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CASE LAWS

2016-TIOL-2307-HC-PATNA-VAT + Story

INSTAKART SERVICES PVT LTD Vs STATE OF BIHAR : PATNA HIGH COURT (Dated: September 27, 2016 )

Bihar Tax on Entry of Goods Act, 1993 - Sections 3(2) & 7(iii) - Constitution of India - Articles 14, 301 & 304(a)

Keywords - e commerce - online portal transaction - compensatory tax -

Whether the reasonable restriction under Article 301 of the Constitution applies not only to inter-State trade, commerce and intercourse, but also to intra-State trade, commerce and intercourse - YES: HC

Whether such reasonable restriction even in public interest, can be imposed on the freedom of trade and commerce, unless prior sanction of the President has been obtained by the State before making the legislation - NO: HC

Whether under the guise of imposing compensatory tax, the State can discriminate between goods imported from outside the State and goods manufactured and produced within the State by imposing a discriminatory tax - NO: HC

Whether a discriminatory tax even if compensatory in nature, cannot be said to be intra vires inasmuch as the same shall be violative of Article 303(1) of the Constitution of India - YES: HC

Whether the discrimination posed against the goods purchased through an e-commerce portal, which restricts the set off of entry tax paid on such goods to a dealer who is liable to pay VAT under the Bihar VAT Act, falls within the ambit of Article 304 of the Constitution and hence cannot be sustained - YES: HC

Whether such discriminatory imposition of Entry tax as an additional cost for the consumer who have purchased the goods through online portal, for their personel use, is in contravention to Article 304(a) r/w Article 303 of the Constitution of India - YES: HC

Whether the set off as provided u/s 3(2) of the Entry tax Act, can be used as a device to make a discrimination in the rate of tax by allowing set off to one class of local dealers of the entry tax paid against the VAT payable and not allowing the benefit of set off to outside dealers - NO: HC

The assessee, registered as a transporter within the provisions of the Bihar VAT Act, 2005, are engaged in the business of providing logistics and delivery services to various individual buyers, who undertake purchase transactions through technology platform of M/s Flipkart Limited. In furtherance of their business objects, the assessee entered into an agreement with Flipkart for providing logistics services to the individual buyers, who were registered on the website of Flipkart. As per the specific terms of use of the online portal of Flipkart, the goods which were purchased by the customers, were meant for personal consumption only and were not for subsequent sale. The sale between the concerned sellers and customers, in the present case, where the goods were situated outside the State of Bihar, consummate prior to the assessee's taking delivery for providing logistics support and the appropriate CST was paid on such goods by the concerned seller. Package, along with invoice, was handed over to the assessee for delivery directly to the customers at the destination addressed. In the meanwhile, the State government enacted Bihar Tax on Entry of Goods Act, 1993, with a view to levy tax on entry of goods into local areas for consumption, use or sale therein. However, the 1993 Act was declared ultra vires Articles 301 and 304 of the Constitution of India by the judgment of this Court in Bihar Chamber of Commerce vs. State of Bihar. The said judgment of this Court was subsequently reversed by the Supreme Court in State of Bihar vs. Bihar Chamber of Commerce, and it was held that the levy under the 1993 Act, was compensatory in nature and, hence, did not violate Article 301 of the Constitution. The said decision of the Supreme Court was again overruled by the Constitution Bench of the Supreme Court, in Jindal Stainless Ltd. vs. State of Haryana, whereby the Bihar Tax on Entry of Goods Act was amended. The said amendment revised the the taxable liability of a person on a scheduled goods imported in the State of Bihar from 5% to 20%. The Act was further amended, whereby entry of goods, coming from outside the territory of India, were also brought within the purview of the Act. However, both the aforesaid amendments of 2003 were made without prior sanction of the President of India. Subsequently, the 1993 Act was again amended, which stipulated that the facility of adjustment towards sales tax would not be available on goods that were exempted from payment of sales tax in terms of any notification issued u/s 7(3) of Bihar Finance Act, 1981 with retrospective effect from February 25, 1993.

