10) even where the title of the lands had not passed on to the assessees and in some cases, the development permissions may also have been obtained in the name of the original land owners – Decided against Revenue.
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2014 (3) TMI 803
Addition made on account of Transfer pricing adjustment towards AMP expenses – Held that:- A sum of ₹ 54.75 crore was incurred on `Incentive’ which was passed on to the subscriber who actually got made bookings for their customers through the network of Amadeus group - But for the payment of incentive, the subscribers had no interest in dealing with the assessee - As the revenue generated from bookings done by the subscribers is the major source of the assessee’s income from its A.E, such `Incentive’ to the subscribers cannot be viewed as anything other than `Selling expense’ which is liable to excluded from the total AMP expenses – Relying upon LG Electronics India Pvt. Ltd. Vs ACIT [2013 (6) TMI 217 - ITAT DELHI] - the discount and incentive passed by the assessee to its dealers and distributors on effecting the sales was required to be excluded from the total AMP expenses for the purposes of determination of ALP in respect of AMP expenses – thus, the incentive amounting to ₹ 54.75 crore should be deducted from total AMP expenses of ₹ 58.66 crores and the remaining amount of ₹ 3.91 crores should be considered by the Assessing Officer for a fresh determination of its ALP – Decided partly in favour of Assessee.
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2014 (3) TMI 802
Claim of deduction on account of interest expenditure – Held that:- The decision in Hitesh S. Mehta Versus DCIT Central Circle- 23, Mumbai [2013 (10) TMI 1065 - ITAT MUMBAI] followed - rejection/reliability of the books of accounts and the proposed adjudication of the CIT(A) in view of the direction may have direct impact on the issue of the liability – thus, the order of the CIT(A) set aside and the matter remitted back to the CIT(A) for fresh adjudication –Decided in favour of Assessee. Deletion of interest u/s 234A, 234B and 234C of the Act – Held that:- The charging of interest u/s. 234A, 234B and 234C squarely depends on the adjudication of the CIT(A) and since the matter is remitted back to the CIT(A). Levy of interest of notified person – Held that:- The decision in M/s. Topaz Holdings Pvt. Ltd. Versus ACIT, CC-31 Mumbai [2013 (10) TMI 1067 - ITAT MUMBAi] followed - the chargeability of interest u/s. 234A, 234B and 234C of the Act does not fall within the domain of the Special Court (Control of offences relating to transactions in securities) at 1992 - Since levy of interest is mandatory and is very much applicable in the case of notified persons – thus, the levy of interest would be consequential – Decided partly in favour of Revenue.
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2014 (3) TMI 801
Revision u/s 263 - Claim of exemption u/s 10(10C) of the Act – Compliance of provisions of Rule 2BA of the Rules - Assessee had taken Voluntary Retirement – Held that:- The decision in Pandya Vinodchandra Bhogilal vs. ITO [2010 (7) TMI 796 - ITAT AHMEDABAD] followed - claim for exemption u/s.10(10C) cannot be denied on the ground that the scheme of Voluntary retirement framed by the employer is not in accordance with the Rule 2BA – also in Dy. CIT v. Krishna Gopal Saha [2009 (7) TMI 173 - ITAT CALCUTTA-B] it was held that the assessee, who had exercised the option for retirement under the Scheme floated by the employer bank and had received the compensation from the employer bank, was entitled to exemption u/s.10(10C) even though the scheme was not in conformity with the requirement of Rule 2BA - the view taken by the AO while allowing the claim of the assessee for exemption u/s.10(10C) in the assessments framed u/s.143(3) was a possible view and the CIT was not justified in treating the assessments as erroneous and prejudicial to the interest of revenue – thus, the order of the CIT set aside – Decided in favour of Assessee.
