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2002 (7) TMI 761
Issues:
1. Rejection of eligibility certificate for deferment of sales tax.
2. Dismissal of appeal against the order of assessment.
3. Dismissal of appeal by Sales Tax Tribunal for non-compliance with deposit orders.
4. Restoration of dismissed appeals after obtaining eligibility and entitlement certificates.
5. Refund of deposited amount during the pendency of appeals.
Analysis:
1. The petitioner, a private limited company, set up a new industrial unit and applied for an eligibility certificate for deferment of sales tax under rule 28-A of the Haryana General Sales Tax Rules, 1975. The claim was initially rejected by the lower screening committee but later accepted by the Higher Level Screening Committee, resulting in the issuance of the eligibility certificate on August 23, 1999. However, before the final decision on the eligibility certificate, the Assessing Authority made an assessment on December 31, 1997.
2. Subsequently, the petitioner filed an appeal against the assessment order, which was dismissed by the Joint Excise and Taxation Commissioner on August 13, 1998. The petitioner was directed to deposit a specific amount in monthly installments, which it failed to comply with, leading to the dismissal of the appeal. Further appeals to the Sales Tax Tribunal were also dismissed due to non-compliance with the deposit orders.
3. Following the dismissal of the appeals, the competent authority granted the eligibility certificate and entitlement certificate to the petitioner. The High Court, considering the subsequent issuance of these certificates, set aside the orders dismissing the appeals and directed the authority to hear the appeals on their merits without requiring the petitioner to deposit the assessed amount.
4. Additionally, the High Court noted that the petitioner had deposited a certain amount during the pendency of the appeals, of which only a partial refund had been made by the department. The court did not delve into this issue but allowed the petitioner to claim any remaining refund due to it in accordance with the law.
5. In conclusion, the High Court allowed the writ petition, quashed the impugned orders of dismissal, and directed the parties to appear for further proceedings. The court emphasized restoring the dismissed appeals after the issuance of the eligibility and entitlement certificates, ensuring the petitioner's right to be heard on merits without the need for depositing the assessed amount.
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2002 (7) TMI 760
Issues:
1. Whether the sales of photography goods by the appellant/assessee to local purchasers for the assessment year 1976-77, based on actual users import license, are exempt from sales tax under the Central Sales Tax Act, 1956, as sales in the course of import into India.
Analysis:
Issue 1:
The appellant, a dealer in photography goods, imported goods based on actual users license and sold them to local buyers. The assessing officer rejected tax exemption, stating no privity of contract between local buyer and foreign seller. The Appellate Assistant Commissioner allowed the appeal, considering the appellant as an agent of the local buyer. However, the Joint Commissioner revised the decision, stating no evidence of agency and upheld tax liability. The Court analyzed the conditions for sales in the course of import under Section 5(2) of the CST Act.
Analysis Continued:
The Court referred to the Supreme Court's criteria for sales in the course of import, emphasizing the essential conditions: sale, actual import, and sale occasioning import. It highlighted the need for an integral connection between sale and import for exemption under Section 5(2). Rulings in previous cases were examined to determine the necessity of a contractual link between the foreign seller and local buyer for sales to qualify as in the course of import.
Analysis Continued:
The Court found the appellant failed to establish a connection between the first sale post-import and the import itself, crucial for claiming exemption. The absence of terms prohibiting diversion post-import weakened the appellant's case. Distinctions were made from previous cases where such integral links were evident, leading to sales being considered inter-State and taxable. The Court upheld the Joint Commissioner's decision, dismissing the appeal against tax liability under the CST Act.
Conclusion:
The Court dismissed the appeal, affirming the tax liability on the appellant for sales of photography goods as inter-State sales under the Central Sales Tax Act.
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2002 (7) TMI 759
Issues Involved:
1. Whether the alphabet charts qualify as "books" or "reading books" under entry 22.
2. Whether the exemption for the sale of reading books, including textbooks, is applicable to a printer who prints and sells alphabet charts.
Detailed Analysis:
Issue 1: Whether the alphabet charts qualify as "books" or "reading books" under entry 22.
The court examined whether alphabet charts could be classified as "books" or "reading books" under entry 22. The judgment referenced the case of *State of Tamil Nadu v. Mundran Kala Mandir* [1980] 46 STC 365, where a guide map with readable material was considered a "book for reading" and thus eligible for exemption. The court reasoned that alphabet charts are fundamental educational tools that introduce children to literacy, making them "reading books." The court emphasized that the form of the material (a chart versus a traditional book) was irrelevant; what mattered was the educational content. Therefore, the court concluded that alphabet charts are indeed "books" meant for reading and thus qualify for the exemption.
Issue 2: Whether the exemption for the sale of reading books, including textbooks, is applicable to a printer who prints and sells alphabet charts.
The court addressed whether the exemption applied only to dealers or also to printers who sell such educational materials. The Joint Commissioner had argued that the exemption was not available to printers, only to dealers. However, the court noted that previous clarifications and judgments did not restrict the exemption to dealers alone. For instance, the clarification issued on March 16, 1992, stated that printers who print and sell reading books, including alphabet charts, are not liable to tax. Additionally, the clarification dated May 23, 1988, indicated that reading books, including textbooks, were exempt from tax without limiting the exemption to dealers.
The court further referenced the *Builders Association of India v. Union of India* [1989] 73 STC 370 (SC), which discussed the implications of sales involved in works contracts. The apex court held that the transfer of materials in such contracts amounted to a deemed sale. Therefore, if a printer supplies goods based on a contract and charges for the materials and printing, it constitutes a deemed sale. Since the printed material (alphabet charts) qualifies as books, the exemption applies to these deemed sales as well.