These amendments were challenged in IOCL vs. State of Bihar, wherein it was held that the introduction of imported goods, within the definition of “entry of goods”, was bad for being retrospective as also for want of the Presidential sanction. At the same time, the levy under the 1993 Act, acquired the nature of a compensatory tax and therefore, was a valid piece of legislation. Thereafter, fresh amendments to the 1993 Act were made to ensure levy of entry tax on goods, brought into the State of Bihar, on account of transactions undertaken by individual consumers through e-commerce. It was under these events, the assessee pleaded that by the amendments aforesaid, entry tax, on the various goods imported by it, had been imposed at a rate higher than the rate of sales tax under the Bihar VAT Act, 2005. Accordingly, the aforesaid amendments made to the 1993 Act as well as 1993 Rules were put to challenge contending the same to be ultra vires and illegal being violative of Articles 14, 301 and 304(a) of the Constitution.

Having heard the parties, the High Court held that,

++ the two expressions used in Article 301, namely, "throughout the territory of India" and "subject to the other provisions of the part", are glaringly noticable. The use of the words "throughout the territory of India" shows that Part XIII conceives India as one economic unit. Article 301 seeks to ensure that tax shall not be imposed on movement of goods solely for the reason that the goods are carried to or transported through a given State, for, if such restrictions are not avoided, the freedom of trade cannot be achieved. Addressing, therefore, the question as to whether tax laws are excluded from the provisions of Part XIII, the Supreme Court in case of Atiabari Tea Company Limited, observed that tax laws were not immune from the operation of the Article 301 or, for that matter, the constitutional scheme, embodied in Part XIII. It was however clarified that it is not all taxes, which will hit Article 301, but only such taxes, which, directly and immediately, restrict trade, for, it is only direct restrictions causing impediments to the movement of goods that Article 301 seeks to avoid and nullify. Article 301, therefore, refers to freedom from laws, which go beyond regulations, and which put restrictions or prevent movement beyond States or within the States, for, Article 301 applies not only to inter-State trade, commerce and intercourse, but also to intra-State trade, commerce and intercourse. However, restrictions, which may be reasonable and are also in public interest, cannot be imposed on the freedom of trade and commerce unless prior sanction of the President has been obtained by the State before introduction of the Bill or before making the legislation. It is further noted, that although a compensatory tax may not amount to restriction on freedom of trade, commerce and intercourse, yet the same may be discriminatory if the State imposes any tax on the goods imported from other States, while not imposing tax on goods manufactured and produced within the State and thereby making a discrimination between the goods imported and goods manufactured and produced within the State. A microscopic examination of scheme of Article 301 to 304 of the Constitution of India will clearly reveal that the framers of our Constitution never intended that under the guise of imposing compensatory tax, the State can discriminate between goods imported from outside the State and goods manufactured and produced within the State by imposing a discriminatory tax. If a compensatory tax is imposed, which is discriminatory in nature and violative of Article 304(a) of the Constitution, such a compensatory tax will not be sustainable, being violative of Article 303(1) of the Constitution;

++ it is only non-discriminatory tax, which imposes reasonable restrictions on the freedom of trade, commerce and intercourse and which is in public interest and while imposing such tax, the Bill or amendment introduced in the State legislature has received the previous assent of the President, then, the same can be said to be valid. A discriminatory tax even if compensatory in nature, cannot be said to be intra vires inasmuch as the same shall be violative of Article 303(1) of the Constitution of India. While examining the provisions of the 1993 Act and the amendment introduced by the Finance Act of 2015, what appears from the statement, object and reasons of 2015 is that the Amendment of 2015 was introduced as a measure of augmenting the revenue of the State. Though the 1993 Act was enacted for the purpose of levy of tax on entry of goods into local area in the State of Bihar for consumption, use or sale therein in exercise of powers traceable to Entry 52 of the State List, the fact remains that the Bihar VAT Act, 2005, was enacted to levy tax on sale and purchase of goods in the State of Bihar, which is a legislation traceable to Entry 54 of the State List, yet the common and broad objectives of both the amendments appear to be to earn revenue for the State, which is apparent from the provisions of Section 7(iii) of the 1993 Act, which makes provision for set off of Entry tax against the VAT payable on the said goods in the State. It is of immense importance to note that the amount of entry tax paid by an importer, while importing goods from the outside the State to the State of Bihar, is liable to be set off against the VAT payable in the State. Viewed from this angle, we find considerable force, in the submission made by assessee's counsel, that the levy is a colourable exercise of powers and though entry tax is, now, claimed to be compensatory in nature, the legislative objective and scheme of the enactment is to realize sales tax/VAT, in advance, inasmuch as the payment of entry tax so made is liable to be set off against the VAT payable inside the State. While examining the contention of assessee that the levy of the entry tax on goods brought into the State of Bihar, on account of e-commerce transaction, is discriminatory and violative of Article 304(a) of the Constitution of India compared to the goods, which are brought into the State of Bihar for sale or consumption in the manufacture of goods, it is to be noted that a set off is provided against the payment of entry tax against the VAT liability to ensure that there is only single incidence of tax. However, such set off has not been made available, when the goods, on the basis of transaction through e-commerce portal, are imported from outside the State to the State of Bihar for the purpose of personal use or consumption;