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Customs
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2014 (3) TMI 800
Project Import - Valuation - inclusion of value of certain costs and services forming part of Off-Shore Engineering/Technical Assistance Contract (OETAC) - Rule 9(1)(b)(iv) of the Customs Valuation Rules, 1988 - - miss-declaration of value of plant and machinery imported under Project Import Regulations Act, 1986 - Held that:- Other than the opinion of the consulting engineer, there is not much else provided by the appellants. While we agree that substance has to be preferred to form, in this case, we find that it is the appellant who is requiring the adjudicators to prefer form over substance. - Further it is also seen that the opinion of the expert consulting engineer to a specific question on the fact of use, is hypothetical. As submitted by the learned special counsel, references to equipment design and connected engineering work in the contract have not been reflected upon in the expert opinion. The analysis of the different contracts and the type of services rendered by KHIL as per OETAC would show that the submissions made by the learned special counsel for the Revenue regarding addition to be made in terms of Rule 9(1)(b)(iv) of Customs Valuation Rules have to be upheld and accepted. - Decided against the assessee. Issuance of SCN when assessments were provisional - Held that:- A question of res judicata may not arise in view of the fact that provisional assessments are resorted for specific purposes and once the assessee is able to specify the purpose for which provisional assessment was resorted to, the assessment can be finalized. Therefore, even if short-levy is disputed, notice issued, adjudicated, the finalization of provisional assessment or assessment process as per the document can be a separate subject and in both cases issues involved will be different. In the present self-assessment regime, there may be many occasions where the assessee may assess and pay higher duty and assessment be provisional. In our opinion, the conclusions reached by us above are more valid today than ever before especially in view of the complications involved in application of law to the facts and difficulties involved in making self-assessment. - Decided against the assessee. Regarding confiscation of goods and penalty penalty imposed by the Commissioner - Held that:- In this case what the appellant’s submission is whether action of the importer does not amount to defrauding revenue or not has to be based on the gravity of offence. It is submitted that in this case, the appellant had a bona fide belief. However, the submission of Revenue is contrary and we happen to agree with the submission of Revenue. - Confiscation and penalty confirmed.
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2014 (3) TMI 799
Smuggling of goods - discovery of offending goods - Penalty - Held that:- There was no defence lead by any of the appellants to prove that those offending goods were not smuggled goods. Therefore, in para 40(c) of the adjudication order, adjudicating authority found that Shri Harinder Singh was real person behind smuggling and was arrested and produced before Magistrate. He merely pleaded his innocence before Magistrate and also pretended to be stranger to Azizur Rehmani Hamid Hamidani. The said appellant when confessed that he was master mind behind this smuggling, he retracted subsequently by his statement dated 30.8.2006 and 3.11.2006. But his concessional statement brought out truth of smuggling. He could not demolish his active role and concern in the smuggling. Shri Harinder Singh was found to be master mind behind smuggling as is proved from the statement dated 30.8.2006 and 3.11.2006 recorded from Azizur Rehmani Hamid Hamidani. That remained un-rebutted. There was no detachment of the goods from the concern and connection of both appellants. They were found in physical possession of the goods. Therefore there is no scope at all to hold that both appellants to be innocent - Decided against assessee.