The court also considered the decision in *State of Tamil Nadu v. Papco Offset Printing Works* [2000] 118 STC 160 (Mad.), which held that sales by a dealer of reading books were exempt, but this decision did not specifically address whether alphabet charts were considered books. The court noted that the *Papco* case did not involve the same arguments or clarifications presented in the current case and thus was not applicable.
Conclusion:
The court concluded that the Joint Commissioner erred in not treating alphabet charts as "books" and in denying the exemption to the printer. The order of the Joint Commissioner was set aside, and the order of the Appellate Assistant Commissioner was restored, granting the exemption to the printer for the sale of alphabet charts. The appeal was allowed with no costs.
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2002 (7) TMI 758
The Madras High Court dismissed the petition challenging the Tamil Nadu Sales Tax Appellate Tribunal's decision regarding the turnover of dies and tools, stating that there is no tax liability under the Central Sales Tax Act as the goods did not leave the factory premises. The court found the Tribunal's decision to be correct and dismissed the revision.
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2002 (7) TMI 757
Issues Involved:
Challenge to orders passed by Joint Commissioner under suo motu revisional powers, Penalty under CST Act, Disallowance of sales tax liability claim, Branch transfer of goods, Partnership firm operations, Factual basis of dealing between branches, Revisional authority's finding on partnership entities, Link between Trichy and Chittoor branches, Sale transactions between branches and Balaji Mill Stores, Tax avoidance scheme using branch as conduit, Comparison with previous court decisions.
Analysis:
Challenge to Orders Passed by Joint Commissioner:
- The appeals were filed challenging the orders passed by the Joint Commissioner under his suo motu revisional powers, setting aside Appellate Assistant Commissioner's orders and inflicting penalties under the CST Act. The issue revolved around the correctness of the Joint Commissioner's decision in disallowing the sales tax liability claim and restoring the assessing authority's orders.
Disallowance of Sales Tax Liability Claim:
- The assessing authority disallowed the claim of branch transfer of goods by the assessee, assessing the turnover as inter-State sales. The Appellate Assistant Commissioner, however, allowed the appeals based on the branch transfer supported by form Fs. The Joint Commissioner, in exercising revisional powers, disagreed with the appellate authority's decision, leading to the current appeals.
Factual Basis of Dealing Between Branches:
- The crux of the matter was the factual basis of the transactions between the Trichy and Chittoor branches. The revisional authority contended that the branches were different legal entities due to the partners' composition, while the appellant argued that the Chittoor branch was merely an extension of the assessee firm, supported by partnership deeds and other documents.
Link Between Branches and Sale Transactions:
- The Court found that the transactions were between the assessee and its branch office at Chittoor, with all goods moving from Trichy to Chittoor ultimately sold to Balaji Mill Stores. The revisional authority's finding of inter-State sale was challenged based on the continuous link between the assessee and the ultimate buyer, Balaji Mill Stores.
Tax Avoidance Scheme Using Branch as Conduit:
- The Court uncovered a tax avoidance scheme where the Chittoor branch acted as a conduit, allowing goods to reach Balaji Mill Stores with lower tax implications. By utilizing the branch transfer mechanism, the assessee avoided additional tax payments under the CST Act, showcasing a novel scheme to reduce tax liabilities.
Comparison with Previous Court Decisions:
- The Court distinguished the current case from previous decisions, emphasizing the direct link between the assessee and Balaji Mill Stores, where partners were common. The sale transactions between the Chittoor branch and Balaji Mill Stores, coupled with the absence of dealings with other parties, solidified the Court's decision to confirm the Joint Commissioner's orders.
Conclusion:
- Ultimately, the Court dismissed the appeals and upheld the orders of the Joint Commissioner, emphasizing the established link between the assessee, its branches, and Balaji Mill Stores. The detailed analysis highlighted the factual intricacies, tax implications, and the unique scheme employed, leading to the confirmation of the revisional authority's decision.
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2002 (7) TMI 756
Issues:
1. Challenge to orders passed by Sales Tax Appellate Tribunal, Appellate Assistant Commissioner, and Commercial Tax Officer regarding taxation of turnover under Central Sales Tax Act.
2. Imposition of penalty for incorrect turnover reporting.
3. Claim of selling goods as a commission agent outside the State.
4. Failure to produce "C" forms as evidence.
5. Penalty under section 9 of the Central Sales Tax Act.
Analysis:
1. The assessee contested the orders of the lower authorities regarding the taxation of turnover under the Central Sales Tax Act, claiming that the turnover was wrongly taxed at 6%. The assessing officer found discrepancies in the assessee's claims, including the absence of "C" forms from the purchaser and failure to prove sales as a commission agent. The authorities upheld the tax liability and imposed a penalty for incorrect reporting.
2. The appellate authorities affirmed the decision, noting the lack of material evidence supporting the assessee's claims. Despite the assessee's argument that income-tax department seizure of accounts hindered evidence submission, the authorities deemed it insufficient justification. The failure to provide necessary documentation, such as "C" forms for concessional tax rates, led to dismissal of the appeal.
3. The Appellate Tribunal observed suspicious circumstances surrounding the sales, including despatches under form XX. However, the focus remained on the absence of "C" forms, indicating inter-State sales subject to tax. The assessee's repeated defense of account seizure by the income-tax department was deemed inadequate, as three years of proceedings allowed ample time for evidence collection.