++ on account of non-availability of set off in terms of the second Proviso to Section 3(2) of the 1993 Act, the imposition of entry tax, by way of the impugned provisions, leads to a higher burden of tax on such goods, which are brought into the State of Bihar by the assessee for personal use or consumption of individual consumer, which are transacted using e-commerce portal. Situated thus, the artificial distinction and discrimination against the said goods, purchased through an e-commerce portal, arises on account of the second Proviso to Section 3(2), which restricts the set off of entry tax paid on such goods only to a dealer, who is liable to pay VAT under the Bihar VAT Act. It is crystal clear that the second Proviso to Section 3(2) is not applicable to a transaction undertaken by e-commerce portal inasmuch as the goods, brought in by the assessee are only for personal use or consumption and not for being sold, when the individual consumers are not dealer and do not have liability under the Bihar VAT Act, the payment of Entry tax, on such transaction will be an additional cost on such goods. For the abovementioned reasons, this discrimination will directly contravene Article 304(a) read with Article 303 of the Constitution of India. The Supreme Court has, in no uncertain words clarified, in Jaiprakash Associates case that the principle of "non-discriminatory tax", as provided in Article 304(a) of the Constitution of India, is a sine qua non to free movement of goods between nation/States in several jurisdictions and also in international trade and policy. It was further held that effect of a tax should not such that two like goods are given discriminatory treatment. The powers given to the State legislature are not unrestricted and are bound to function within limitations stipulated under Article 304(a) of the Constitution of India. The set off, as given in Section 3(2) of the 1993 Act, cannot be used as a device or weapon so as to make a discrimination in the rate of tax by repaying or by allowing set off to one class of local dealers of the entry tax paid against the VAT payable and not allowing the benefit of set off to outside dealers. Such a situation squarely falls within the ambit of Article 304(a) of the Constitution of India.

Assessee's petition allowed

2016-TIOL-2306-HC-MP-VAT

GWALIOR ALCOBREW PVT LTD Vs STATE OF M P : MADHYA PRADESH HIGH COURT (Dated: August 26, 2016)

M.P. VAT Act/ M.P. Commercial Tax Act - Alternate remedy - Exemption of tax - Reassessment.

Whether IMFL which is not sold within the State but which is sold outside, is subject to the exemption available under Entry 18 to Schedule I of the Commercial Tax Act or Entry 47 to Schedule I of the VAT Act - YES : HC

Whether inspite of having an alternate remedy writ petition route can be resorted to provided imposition of tax under the Act is unsustainable -YES : HC

The assessee was a manufacturer of Indian Made Foreign Liquor (IMFL) and spirit. The IMFL manufactured by the assessee in the State of Madhya Pradesh was sold both within the State and outside. The assessee held a valid license for this work. The assessee was exempted from payment of Commercial Tax and Central Sales Tax on the IMFL manufactured and sold. For the relevant year, the assessee filed the prescribed returns under the Central Sales Tax Act along with M.P. VAT Act. Assessment was completed and assessee paid the tax demanded. However, after a period of five years from the date of original assessment, Revenue issues a notice for reassessment on the ground that the exemption or benefit granted to the assessee by virtue of Entry No.18 of Schedule I to the Commercial Tax Act was incorrect. The reassessment order was passed. The assessee preferred a revision petition before the Additional Commissioner which was dismissed. Aggrieved assessee filed writ petition in the High Court on the ground that (a) That the Indian Made Foreign Liquor exported from Madhya Pradesh was exempted or not liable from payment of Central Sales Tax in view of Entry 18, Schedule I of the M.P. Commercial Tax Act. (b) The show cause notice initiating assessment on the basis that exemption is not available to the assessee since the condition mentioned in Entry 18 had not been fulfilled was untenable as admittedly under Column No.3 of Entry 18, no condition was mentioned. (c) That when IMFL manufactured by the assessee in the State was not leviable for payment of tax under the Sales Tax Act when sold to buyers within the State, then merely because it was sold to buyers outside the State, imposition of duty or tax was unsustainable. (d) Various grounds were also raised with regard to legality of the reassessment proceedings on account of the fact that it was barred by limitation. Reassessment or re-opening of assessment after a period of five years was not permissible etc.