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2014 (3) TMI 798
Denial of benefit of Project Import Concession under CTH 9801 - import of raw materials in excess of the quantity required - import of raw material after finished goods (transformers) manufactured and dispatched - one-to-one co-relation between raw material (inputs) and finished goods - Confiscation of goods - Redemption fine - Difference of opinion - Majority order - Held that:- This condition implies that materials imported for one unit of a specified project cannot be used elsewhere in any other unit or in any other project. Similarly, the application for the project imports should clearly specify the particulars mentioned under clauses (a) to (d) of a sub-regulation (3) of the Regulation 5 and these particulars are required to be registered unit-wise and project-wise. The purpose of requiring all these details in advance is to ensure that there is one-to-one co-relation between the goods imported and the projects where they would be used and, therefore, it cannot be said that there is no requirement of one-to-one co-relation between the materials imported and the unit/projects where they are going to be used. It is an admitted position that the materials have been imported after the machinery have been already supplied to a project. If the machinery has already been supplied to a particular project, usage of the imported raw materials for the manufacture of machinery which is required to be supplied to a specific project cannot happen at all and, therefore, it is clear that the appellants have not complied with the terms and conditions of the Project Import Regulations. It is very clear the even before placing the order, the appellant have declared that the raw material is being imported for the initial assembly of capital goods required for the Project. The appellant have also made declaration that they shall be liable for any legal action and penalties as per the relevant Customs Tariff Act as amended form time to time in case of diversion of the goods imported under concessional duty or misuse of the imported material. The electrical steel sheets were diverted for the manufacture of other goods which were supplied to various customers, perhaps for some other Projects also. Under these circumstances, the action of the appellant is contrary to the declaration given to the authorities and it cannot be said that the appellant was not aware of the said provisions. Therefore, there can be no doubt that the imported goods are liable to confiscation, and the appellant is liable to pay redemption fine and penalty. Appellants have cleared goods/obtained Recommendatory letter based upon false declaration, knowing the implications. There is no interpretation of law involved. This is clear from the declaration given by them - appellant is not eligible for the benefit of Project Import Concession under CTH 9801 and consequently the imported goods are liable to confiscation with option to redeem the same on payment of fine and the appellant is liable to penalty - However, the fine is reduced from ₹ 1.25 crore to ₹ 1 crore and penalty is reduced from ₹ 50 lakhs to ₹ 10 lakhs - Decided partly in favour of assessee.
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Service Tax
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2014 (3) TMI 819
Denial of refund of unutilized CENVAT credit of service tax - Export of IT enabled servcies - Held that:- appellant is eligible for the benefit of refund in respect of all the services in dispute and therefore appeal is allowed and the matter is remanded to the original adjudicating authority for considering the refund claim in accordance with law as regards other aspects except the eligibility in respect of the services - amount claimed is in accordance with the Notification which requires refund to be sanctioned on the basis of proportion of exports to the total turnover only. However, since the matter is remanded to the original refund sanctioning authority, he can verify whether this claim is correct or not - Decided in favour of assessee.
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2014 (3) TMI 818
Non-payment of service tax - difference in the gross taxable value as declared in their ST-3 Returns and the amount reflected in their Debtors ledger - Held that:- Appellant was given sufficient opportunities of hearing between 18th May, 2011 and 2nd September, 2011. The Appellant sought adjournments on one pretext or the other. We find from the observation of the ld. Commissioner that even though the Appellant had given re-conciliation statement, they have not adduced proper evidences explaining the discrepancies as claimed by them. Thus, there has been no proper adjudication of the case due to non-participation of the Appellant. However, from the submissions of the ld.C.A. for the Appellant, we find force in his arguments that they could furnish relevant documents in support of their claim that the differential value between ST-3 Returns and Debtors ledger, were on account of receipts attributable to non-taxable activity and or adjustments. In these circumstances, we are of the opinion that it is an appropriate case for remand to the adjudicating authority for re-appreciation of the facts and evidences on record. - Decided in favour of assessee.
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2014 (3) TMI 817
Waiver of pre deposit of Service Tax - demand on the basis of receipt shown in the Balance Sheet in comparison to their ST-3 Returns filed with the Department - Held that:- for the period 1.6.2007 onwards, they have not discharged the exact amount of Service Tax against the receipts shown in their balance sheet. The explanation submitted by the Ld. Advocate is that they were under severe financial hardship and thus they have undertaken the trading of textile items from their Head office in Kolkata, and the excess receipts shown in their Balance Sheet against the value in ST-3 returns, are due to the said reason. We find that the said plea has not been raised earlier before the adjudicating authority, hence, prima facie not acceptable at this stage. In these circumstances, we are of the view that the applicant could not be able to make out a prima facie case for total waiver of pre deposit of dues adjudged against them. Even though the applicant has pleaded financial hardship and submitted that the Bank has withdrawn their cash credit facilities but failed to substantiate by producing evidence including the Profit & Loss A/c. for the relevant years. In such circumstances, we are of the view that the claim of the financial hardship has not been substantiated through material particulars - Conditional stay granted.