4. The court rejected the argument that the assessee acted as a commission agent of an agriculturist, emphasizing the absence of factual support. The authorities were deemed to have appropriately assessed the available evidence, concluding no legal errors. Consequently, the revision was dismissed without costs, as no legal issues were identified.
In conclusion, the judgment upheld the taxation of turnover under the Central Sales Tax Act, highlighting the importance of providing necessary evidence, such as "C" forms, to support claims and exemptions. The failure to substantiate transactions as exempt or conducted as a commission agent led to the imposition of penalties and dismissal of the revision petition.
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2002 (7) TMI 755
Whether looking at the nature of requirement pleaded by the landlord- respondents in their applications the forum of Rent Controlling Authority was available to the respondents under Chapter III-A of the Act or whether they were required to have recourse to the jurisdiction of Civil Court by filing suits for eviction under Section 12 of the Act?
Whether the landlords have succeeded in making out case of bona fide requirement of the suit premises within the meaning of clause (b) of Section 23-A of the Act?
Held that:- There is no merit in the plea raised on behalf of the appellants that the three respondents, one widow and her two major sons, could not have initiated proceedings for eviction before the Rent Controlling Authority. We have carefully perused the two applications for eviction filed by the respondents. The bonafide requirement pleaded is of the widow landlady, the respondent no.1, who requires the suit premises for Govinda, respondent no.2 for starting his business and that of another son Hemant, the respondent no.3 for continuing the business which presently he is carrying on in rented premises. Respondents 2 and 3 being major sons of the widow respondent no.1, such requirement clearly falls also within the purview of Section 23-A (b) of the Act. The proceedings initiated before R.C.A. do not suffer from want of jurisdictional competence.
To be an alternative accommodation relevant within the meaning of Section 12(1)(f) or Section 23-A(b) it must be 'of his own', that is, the one 'owned' by the landlord. There is no evidence adduced by the appellants to show that in M.T. Cloth market shops are also situated on first floor of buildings and attract the same business as the shops on ground floor do. The High Court and the R.C.A. have held none of the premises pointed out by the tenant-appellants such alternate accommodation as may defeat the respondents' claim. We find no reason to take a different view. Between the years 1987 and 1989 late Krishna Das, the then sole owner of the building, had sold three shops but that was an event which had taken place in the life- time of late Krishna Das and cannot have relevance for denying the claim of the respondent-landlords filed in the year 1995. Appeal dismissed.
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2002 (7) TMI 754
Whether the tender offered by the appellant with the rebate could have been accepted?
Whether such acceptance would affect the interests of any other party?
Held that:- Appeal allowed. Now the appellant made his offer of concessional rates along with the tender while Respondent No.5 made such offer after opening of the tenders. It is difficult to conceive that the Respondent No.5 who is a prudent businessman would not be aware of commercial practice of giving rebate or concession in the event of quick finalization of a transaction. What the appellant offered was part of the tender itself while the Respondent No.5 made such offer separately and much later.
There was nothing illegal or arbitrary on the part of Railway Administration in accepting the offer of the appellant, which was made at the time of submitting the tender itself.
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2002 (7) TMI 752
Issues Involved:
1. Whether the assessee can be treated as an assessee in default under section 201 for not deducting tax under section 192 on the so-called perquisite arising to employees by way of allotment of shares under its employees stock option plan (ESOP).
2. Whether the assessee is liable for payment of interest under section 201(1A) of the IT Act, 1961.
3. Whether Wipro Equity Reward Trust (WERT) is a conduit for Wipro Limited.
4. Issues relating to the valuation of shares in view of the lock-in period of 4 years.
Detailed Analysis:
1. Assessee in Default under Section 201:
The primary issue to be decided is whether the assessee can be treated as an assessee in default under section 201 for not deducting tax under section 192 on the so-called perquisite arising to employees by way of allotment of shares under its ESOP. The appellant argued that there is no employer-employee relationship between WERT (transferor) and the beneficiaries (transferees), thus no perquisite arises on the award of shares. The AO erred in treating the appellant-company as an assessee in default under section 201(1) of the Act for its alleged failure to deduct tax at source under section 192 of the Act. The shares were received by the beneficiaries from WERT, which was not the employer. The authorities below should not have treated WERT as a conduit.
2. Liability for Payment of Interest under Section 201(1A):
The appellant contended that the authorities below erred in imposing the liability mentioned above on the assessee even though there is no employer-employee relationship between WERT and the beneficiaries. The AO should have refrained from passing the order as the shares were received by the beneficiaries from WERT, which was not the employer. Consequently, the assessee is not liable to pay any interest under section 201(1A).
3. WERT as a Conduit for Wipro Limited:
The appellant argued that WERT was settled by Wipro Ltd. as an irrevocable trust, and it has been assessed to tax in its status as an employees' welfare trust. WERT has paid tax on the dividend income, capital gains, and income from other sources. The trust was created in conformity with section 79 of the Companies Act and under section 164(1)(iv) of the IT Act. The trust has been functioning within the objects enumerated in the trust deed, and there is no material on record to say that the trust was a conduit. The trust is a private discretionary trust, and the beneficiaries are the employees of the appellant and its affiliates. The income or assets of the trust, after paying the taxes distributed, do not amount to distribution in favor of the appellant.
4. Valuation of Shares in View of the Lock-in Period:
The appellant contended that the AO erred in arriving at the value of the perquisite arising on account of shares being awarded by WERT. The quoted price on a recognized stock exchange represents the price when a holder of shares is in a position to sell the shares, free from encumbrances. The employees receiving shares from WERT are prohibited from selling the shares during the period of lock-in covered by the undertaking executed by them. Thus, the employees cannot legally transfer nor deliver the shares to receive the benefit of the quoted price of the shares. Therefore, the quoted price cannot be applied in determining the value of the shares. The AO failed to address this aspect in the case of employees who have ceased to remain in the continuous employment of the company for the specified period following which the shares have reverted back to WERT.