HC Held that,

++ under Entry 18 to Schedule-I of the M.P. Commercial Tax Act, certain goods are exempt from payment of tax, these are the goods on which duty is or may be levied under the M.P. Excise Act. Similarly, under Entry 47 of the VAT Act, particulars of tax free good as contemplated under Section 16 of the VAT Act are specified and it includes good on which duty is or may be levied under the Excise Act. Shri Khanna, learned Senior Counsel had emphasized and argued that the words used in the entries are " goods on which duty is or may be levied ". According to him, if excise duty is levied or is charged or paid under the M.P. Excise Act, same is exempted from payment of taxes or duties under the M.P. General Sales Tax Act, the Commercial Tax Act and VAT Act. Apart from that if the goods are such, on which duty even though not actually paid but on which a duty may or can be levied under the M.P. Excise Act, such goods are also exempt from payment of tax or duty. According to him, it is evident from the words used in the statute, that it is not necessary that only such goods are exempted on which excise duty is in fact paid. There may be cases where duties is leviable under a statute but for various reasons the Government may not be levying duty, even such goods are exempted from payment of duty. This was rebutted by Shri Kourav by saying that grant of exemption is of no consequence. If duty is leviable then only the protection under the entry would be available. If the duty is not at all leviable and when there is no liability to tax, no exemption can be claimed and therefore, IMFL exported according to Shri Kourav, it is not a tax free good;

++ It is a cardinal principle of interpretation of statute that a rule or a statutory provision has to be read in a manner to give effect to the legislative intent and if on a bare reading, the intention of the rule maker or its meaning is clear, effect should be given to the provisions by interpreting it in a manner which goes in furtherance to the intention for which a particular rule was legislated. If we analyze the words used in the entries in question, i.e. the relevant entries under all the statutory provisions as detailed herein above, we find that the words used are goods on which duty is levied under the M.P. Excise Act or goods on which duty may be levied under the M.P. Excise Act. Therefore, we are now required to see whether the goods in question i.e. IMFL manufactured in Madhya Pradesh and exported is a product on which duty is or may be levied under the Excise Act ? Answer to this question would determine the issues in question. There is, nor can there be any dispute to the fact that Indian Made Foreign Liquor manufactured in Madhya Pradesh and exported is an excisable good amenable to the provisions of the M.P. Excise Act, 1950, it is infact an "excisable article" and therefore, the State is empowered under the Excise Act to levy duty on the same. It is also a admitted position that IMFL manufactured in the State and when sold within the State it is subjected to payment of excise duty;

++ it is therefore, clear from the aforesaid principle, that it is not necessary that excise duty should be actually levied on goods to attract application of the entry. It is sufficient, if there is power under the relevant act to impose such a duty. This principle in our considered view, squarely applies to the present case also;

++ even if the IMFL exported out of the State form a separate class, still it is leviable to duty under the M.P. Excise Act and once it is found to be leviable to duty under the M.P. Excise Act, it becomes a tax free good, not liable for payment of commercial tax, sales tax or VAT, as the case may be, by virtue of Entry 18 or 47. The contention of Shri Kourav to say that there is no leviability on IMFL exported out of Madhya Pradesh is not correct. Once it is a excisable good, excise duty can always be levied, but merely because the State Government does not levy excise duty, in its own discretion the benefit of exemption cannot be denied;