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2014 (3) TMI 816
Benefit of Notification No.12/2003-ST, dated 20.06.2003 - Outdoor Catering Service - Held that:- As per the agreement entered into between the parties, it is 'service of supply of food', under Outdoor Catering Service. In view of that the applicant has failed to make out a prima facie case - Conditional stay granted.
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Central Excise
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2014 (3) TMI 797
Waiver of pre deposit - Tribuanl directed the appellant to pre-deposit 75% amount of duty. - Held that:- It is considered appropriate that a sum of Rs. 40 lacs be deposited as a condition precedent for hearing of the appeal which was not disputed by the learned counsel for the appellant - Extention of time for submission of pre deposit granted.
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2014 (3) TMI 796
Refund - period of limitation - duty was paid under protest on persuasion of department - Scope of section 11B - Held that:- Once second proviso appears in the Statute the very purpose of bringing such benefit is that if the case of applicant falls within the proviso giving rise to a benefit not to question limitation it has to be extended. In other words, no question of limitation would fall for consideration or deserves to be extended depending upon the conditional deposit when duty and interest payable if any made by the applicants. If no such liberty or protest is indicated at the time of payment of duty and interest, definitely such applicants are not entitled to claim such benefit provided under the second proviso to Section 11B. Computation of period of one year with reference to the relevant date is not an issue for adjudication as the very case of the appellant is such period of limitation, i.e. one year, is not applicable to his case as the duty was paid under protest. Since the duty paid by the applicant was subsequent to 20.09.1991, he is entitled to the benefit of second proviso to Section 11B, therefore the Tribunal was erroneous in setting aside the order of the first appellate authority which granted the benefit to the applicant - Decided in favour of assessee.
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2014 (3) TMI 795
Restoration of appeal - appeal was dismissed for not curing the defects in the appeal - Held that:- Appellant have submitted a typed copy of the order-in-original and the defects have been cured - Appeal restored subject to cost of Rs. 2000/-
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2014 (3) TMI 794
Constitution of panel of experts to examine / consult that, whether machinery items supplied have essential characteristic of lift when assembled - various material supplied by the appellant for installation of lift - Held that:- In view of the direction of the Hon'ble High Court, the matter had to be considered afresh and after hearing the parties, the order has to be passed in accordance with law. Therefore, the question of setting up of any panel would not arise in terms of the order passed by the Hon'ble High Court. - Panel of Chartered Engineers appointed, now disassembled - Member(T) recuses himself from case, new Member(T) appointed to preside and matter to be heard finally by Tribunal itself by hearing on two consecutive days - Matter listed for next hearing.
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2014 (3) TMI 793
Manufacturing activity or not - improvement in the quality of imported plywood by dipping the imported plywood into a boiling hot chemical solution consisting of Sodium Bicarbonate, Boric Acid and Copper Sulphate mixed in water and thereafter drying - Revenue contends that final product is “marine plywood” and since a new commodity with different name, character and use has emerged - Held that:- "manufacture" can be said to have taken place only when there is transformation of raw materials into a new and different article having a different identity, characteristic and use. It is well settled that mere improvement in quality does not amount to manufacture. It is only when the change or a series of changes take the commodity to a point where commercially it can no longer be regarded as the original commodity but is instead recognized as a new and distinct article that manufacture can be said to have taken place - process undertaken by the appellant does not amount to manufacture and hence the demands and penalties are set aside and both the appeals are allowed - Following decision of Commissioner of Central Excise Versus Osnar Chemical (P) Ltd. [2012 (1) TMI 27 - Supreme Court of India] - Decided in favour of assessee.