Conclusion:
The Tribunal held that:
1. ESOP benefit is not income or perquisite taxable under section 17(2)(iii) for the assessment years 1997-98, 1998-99, and 1999-2000.
2. The assessee has acted bona fide in not deducting tax under section 192 for such benefit and hence cannot be treated as an assessee in default under section 201.
3. Consequently, the assessee is not liable to pay any interest under section 201(1A).
The Tribunal further held that the trust (WERT) is not a conduit for Wipro Limited. The trust has been in existence for more than 18 years and has been assessed to tax previously. The trust has been functioning within the objects enumerated in the trust deed, and there is no material on record to say that the trust was a conduit. The Tribunal refrained from dealing with the issue of valuation, as the orders under section 201(1) and 201(1A) were already canceled. Consequently, the appeals were allowed in favor of the appellant, and the orders of CIT(A) were set aside.
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2002 (7) TMI 751
Issues Involved:
1. Validity of reference to the Departmental Valuation Officer (DVO).
2. Adoption of Central Public Works Department (C.P.W.D.) rates versus State Public Works Department (State P.W.D.) rates.
3. Rejection of books of account and unexplained investment u/s 69 of the Income-tax Act, 1961.
Summary:
1. Validity of Reference to the Departmental Valuation Officer (DVO):
The assessee contended that the reference to the DVO by the Assessing Officer was unnecessary and unwarranted since the books of account were accepted. The Tribunal held that the Assessing Officer is authorized to refer to the DVO for determining the cost of construction, and there is no prohibition under the Income-tax Act against such a reference. The Andhra Pradesh High Court in Daulatram v. ITO and the Madras High Court in C.T. Laxmandas v. Asstt. CIT upheld the validity of such references u/s 55A. However, the Judicial Member dissented, stating that the DVO's report is not dependable evidence for cost determination and that the Assessing Officer must have cogent evidence to reject the disclosed cost.
2. Adoption of Central Public Works Department (C.P.W.D.) Rates versus State Public Works Department (State P.W.D.) Rates:
The assessee argued that the valuation should be based on State P.W.D. rates rather than C.P.W.D. rates. The Tribunal noted that the assessee did not provide evidence of State P.W.D. rates. The Judicial Member emphasized that the DVO is not a cost analyst and the C.P.W.D. rates are not applicable for non-metropolitan areas. The Third Member agreed that the valuation should be based on State P.W.D. rates, as supported by the Tribunal's decision in M.S. Ponraj v. ITO.
3. Rejection of Books of Account and Unexplained Investment u/s 69:
The Tribunal upheld the addition made by the Commissioner of Income-tax (Appeals) as unexplained investment u/s 69, despite the assessee's books being accepted. The Judicial Member disagreed, stating that the Assessing Officer must find defects in the books of account to invoke u/s 69. The Third Member concluded that the reference to the DVO without recording satisfaction was invalid, the valuation report was non est, and no addition was justified since the books were not rejected. The Madras High Court in K.K. Seshaiyer v. CIT supported this view, emphasizing that the actual cost recorded in the books should be accepted if no defects are found.
Conclusion:
The Third Member ruled in favor of the assessee, stating that no addition u/s 69 could be made based on the DVO's report. The assessee's appeals were allowed, and the matter was referred back to the regular Bench for appropriate orders.
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2002 (7) TMI 750
Issues Involved:
1. Deletion of addition made on account of difference in cost of construction.
Issue-wise Detailed Analysis:
1. Deletion of Addition Made on Account of Difference in Cost of Construction:
The Department appealed against the order of the CIT(A), Bhatinda, which deleted an addition of Rs. 82,210 made by the Assessing Officer (AO) due to a difference in the cost of construction. The case revolves around the construction of plinths by the assessee and four family members during the period from 30-3-1995 to 14-4-1995, as per an agreement dated 20-3-1995 with DP&SC.
Facts of the Case:
The assessee declared a total construction cost of Rs. 4,60,714, supported by a registered valuer's report estimating the cost at Rs. 4,59,614. However, the AO referred the matter to the Valuation Cell, which determined the cost at Rs. 8,52,500, resulting in a difference of Rs. 3,91,800. The assessee raised objections to the Valuation Officer's (VO) report and moved an application under section 144A for intervention. The VO defended his valuation, criticizing the registered valuer's report for discrepancies in measurements and alleged attempts to match the declared amount by the assessee.
The AO dismissed the assessee's claim of using different classes of bricks and additional expenditure of Rs. 48,440, deeming the bills and vouchers for third-class bricks as bogus. Consequently, the AO made a proportionate addition of Rs. 82,210.
Contentions Before CIT(A):
The assessee argued that the VO adopted high rates for materials and overestimated the number of bricks required. The assessee used first, second, and third-class bricks, supported by a certificate from the Inspector, Food Supplies, Jalalabad. The VO's valuation of bricks at Rs. 620 per 1000 was contested, with the assessee suggesting an average value of Rs. 450 per 1000. The labour charges were also disputed, with the assessee claiming a maximum rate of Rs. 100 per 1000 bricks, contrary to the VO's Rs. 502 per 1000. Additionally, the assessee highlighted the AO's failure to allow a 10% deduction for self-supervision, a standard practice. The assessee contended that the actual expenditure was Rs. 5,09,154, not Rs. 4,60,174 as determined by the AO. The assessee also claimed that any unexplained investment should be attributed to agricultural income, which is tax-exempt.