++ it is clear that to avoid double taxation in the matter of payment of excise duty on IMFL manufactured in Madhya Pradesh, Rule 12 has been framed, so that the manufacture is required to pay excise duty only once, i.e. either in the State of M.P. or in the State where it is exported. The Rule as formulated goes to show that the intention of the rule makers were that foreign liquor manufactured in State of M.P. and exported to any other State even though a excisable good is exempted from payment of excise duty in M.P. subject however, to the condition that they pay excise duty in the State to which the good are exported, that being the intention of the rule maker, it has to be held that it becomes a tax free good and as the words used in the entries are "goods on which duty may be levied under the Excise Act", this would and could only mean that duty could be levied on the goods in question but the State Government thought it appropriate not to levy duty and once it is a good on which duty could be levied the exemption has to be granted;

++ the question of existence of alternate remedy has already been considered by the Supreme Court in the case of Paradip Port Trust; Balco Captive Power Plant and by Division Bench of this Court in the case of Commercial Engineers & Body Builders and it is well settled principle of law that if any action is found to be contrary to law or unsustainable, then relegating a party to take recourse to the alternate remedy is not necessary. In the case of Paradip Port Trust it is held by the Supreme Court that if a question involved pertains to interpretation of statutory provisions instead of leaving it to the taxing authority to interpret such a provision, the High Court or the Writ Court can exercising the jurisdiction. It has been held consistently not only by the Supreme Court but also by this Court that if the power exercised under the statute is found to be in excess to the power or jurisdiction provided under the statute, is unreasonable, exercised without proper consideration and when disputed questions of fact are not involved, a writ Court can always interfere into such matters. Applying the principles of law laid down in the cases of Paradip Port Trust; Balco Captive Power Plant and by Division Bench of this Court in the case of Commercial Engineers & Body Builders , we see no reason to relegate the assessee to take recourse to the alternate remedy available of filing appeal, once we find that imposition of tax under the Commercial Tax Act/ VAT Act is unsustainable .

2016-TIOL-2299-HC-MUM-IT

JAMNALAL SONS LTD Vs CIT : BOMBAY HIGH COURT (Dated: September 27, 2016)

Income Tax - Sections 2(47), 45(3), 143(3) & 256(1).

Keywords: immovable property - capital gain tax - partnership deed - transfer of asset - stock in trade - chargeable profits - evasion of taxes.

Whether if any particular consideration is received by a partner on making contribution of a capital asset into a partnership firm, the capital gains earned by such assessee cannot be determined in terms of Section 48 & it is apparent where the computation provision is not workable & the charge itself fails - YES: HC

Whether when the contribution by assessee into the partnership firm as capital was required by the firm to carry on its business, is not a device to evade tax which would have otherwise been payable, no addition is possible on account of such capital contribution - YES: HC

The assessee company was incorporated to carry on investment business. On 23rd April, 1979, the assessee Company at its General Body meeting of shareholders decided to commence a new business activity inter alia of dealing / trading in immovable properties, shares and securities. Besides, the General Body of shareholders authorized its Board of Directors to do the said business as they think fit and proper either itself or in partnership with others. On 2nd May, 1979, the applicant assessee converted certain plots of land and shares hitherto held as investments into its stock in trade. On 8th May, 1979, the applicant assessee entered into the partnership firm with six others to trade in land, stock and shares by executing a partnership deed. The firm was styled M/s. Bajaj Trading Company. The applicant Company contributed total Capital of Rs.1.23 crores consisting of Rs.1.20 crores in the form of plot of land (immovable property), Rs.1.13 lakhs in the form of shares in limited companies and Rs.2 lakhs in the form of cash. Other parties also contributed in the same manner, resulting in initial Capital brought in by the partners to an aggregate of Rs.2.49 crores. Assessee filed its Return of income for the subject AY declaring an income of Rs. 5.95 lakhs. However, AO while passing an Assessment Order dated 13th February, 1984 determined the income at Rs.1.25 crores u/s 143(3). This was on account of the fact that he held that the transfer of immovable property and shares and securities into the partnership firm M/s. Bajaj Trading Company resulted in long term capital gains of Rs.1.19 crores.