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2014 (3) TMI 792
Valuation of goods - manufacture of glass sheets - Inclusion of sound delivery charges - Held that:- We have examined the invoices issued in some of the cases, where no sound delivery charges stand raised and received by the appellants. As such the contract price being available at the factory gate and the sound delivery charges being optional in nature, we find no reasons to add the same in the assessable value of the goods - assessee has undertaken transport and insurance of the goods after their sale from the factory or depot, such charges cannot be included in the assessable value of the goods. We also find that the transit breakage is covered under the sound delivery charges and the same were in nature of insurance to breakage of the goods - sound delivery charges recovered by the appellants were not to be added to the assessable value, the bifurcation of the same into freight, insurance and transit breakage, by the Commissioner (Appeals) was not justified - Decided in favour of assessee.
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2014 (3) TMI 791
Penalty – Denial of Cenvat credit on Boomer Tattoo - manufacture of chewing gum/bubble gum - Earlier tribunal [2010 (2) TMI 443 - CESTAT NEW DELHI] has disallowed the credit as Tatoos/Printed Transfer were being supplied as complementary items not eligible for credit - demand with interest and penalty was confirmed. - In respect of penalty HC has remanded back the order for reconsideration – Held that:- If the credit was being availed by reflecting the same in the statutory records and proper ER-1 returns were being filed, it cannot be said that there was any suppressions on mis-statement with any malafide intent on the part of the assessee - issue involved in the present appeal is of legal interpretation of the provisions of Modvat Rules and is capable of interpretation in favour of the assessee also. As such the respondents cannot be faulted upon for availing the benefit of Modvat credit in respect of Tattoos so as to impose penalty upon them - no reason to impose any penalty on the respondents - denial of Modvat credit upheld, penalty is not required to be imposed - Decided partly in favour of Reveue.
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2014 (3) TMI 790
CENVAT Credit - avaling Credit while availing duty drawback - Benefit of Notification No. 29/2004-C.E - Penalty under Section 11AC of the Central Excise Act, 1944 read with Rule 15 of Cenvat Credit Rules, 2004 - Held that:- Credit taken in ER-I return of December 2005 for inputs received during Feb. and March 2005 is illegal for the reason that during the said period, the Appellants were required to maintain separate account of inputs used in the manufacture of dutiable products if they were to claim Cenvat credit. Further, it is also on record that the Appellants were claiming drawback and they could not have claimed drawback and Cenvat credit together. Having operated under a scheme where they had to forgo the Cenvat Credit Rules till November 2005, they are not entitled to take credit for input used in the previous period as opening balance in the return of December 2005. There is no affirmation that during 2005 they were maintaining separate accounts. Rule 15 of the Cenvat Credit Rules, 2004 does not mandate that a penalty equal of the credit regularly taken has to be imposed. The Rule prescribes that penalty not exceeding such credit amount shall be imposed. Therefore, in the facts of the case, I am of the view that penalty of Rs. 90,000/- under Rule 15 of the Cenvat Credit Rules will be sufficient to meet the ends of justice in this case - Decided partly in favour of assessee.
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2014 (3) TMI 789
100% EOU - Determination of Rate of duty where goods have been manufactured wholly from the raw material produced or manufactured in India - Supplier has availed deemed export benefit in respect of this supplies under para 8.3 (a) & (b) of the EXIM Policy - DTA clearances of polyester or polyester cotton blended spun yarn made out of PSF - Exemption Notification No. 23/2003-C.E., dated 31-3-2003 - Held that:- the terms “imported goods” cannot be treated as synonymous with “goods not produced or manufactured in India”. The goods imported into India can be the ones which had been produced or manufactured in India. Moreover in this case, there is no dispute that the PSF supplied by M/s. Indo Rama to the Appellant Company had been manufactured by them. Just because M/s. Indo Rama availed deemed export benefits under para 8.3(a) & 8.3(b) of the EXIM Policy in respect of PSF manufactured and supplied by them to the Appellant Company, the PSF supplied to the Appellant Company will not cease to be manufactured in India. There is no provision in the notification that the goods received as deemed exports are to be treated as “goods not produced or manufactured in India” - Appellant have a strong prima facie case in their favour and the requirement of pre-deposit will cause undue hardship - Stay granted.