CIT(A)'s Conclusions:
The CIT(A) concluded that the assessee used different classes of bricks, as certified by the Inspector, Food & Supplies Department. The AO's labour charges were deemed excessively high, and the prevailing rates were significantly lower. The CIT(A) noted that the AO did not allow the standard 10% rebate for self-supervision. The CIT(A) determined the cost of construction at Rs. 5,09,154, aligning closely with the assessee's declared amount, and deemed the difference of Rs. 10,146 as insignificant. Consequently, the addition of Rs. 82,210 was deleted.
Arguments Before ITAT:
The Department's representative argued that the assessee's objections to the VO's report were general and not legally tenable. The Department reiterated that the bills for third-class bricks were bogus and that the claim of additional expenditure was an afterthought. The assessee's representative supported the CIT(A)'s order, emphasizing the correct appreciation of facts.
ITAT's Findings:
The ITAT upheld the CIT(A)'s order, agreeing that the assessee used different classes of bricks and that the AO's labour charges were excessively high. The ITAT noted the standard practice of allowing a 10% rebate for self-supervision and found the CIT(A)'s valuation reasonable. The ITAT also highlighted that the Department did not controvert the certificate from the Inspector, Food & Supplies Department. The ITAT dismissed the appeal, finding no justification to interfere with the CIT(A)'s order.
Conclusion:
The appeal by the Department was dismissed, and the CIT(A)'s order deleting the addition of Rs. 82,210 was upheld. The ITAT found the CIT(A)'s valuation of the cost of construction reasonable and supported by the facts of the case.
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2002 (7) TMI 749
Issues involved: Violation of sections 269SS and 269T regarding credit entries without account payee cheques or bank drafts, imposition of penalties under sections 271D and 269T, deletion of penalties by CIT(A), appeal by Revenue and Cross Objection by assessee.
Summary:
The Appellate Tribunal ITAT Lucknow, in the case involving violations of sections 269SS and 269T due to credit entries without account payee cheques or bank drafts, addressed the appeal of the Revenue and the Cross Objection of the assessee arising from the order of the ld. CIT(A)-II, Kanpur, dated 12-9-1994. During the assessment proceedings, it was found that there were credit entries on 31-3-1992, not through account payee cheques or bank drafts, amounting to Rs. 79,11,204. The Assessing Officer imposed penalties under sections 271D and 269T, which were later deleted by the ld. CIT(A) for the assessment year 1992-93. The Tribunal considered the contention that for a violation of section 269SS, there must be an involvement of transfer of money, which was not the case here. The Tribunal agreed with the decision of other benches and held that since there was no deposit as per the prescribed mode under section 269SS, the violation of provisions could not be accepted. It was also noted that there was no evidence to show that the violation was done knowingly or in defiance of the provisions. Therefore, the imposition of penalties was cancelled by the ld. CIT(A), a decision upheld by the Tribunal, resulting in the dismissal of the Revenue's appeal and the disposal of the assessee's Cross Objection accordingly.
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2002 (7) TMI 748
Issues Involved:
1. Accountability of the appellant for Rs. 1,10,000 plus interest.
2. Direction for payment of Rs. 50,000 by the appellant to the company.
3. Validity of the licence granted by the appellant to the company.
4. Consideration of the appellant's claim that no permanent structure was erected.
5. Appellant's contention regarding the deadlock in the company.
6. The role of the official liquidator in settling the claims of the creditors.
Detailed Analysis:
1. Accountability of the appellant for Rs. 1,10,000 plus interest:
The learned company judge directed that the appellant, Satbir Singh, is accountable to the company for Rs. 1,10,000 plus interest at 10% per annum from April 1, 1972, till the date of payment or the amount at which the claim of creditors may be settled by the official liquidator, whichever is lesser. This was based on the finding that the appellant had promoted the company for developing an orchard and setting up a canning factory, and had granted a licence to the company for these purposes. The judge observed that the company's balance-sheet and director's report indicated the establishment of the factory and development of the orchard, thus confirming the incurred expenses and the existence of a work of permanent character.
2. Direction for payment of Rs. 50,000 by the appellant to the company:
The appellant was directed to pay Rs. 50,000 received from the Lakhanis on behalf of the company within four weeks. The balance amount was to be paid within four weeks of requisition by the official liquidator after the claims had been settled. The judge found that the machinery and other assets remained with the Lakhanis, and thus, the appellant was held liable for the payment. The appellant's contention that the machinery should have been the responsibility of the Lakhanis was rejected.
3. Validity of the licence granted by the appellant to the company:
The court found that the appellant had indeed granted a licence to the company to develop the orchard and set up the factory. This was inferred from the appellant's own admissions and the company's balance-sheet, which showed significant expenditures on plant, machinery, and the development of the orchard. The judge noted that these constituted works of a permanent character, thus invoking the protection under Section 60(b) of the Easement Act, which prevents the revocation of a licence when such works have been executed.
4. Consideration of the appellant's claim that no permanent structure was erected:
The appellant's claim that no permanent structure was erected was dismissed. The judge highlighted that the balance-sheet showed expenditures on fixed assets and the development of the orchard. The judge concluded that the installation of machinery and development of the orchard over the years constituted permanent works, thereby validating the licence and the expenditures incurred.
5. Appellant's contention regarding the deadlock in the company:
The appellant argued that since there was a deadlock in the company since 1971, there was no possibility of revival, and therefore, no loss was suffered by the company. The judge dismissed this argument, stating that the deadlock did not negate the incurred expenses and the existence of a work of permanent character, which justified the directions for payment.