On appeal, CIT(A) held that conversion of investment in the form of immovable property and shares into stock in trade was not a sham or bogus act. The setting up of the partnership firm M/s. Bajaj Trading company was not a sham but a genuine firm which is granted registration and is also assessed under the Act. However, notwithstanding the conversion of investment into stock in trade, at the time of contribution into the partnership firm M/s. Bajaj Trading Company, it reverted to its earlier character of capital assets. There was transfer of assets to the firm within the meaning of Section 2(47) r/w Section 45 in view of the decision of the Supreme Court in Sunil Siddharthbhai Vs. CIT 2002-TIOL-186-SC-IT-LB . However, he proceeded to hold that as no consideration was received within the meaning of Section 48, no capital gains arose. However, the applicant company had so arranged its affairs that when it is taken as a whole, it was device / scheme to evade capital gains tax and would squarely fall within the caution set out in paragraph 20 of Sunil Siddharthbhai. Thus, CIT(A) concluded that there was a transfer within the meaning of Section 2(47) r/w Section 45 and upheld the order dated 13th February, 1984 of the Assessing Officer, while restoring the issue to the AO to determine the value of the capital asset as on 1st January, 1964 to compute its costs. On further appeal, Tribunal held that the effect of all the transactions taken together was that the applicant assessee was able to transfer its land to another entity i.e. partnership firm and received the market value of the same without having paid any tax. Thus, on application of paragraph 20 of the Supreme Court decision in Sunil Siddharthbhai, the contribution of the capital asset into the firm was a device or ruse to convert a capital asset into money while evading capital gain tax. Thus, the appeal of the assessee was dismissed.

Held that,

++ we find that SC in Sunil Siddharthbhai has relied upon its earlier decision in CIT Vs. B.C. Srinivasa Setty, 2002-TIOL-587-SC-IT-LB to hold that where the computation provision fails then, the charging Section cannot be invoked. The consideration received for the transfer of assets into a partnership firm is only a right of the partner during the subsistence of the partnership firm to get his share of profits from the partnership firm and after dissolution of the partnership or on his retirement from the partnership, to get the value of his share in the net assets on the date of the dissolution or retirement. SC had held that the credit entry in the partners' capital account does not represent the true value of the consideration received / receivable. It is only a notional value. Therefore, it is not possible to predicate the share of a partner in the partnership firm as on the date of dissolution or retirement, as a share which is presently payable or ascertainable. This is particularly so, as we are concerned with a period prior to A.Y. 1988-89 when subsection (3) to Section 45 was introduced. Section 45(3) provides that the amounts credited /recorded in the books of accounts of the firm would be deemed to be the full consideration received by the partner as a result of any transfer, chargeable to capital gain tax. Therefore, for the period for which we are concerned, i.e. A.Y. 1980-81, it cannot be said that any particular consideration is received by a partner on making contribution of a capital asset into a partnership firm. Consequently, the capital gains earned by the applicant assessee cannot be determined in terms of Section 48. Therefore, as held by the Apex Court in B.C. Srinivasa Setty, where the computation provision is not workable, the charge itself fails;

++ 3 years next after having introduced its capital into the partnership firm, the applicant Company withdrew its capital to the extent of Rs.1.16 crores. On the basis of this fact, the Authorities conclude that the applicant assessee had received the value of the capital contribution made by it into the partnership firm by receiving the value of the immovable property from the firm. Thus, the entire exercise was a mere device to evade capital gains tax. However, the Revenue is completely ignoring the finding of fact recorded by the Tribunal to the effect that the amount of Rs.1.16 crores and other amounts withdrawn by the other partners were on receipt of advances by the firm against sale of its plots. Thus, the amounts were received by the partnership firm in the process of carrying on its business of developing land and, therefore, return of capital from out of these receipts cannot be said to be a device / strategy to evade tax, which would otherwise be payable by assessee. It must be borne in mind that assessee had decided to carry on business in the partnership firm with others by contributing an amount of Rs.1.23 crores as its capital while other partners also contributed varying amounts resulting in an aggregate balance in the partnership capital account of Rs.2.49 crores. Thus, it was a decision taken by the applicant assessee to pool its resources along with other persons who have contributed over 50% of the total capital in the partnership firm. This itself is a further indication of the fact that a decision was taken by assessee to enter into a partnership firm and form the firm M/s. Bajaj Trading company only with a view to engage in a new line of business i.e. trading in land, shares and securities so as to generate profits along with other persons who had equally contributed to the capital of the firm. Thus, in these facts, the contribution of capital asset into the partnership firm M/s. Bajaj Trading Company, cannot be said to fall within the mischief as indicated by SC in Sunil Siddharthbhai as extracted hereinabove. In any case, at the time when assessee made its contribution of capital assets into the partnership firm, no consideration was received by the applicant assessee. If at all, the firm is held to be not genuine, then, the consideration received for transfer of the property was only 3 years down the line. Consequently, it would not be fair to bring it to tax in the A.Y. 1980-81. In the result, we hold that there is a transfer of capital asset by the applicant assessee to a partnership firm M/s. Bajaj Trading company and yet, the same would not result in capital gains which can be subjected to capital gains tax in the A.Y. 1980-81;