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2014 (3) TMI 788
Duty demand - Shortage in stock - Allegation of clandestine removal on the basis of admission before Income Tax Authority - Commissioner set aside demand and penalty - Held that:- apart from surrendering of income to the Income Tax department, there is no iota of evidence to suggest that such excess income was on account of clandestine manufacture activity of the respondents. Even there is no such admission on the said ground by any of the assessee’s authorized representative. In such scenario, we find no reason to hold that surrendered income was on account of clandestine manufacturing activity - Tribunal in the case of Ravi Foods Pvt. Ltd. v. C.C.E., Hyderabad - [2010 (12) TMI 290 - CESTAT, BANGALORE] and C.C.E., Ludhiana v. Mayfair Resorts - [2011 (3) TMI 175 - PUNJAB AND HARYANA HIGH COURT ] has held that admission by assessee to Income Tax department as regards undisclosed/suppressed sales turnover cannot be held to be on account of clandestine removal of their final products, in the absence of any other corroborative evidence - Decided against Revenue.
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2014 (3) TMI 787
Classification of goods - Classification under 8479 or 8448 - (1) Wire mounting equipment: (2) Roll-O-Dress - lickering mounting machine; and (3) Flat mounting machine. - Held that:- All the three machines would fall for classification under Tariff Heading 84.79 as ‘machines having independent functions’. As regards the machine at S.No. 3, the Tribunal has held [2004 (6) TMI 363 - CESTAT, CHENNAI] will fall for classification as ‘a machine having an independent function of replacing worn out card clothing on carding cylinder’, classifiable under Heading 84.79. The other machines also have ‘independent/individual function’ and are thus classifiable under Chapter Heading 8479.00. We, therefore, set aside the finding of the Commissioner (Appeals) that the ‘machines do not have any’ independent functions but are textile machinery used in the carding room and cannot be used separately, and, therefore, merit classification under Chapter Heading 8448.00 - all machines in dispute are to be classified under Chapter Heading 8479.00 - Decided in favour of Revenue.
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2014 (3) TMI 786
Waiver of pre-deposit - Cenvat Credit on inputs supplied free of cost - MRP Based valuation u/s 4A - whether the assessee is eligible to avail Cenvat credit of the duty paid on the film roll which are cleared by the assessee along with the camera pack of the camera on which duty liability discharged based on Section 4A - Held that:- accessories of the final product cleared with the final product are considered as input. There is no dispute that the films which are cleared along with final product by the appellant in the combination pack are duty paid. It is also seen from the order-in-original that the ld. Commissioner has recorded in his findings that the films are accessories to the camera. We find that, prima-facie, appellant has made out a case for waiver of pre-deposit of amounts involved. Applications for waiver of pre-deposit of the amounts involved are allowed and recovery thereof stayed till the disposal of the appeals - Stay granted.
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2014 (3) TMI 785
Duty demand - Availment of CENVAT Credit - there was no duty paying documents in the name of the registered dealers in respect of the inputs supplied to the appellants - Held that:- As there is no duty paying documents with the registered dealers showing payment of duty on the inputs which was supplied to the appellants and the appellants availed credit on the strength of invoices issued by the dealers, I find that the appellants failed to show the inputs received by the appellants and have suffered duty, therefore, the demand is rightly made. The impugned order confirming the demand is upheld - However, penalty reduced - Decided partly in favour of assessee.