6. The role of the official liquidator in settling the claims of the creditors:
The judge directed that the claims of the creditors, including Bugg, on account of arrears or loans, be settled by the official liquidator within three months. The appellant's contention that the official liquidator had not conducted an enquiry was rejected, as the official liquidator had filed C.A. No. 583 of 1979, which was decided along with C.A. No. 138 of 1975. The judge emphasized that the official liquidator's role was crucial in finalizing the claims and ensuring the equitable distribution of the company's assets.
Conclusion:
The appeal was dismissed, and the directions of the learned company judge were upheld. The court found no merit in the appellant's arguments and emphasized the importance of the official liquidator's role in settling the claims. The judgment reinforced the principles of accountability and the protection of works of permanent character under the Easement Act.
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2002 (7) TMI 747
Issues:
1. Export Promotion Capital Goods Scheme - Non-fulfillment of export obligation by the petitioner.
2. Delay in deciding on the extension application by the 2nd respondent.
3. Invocation of bank guarantee by the 2nd respondent.
4. Lack of response from respondents 1 and 2.
5. Stay order on the invocation of the bank guarantee.
6. Direction to the 2nd respondent to decide on the extension application.
7. Consideration of fraud in the matter.
Issue 1: Export Promotion Capital Goods Scheme - Non-fulfillment of export obligation by the petitioner:
The petitioner, a company registered under the Companies Act, participated in the Export Promotion Capital Goods Scheme, which allowed the import of capital goods for manufacturing at a concessional rate of duty. An export obligation was attached, requiring the company to export goods worth three times the value of the machinery within four years. Due to various reasons, the petitioner could only fulfill a small portion of its export obligation, leading to the filing of an extension application to honor the obligation.
Issue 2: Delay in deciding on the extension application by the 2nd respondent:
The petitioner filed an extension application in 1995 due to difficulties in meeting the export obligation. However, the 2nd respondent did not respond to the application for an extended period, causing uncertainty for the petitioner regarding the status of the extension request. This delay in decision-making hampered the petitioner's ability to export goods and fulfill its obligation.
Issue 3: Invocation of bank guarantee by the 2nd respondent:
Despite the pending extension application, the 2nd respondent invoked the bank guarantee provided by the petitioner through a bank. The petitioner contested this action, highlighting the lack of a decision on the extension application and the consequent inability to fulfill the export obligation. The court stayed the invocation of the bank guarantee, emphasizing the need for a prompt decision on the extension application.
Issue 4: Lack of response from respondents 1 and 2:
The respondents, particularly the 1st and 2nd respondents, displayed apathy by not filing a counter or responding to the allegations made by the petitioner. This lack of engagement from the respondents further complicated the situation and delayed the resolution of the matter.
Issue 5: Stay order on the invocation of the bank guarantee:
An interim stay order was issued on the invocation of the bank guarantee, preventing immediate action by the 2nd respondent. However, the lack of progress or counter-petition from the respondents prolonged the legal proceedings, leaving the petitioner in a state of uncertainty.
Issue 6: Direction to the 2nd respondent to decide on the extension application:
The court directed the 2nd respondent to make a decision on the extension application within two months of the court order. This directive aimed to provide clarity to the petitioner regarding the extension of time to fulfill the export obligation and to ensure a timely resolution of the matter.
Issue 7: Consideration of fraud in the matter:
The court noted that there was no allegation or evidence of fraud in the case related to obtaining the bank guarantee or the export obligation. The delay and apathy displayed by the authorities were not indicative of fraudulent behavior, leading to the partial success of the writ petition and the vacation of the interim stay order on the bank guarantee invocation.
In conclusion, the judgment addressed the challenges faced by the petitioner in meeting its export obligation under the Export Promotion Capital Goods Scheme, emphasizing the need for timely decisions by the concerned authorities and highlighting the importance of clarity and responsiveness in such matters.
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2002 (7) TMI 746
The Appellate Tribunal CEGAT, New Delhi ruled in favor of the appellants against the disallowance of exclusion of freight and insurance charges from the assessable value of goods. The Tribunal cited a previous case where it was decided that such charges should not be added to the assessable value. The Commissioner's order was set aside, and the appeals of the appellants were accepted.
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2002 (7) TMI 745
Issues Involved:
1. Whether the goods cleared by the appellants can be considered as clearances made for captive consumption.
2. Whether the appellants have suppressed facts from the department warranting demand of duty for a larger period under the proviso to Section 11A(1) of the CE Act, 1944.
3. Eligibility to Modvat Credit on the removals made to Kilburn Electricals Ltd (KEL).
Detailed Analysis:
Issue 1: Captive Consumption
The appellants challenged the order demanding duty for goods cleared under various gate passes, arguing these were for captive consumption. The tribunal found that although the factory was taken over by KEL from 1-4-88, the appellants continued to use their L-4 licence and filed statutory returns in their name till November 1988. The goods were shown as cleared for captive consumption but were actually sent to KEL's factory at Ambattur. The notification No. 217/86, which permits removal for captive consumption, applies only within the factory of production. Since the goods were moved to another factory, the tribunal held that these clearances cannot be considered as captive consumption. Thus, duty is demandable for these removals.
Issue 2: Suppression of Facts and Extended Limitation
The appellants argued that they maintained statutory documents and regularly filed returns, thus longer limitation should not apply. The tribunal noted that appellants did not file classification and price lists for captive consumption and misrepresented the removals as within their factory. The removals to KEL were discovered only through statements during investigations. The tribunal concluded that the appellants withheld information with intent to evade duty, justifying the invocation of the extended period of limitation under the proviso to Section 11A(1) of the CE Act, 1944.