++ we may point out that whether the transferred asset was a capital asset or stock in trade makes no difference. This for the reason that the subsequent steps taken by the Company of introducing these assets into partnership firm and the manner in which it has been dealt with thereafter by the firm does not indicate that the conversion was a device/ruse to evade capital tax gains. Therefore, the transaction as a whole does not fall within the caution provided in Sunil Siddharthbhai. In the above view, we have proceeded on the basis that the immovable property, stock and security were capital assets in the hands of assessee company when introduced into the partnership firm – M/s. Bajaj Trading Company. Moreover, the Authorities have held that the partnership firm was genuine and not a colourable device. Therefore, the investment made in it, cannot be a device when seen in the light of the subsequent conduct of the partnership firm of dealing in immovable properties, stocks and securities as its stockintrade for the subsequent years. In fact, we are informed the firm continues to do so till date and is being assessed to tax as a dealer in immovable property, stocks and securities. In the circumstances, when the transaction is looked at in its entirety, the investment made cannot be said to be ruse to evade tax (see Vodafone International v/s. Union of India 341 – ITR1). Accordingly, we answer the question partly in the affirmative to the extent the Tribunal held that there was a transfer of capital asset when the applicant assessee made its capital contribution in the form of land, shares and securities to the partnership firm M/s. Bajaj Trading Company. However, other parts of the question namely that the transfer of capital assets resulted in capital gains, which can be subjected to capital gain tax in the subject assessment year, is answered in the negative, i.e. in favour the of the applicant assessee and against the Revenue.

Assessee's appeal allowed

2016-TIOL-2574-CESTAT-MUM

M/s JINDAL DRUGS LTD Vs CC: MUMBAI CESTAT (Dated: September 16, 2016)

Cus - ROM application - Appeal dismissed on the ground that burden of unjust enrichment can only be discharged on the basis of concrete evidence and the evidence submitted by the appellant does not discharge this burden; that the documents were neither produced before the lower authorities nor sought to be introduced as additional evidence; that the letters are to be disregarded - in ROM application, applicant referring to the observations of lower appellate authority wherein it is mentioned that these documents were produced before the Commissioner (Appeals).

Held: There is indeed error in the Tribunal order - said documents/certificate produced cannot be discarded just like that - ROM application allowed; paragraphs 4 & 5 of order replaced; only reason recorded in the impugned order for rejection of the certificates of M/s Earnest Healthcare Ltd. is that the same has not been certified by any statutory authority - If M/s Earnest Healthcare Ltd. have not paid the duty amount to the appellant then the question of its recovery from any others person does not arise - charges of unjust enrichment negated by applicant, therefore, appeal allowed: CESTAT [para 4]

ROM/Appeal allowed

2016-TIOL-2573-CESTAT-MUM

BRITISH BIOLOGICALS Vs CC : MUMBAI CESTAT (Dated: September 6, 2016)

Cus - Requirement of homologation certificate is mandated for any new type of Car, which is imported first time into India - Undisputedly, the car was imported first time in India and the findings recorded by the adjudicating authority cannot, therefore, be faulted with – Order of confiscation with an option to redeem the same on payment of RF and imposition of penalty is proper – no merit in appeal hence rejected: CESTAT [para 5]

Appeal rejected

2016-TIOL-2572-CESTAT-MUM + Story

GLENMARK GENERICS LTD Vs CCE & ST : MUMBAI CESTAT (Dated: August 4, 2016)

CX - s.35(1) of the CEA, 1944 - Last date of filing appeal being Sunday, the appeal filed on the next day, Monday, cannot be said to have been delayed but filed in time in view of section 10 of the General Clauses Act, 1897: CESTAT [para 5]

Matter remanded