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2014 (3) TMI 784
Cenvat Credit - Classification - Inputs or capital goods - 100% credit at once - whether Lithographic Plates and Thermostar are to be treated as inputs or capital goods - Held that:- what was input prior to introduction of definition of capital goods and Modvat credit for capital goods does not become capital goods once the definition of capital goods is given and credit is made available for capital goods also. Further, I take note of the fact that as and when a printing order is received, the printer has to take a plate, expose and develops the material on that plate and then proceed to print the matter. That being the position, the Lithographic plate, chemical etc. used for printing would all become inputs for the offset printing process and we cannot say that Lithographic plate alone would not be input just because the same can be used repeatedly. Just like other inputs, the Lithographic plate also is relevant only for a particular job which the printer undertakes and the job may be repetitive but the fact remains that the plate cannot be used for any other purpose. Moreover, the printers charges for cost of Lithographic plate, exposure and development cost used by them separately. In any case, the cost of the Lithographic plate exposed and developed is recovered from the person for whom offset printing job is undertaken. All these factors would go to show that a Lithographic plate used by the appellant is an input for a particular offset printing job and that may be repetitive but cannot be said that like a capital goods Lithographic plate is used repeatedly. - Therefore, Lithographic plate cannot be considered as capital goods - Decided in favour of assessee.
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2014 (3) TMI 783
Duty demand - Destruction of goods by fire - Suppression of facts - Held that:- The DG sets stands utilized for the intended purpose in the Karnataka unit for about five years and transferred to their Imlai unit and installed on 3-6-2002 and was being used in the Imlai unit when the fire on 8-11-2003 destroyed substantial parts of the capital goods. The claim of the applicant was that the scrap generated out of whatever destroyed has been cleared on payment of duty and whatever was reparable has been got repaired and received back in terms of Rule 4(5)(a). In the given facts and circumstances of the case, prima facie, it cannot be treated as a case of removal of capital goods as such and the amount received by the applicants from the insurance company cannot be treated as if sale proceeds of capital goods cleared as such and therefore, payment of duty or reversal of credit on the capital goods so destroyed, may not arise - Stay granted.
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CST, VAT & Sales Tax
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2014 (3) TMI 822
Violation/Breach of conditions of tax exemption - restriction on stock transfer outside state while availing exemption – Refunding of amount availed by tax exemption/deferment of tax under the exemption scheme - u/s 13–B of the Haryana General Sales Tax Act r/w Rule 28-A – Held that:- The assessee-company had availed benefit of the sales tax exemption under the Exemption Scheme issued by the State Government - The Eligibility Certificate provides for certain conditions to be complied by the assessee-company - Condition No. 7 provides that the certificate can be cancelled if there is contravention of any condition mentioned in the certificate or Rule 28-A - In the show cause notice it is specifically alleged that the assessee had dispatched good on consignment basis during the assessment period 1995-1996, 1996- 1997 and 1997-1998 and thus the assessee has breached Sub-rule 11(a)(ii) of the Rule 28-A, which prescribes that the assessee having availed the benefit of tax exemption shall not make sales outside the State for next five years by way of transfer or consignment of goods manufactured by it - Since the assessee did not dispute the specific contravention by the assessing authority after cancelling the exemption certificate issued has quantified the tax liability and the interest - The order so passed is in consonance with the scheme of exemption notified by the State Government and also in accordance with the rules prescribed under Section 13B. Validity of High Court Order - Held that:- High Court while allowing the petition has proceeded on a wrong assumption, that, the AO has levied tax on inter-state sales and on consignment transfer and accordingly has quashed the assessment order - Judgment and order of the High Court cannot be sustained, impugned order set aside – appeal allowed – Though assessing authority has completed the assessments in the light of the judgment and order passed by the High Court - Since the judgment and order of the High Court is set aside, the assessing authority is directed to pass fresh assessment order for the periods in dispute after affording opportunity of hearing to the assessee - Decided in favour of Revenue.