Issue 3: Eligibility to Modvat Credit
The tribunal observed that since the goods were taken over by KEL, any claim for Modvat Credit should have been raised by KEL, not the appellants. As KEL was not in appeal, the claim for Modvat Credit by the appellants was deemed devoid of merit.
Conclusion:
The tribunal upheld the order of the lower authority, confirming the duty demand and penalties imposed on the appellants. The appeal was rejected, affirming that the clearances were not for captive consumption, the extended period of limitation was correctly invoked, and the appellants were not eligible for Modvat Credit. The additional documents submitted by the appellants, including court orders and industrial tribunal proceedings, were found irrelevant to the case.
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2002 (7) TMI 744
Issues:
1. Barred by limitation - Recovery proceedings for a loan from 1986
2. Recovery of loan as arrears of land revenue
3. Sale made by U.P. Financial Corporation
4. Legality of proceeding against guarantors after taking possession of assets
5. Jurisdiction for recovery proceedings under specific acts
Issue 1 - Barred by Limitation:
The petitioners claimed that recovery proceedings for a loan from 1986 were time-barred. However, the court found that the petitioners failed to provide the necessary factual foundation or documents to support this claim. Moreover, the petitioners acknowledged their liability in letters to the U.P. Financial Corporation, which prevented the plea of limitation. The court concluded that the recovery proceedings against the guarantors were not barred by limitation.
Issue 2 - Recovery of Loan as Arrears of Land Revenue:
The petitioners argued that the loan given to the company could not be recovered as arrears of land revenue. They cited a Full Bench decision but failed to provide relevant documents for consideration. The court determined that the loan fell under the U.P. Public Moneys (Recovery of Dues) Act, 1972, and not a State Sponsored Scheme, thus rejecting the petitioners' plea.
Issue 3 - Sale Made by U.P. Financial Corporation:
The petitioners questioned the sale of the company's assets by the U.P. Financial Corporation, alleging vague irregularities. However, the court noted that the petitioners did not establish a proper factual foundation for this claim. The court highlighted that the corporation had followed due process in the sale, offering the company an opportunity to purchase the assets.
Issue 4 - Legality of Proceeding Against Guarantors After Taking Possession of Assets:
The petitioners contended that after the corporation took possession of the company's assets, proceeding against the guarantors was not permissible. They relied on a previous case but failed to consider that the corporation had already sold the assets before initiating recovery proceedings against the guarantors. The court concluded that the previous case cited was not applicable to the present situation.
Issue 5 - Jurisdiction for Recovery Proceedings Under Specific Acts:
The petitioners argued that recovery proceedings should have been under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, instead of the U.P. Public Moneys (Recovery of Dues) Act, 1972. The court noted a difference in opinions on this matter and referred the case for further consideration. Pending a final decision, the court allowed the U.P. Financial Corporation to proceed under specific acts for recovery.
In conclusion, the court directed the case to be listed after a related judgment for further clarity. The interim order was modified to allow the U.P. Financial Corporation to proceed under specific acts for recovery, pending the final decision in the related case.
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2002 (7) TMI 743
Issues Involved:
1. Interpretation of sections 4(1), 5(1)(a), 5(1)(b), 5(1)(c), and 5(1)(d) of FERA 1947.
2. Whether RBI permission to execute contracts includes permission to spend money necessary for executing such contracts.
3. Entitlement to adjust, deduct, or set off amounts due without RBI permission.
4. Imposition of penalty for technical or venial breaches.
5. Authority to alter charges without providing an opportunity to meet the same.
6. Adherence to settled principles of law in adjudicating the matter and disposing of the appeal.
Detailed Analysis:
Re Show Cause Notice No. 29:
The charge was for selling foreign exchange amounting to KD 670 to staff in Kuwait, contravening section 4(1) of FERA 1947. The Special Director found that the amounts were "lent" rather than "sold," which also contravened section 4(1). The Appellants argued that altering the charge from "selling" to "lending" without notice violated principles of natural justice. The court agreed that altering charges midstream without notice was impermissible and discharged the show-cause notice. The court also noted that the breach was technical and under a bona fide belief, thus no penalty should be imposed.
Re Show Cause Notice No. 32:
The charge was for receiving Rs. 2596-80 from Manipal Engg. College and placing it to the credit of M/s. Karl Kolb, contravening sections 5(1)(d) and 5(1)(a). The adjudicating authority found no loss of foreign exchange and termed it a technical breach. The court held that for technical or venial breaches, no penalty should be imposed, referencing Hindustan Steel Ltd. v. State of Orissa.
Re Show Cause Notice Nos. 35 and 36:
Show-cause notice No. 35 involved payments of Rs. 827-70, and No. 36 involved acknowledging a debt of Rs. 3,000 to M/s. A.B. Turitz, contravening section 5(1)(c). The court found these transactions were in the usual course of business and technical breaches. Applying the principles from Hindustan Steel Ltd., the court held no penalty should be imposed for such breaches.
Re Show Cause Notice No. 37:
The charge was for receiving Rs. 4500 from M/s. Flexicons Ltd. and crediting it to M/s. Mannesmann Pulvermetal Gmbh, contravening section 5(1)(d). The adjudicating authority altered the charge to section 5(1)(aa) during proceedings, which the court found impermissible without proper notice. The court reiterated that altering charges midstream without notice violated natural justice principles and discharged the show-cause notice.