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2014 (3) TMI 821
Reduction of Rate of Tax - `Whether food colours and food essences used in the manufacturing of foodstuffs and food products would fall under Entry 56 of the Notification No. ST-2-7218/10/6(43)/77, dated 30.09.1977' - Held that:- The words "food" and "foodstuff" are used interchangeably - Any reference to "food" in common parlance suggests a substance or composite preparation which constitutes a meal to satiate hunger - The two products are either chemically manufactured or processed after their islolation from a plant and therefore, available as retail products in their concentrated forms - Thus, the food colours and essences cannot be consumed as such and their addition to any foodstuff is basically to ornamentally improve the end-product by making it attractive and impressive - The purpose behind their addition is to aid appetite by pleasing ones olfactory and ocular senses - Insofar as food essence is concerned, it also aids in improvement of the taste of the food product - They have no relation to enhancing the nutritive value of food and only cosmetically aid in enhancing the aesthetic value of the food product. Food colours and food essences have not been considered to be foodstuff or a combination of the foodstuffs by either lexicographers or in common parlance and the two by no stretch of imagination would constitute "foodstuff" –The claim of the assessee that "food colours" and "food essences" are "foodstuffs" within the meaning of the notification was rightly rejected by High Court - High Court has not committed any error – Appeal dismissed – Decided in favour of Revenue.
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Indian Laws
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2014 (3) TMI 820
Validity of High Court order - Whether restriction of the candidates to be considered, who were otherwise eligible, was permissible under IAS (Recruitment) Rules 1954 – Violation of Regulation 4(1) of I.A.S. (appointment by selection) Regulation 1997 and Article 14, 16 and 21 of the Constitution of India - Held that:- Once a candidate comes into the zone of consideration and satisfies all the requirements he cannot be told that merely because he is junior in the seniority, his name will not be forwarded for consideration - The rule requires that from amongst the outstanding officers, 15 names are to be forwarded to the Central Government, and hence it is possible that amongst these 15, a junior officer may as well figure, depending upon the assessment of his merit - He cannot be eliminated merely on the ground that he is a junior officer, and that if selected he will write the ACRs of his superiors. If the rules for selection contain a requirement, the same has to be applied uniformly and strictly, and none from the eligible group can be eliminated from being considered on any criteria, other than those which are provided in the rules - If there is a criteria laid down for selection, the Administration has to confine to the same, and it cannot impose an additional criterion over and above whatever has been laid down - If that is done, it will no longer remain an exercise of discretion, but will result into discrimination - It will mean treating similarly situated employees dissimilarly, and denying equal opportunity to some of them in the matter of public employment on the basis of a criterion which is not laid down, violating Articles 14 and 16(1) of the Constitution of India - If the rules were to provide that in the event of large number of persons coming into the zone of consideration, the names of the senior most alone will be forwarded, then it would have been a different situation - In the absence any such restrictive rule, the decision of the respondents cannot be justified. The appellant is entitled to such a positive declaration – Appeal allowed, set-aside the impugned judgment and order of the High Court as well as of the Central Administrative Tribunal, modify the relief as prayed in the O.A., and hold that the decision of the Respondents not to consider the appellant for the selection, amounted to her being treated dissimilarly, though she was situated similarly to the recommended officers - The decision was violative of Article 14 and Article 16(1) of the Constitution - However, the selection for the year 2011 was over, even before the interim application in the CAT was decided - Setting aside the selection conducted some two years back, and asking the respondents to re-do the exercise after considering the appellant and other similarly situated candidates, would create lot of uncertainty, in as much as the appellant and such other similarly situated candidates, might or might not finally succeed in the selection process - Hence, it will not be proper now to set aside the selection of the selected candidates - Therefore, though this declaration is being granted, viz. that the appellant and persons situated like her were entitled to be considered by the committee, no further relief in that behalf can be granted to them - The opinion rendered by us will have to operate prospectively in the matter of application of the concerned rules, for the future selections. The non-consideration of her claim was totally unjust - because the CCT had acted to reduce the zone of consideration, contrary to the rules, and inspite of a letter dated 1.7.2010 from the Principal Secretary Revenue (CT-I) Department, which had clarified that the Commissioner may send the proposals of the eligible candidates of the cadre of ACs and above, who were of outstanding merit - The award of damages is necessary also because, a message must go down that those who are responsible for administration of the State cannot trample upon the rights of others on the grounds which are unsustainable in law - State of Andhra Pradesh is directed to pay the damages of rupees fifty thousand to the appellant additional to the litigation cost of rupees twenty five thousand – Decided partly in favour of Appellant.
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