Re Show Cause Notice Nos. 38 and 39:
Show-cause notice No. 38 involved making a payment of Rs. 28,582-83, and No. 39 involved acknowledging a debt of DM 22,719-25, contravening sections 5(1)(c) and 5(1)(b). The appellate authority found the transactions were adjustments in the usual course of business. The court held that such technical breaches should not attract penalties, referencing Hindustan Steel Ltd. The court also noted that the appellate authority selectively considered evidence and failed to consider the entire material.
Conclusion:
The appeal succeeded, and the impugned judgments and orders were set aside. The court emphasized the importance of adhering to principles of natural justice and the need for proper notice before altering charges. The court also highlighted that penalties should not be imposed for technical or venial breaches, especially when actions were under a bona fide belief.
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2002 (7) TMI 742
Issues Involved:
1. Refund or security for Rs. 25 crores under Section 9 of the Arbitration and Conciliation Act, 1996.
2. Delivery of shares by the respondents.
3. Jurisdiction of the court under the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992.
4. Applicability of Section 42 of the Arbitration and Conciliation Act, 1996.
5. Interpretation of Section 9B of the Special Courts Act.
6. Legislative scheme and the overriding effect of the Special Courts Act.
Detailed Analysis:
1. Refund or Security for Rs. 25 Crores under Section 9 of the Arbitration and Conciliation Act, 1996:
The petitioner, Ganjam Trading Co. Pvt. Ltd., sought a direction for the respondents, Panther Investrade Ltd. (PIL) and Ketan Parekh, to refund or furnish security for Rs. 25 crores paid for the purchase of shares under an agreement dated January 19, 2001. The agreement contained an arbitration clause, and the petitioner intended to invoke it for dispute resolution while seeking interim protection.
2. Delivery of Shares by the Respondents:
The petitioner claimed that the respondents had not delivered the shares as agreed. The respondents relied on a letter dated March 29, 2001, claiming delivery of shares worth Rs. 25 crores, evidenced by a receipt with initials. However, the petitioner strongly denied this, and the court found the respondents' assertion of delivery doubtful. Consequently, the court inclined to direct PIL to secure the petitioner's claim if arbitration was initiated within a month.
3. Jurisdiction of the Court under the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992:
Ketan Parekh, a notified party under the Special Courts Act, contended that he could not be proceeded against under the Arbitration and Conciliation Act, 1996, due to the special jurisdiction conferred by Section 9B of the Special Courts Act. The court examined the legislative scheme, noting that the Special Courts Act was enacted to address irregularities and malpractices in securities transactions, establishing a special court with exclusive jurisdiction over such matters.
4. Applicability of Section 42 of the Arbitration and Conciliation Act, 1996:
The petitioner argued that Section 42 of the Arbitration and Conciliation Act, 1996, conferred jurisdiction on the court over arbitral proceedings. Section 42 states that once an application is made in a court regarding an arbitration agreement, that court alone has jurisdiction over subsequent applications and proceedings. However, the court found that this provision did not override the special jurisdiction conferred by the Special Courts Act.
5. Interpretation of Section 9B of the Special Courts Act:
Section 9B of the Special Courts Act gives the special court jurisdiction and powers under the Arbitration Act, 1940, to decide questions related to matters or claims mentioned in Section 9A. The court held that this jurisdiction extended to the re-enacted Arbitration and Conciliation Act, 1996, due to Section 8 of the General Clauses Act, 1897, which ensures references to repealed enactments are construed as references to the re-enacted provisions unless a different intention appears.
6. Legislative Scheme and the Overriding Effect of the Special Courts Act:
The court noted that the Special Courts Act is a self-contained code with an overriding effect over other laws, as stated in Section 13. This section ensures that the provisions of the Special Courts Act prevail over any inconsistent laws. Therefore, the court concluded that it lacked jurisdiction to entertain arbitration proceedings involving a notified person under the Special Courts Act, despite the Arbitration and Conciliation Act, 1996.
Conclusion:
The petition was allowed against respondent No. 1 (PIL) to the extent of securing the petitioner's claim and dismissed against respondent No. 2 (Ketan Parekh) due to the special jurisdiction conferred by the Special Courts Act. The court clarified that this judgment would not affect the rights of other financial institutions involved.
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2002 (7) TMI 741
Issues Involved:
1. Whether the UP Financial Corporation, having invoked Section 29 of the State Financial Corporation Act and taken possession of the unit, is precluded from resorting to personal guarantees against the petitioner and other guarantors.
2. Whether the UP Financial Corporation acted justly and fairly in proceeding against the guarantors while keeping the assets of the company in its possession.
3. Whether the UP Financial Corporation is entitled to charge compound interest on the loan after taking possession of the unit.
4. Whether recovery should first be made against the mortgaged property of the petitioner before proceeding against other personal properties.
Issue-wise Detailed Analysis:
1. Invocation of Personal Guarantees:
The petitioner contended that the UP Financial Corporation, having invoked Section 29 and taken possession of the unit, should not proceed against personal guarantees. The court rejected this contention, citing the Supreme Court's decision in *State Bank of India v. Indexport Registered* which held that the liability of the guarantor is co-extensive with that of the principal debtor. The court emphasized that the creditor can proceed against the guarantor without first exhausting remedies against the principal debtor. The UP Financial Corporation's action was deemed permissible even after taking possession of the company's unit under Section 29.
2. Fairness in Proceeding Against Guarantors:
The petitioner argued that the UP Financial Corporation should not proceed against guarantors while keeping the company's assets. The court noted that fairness and justice must be evaluated based on the facts and circumstances of each case. The court found that the petitioner and other directors/guarantors did not make efforts to repay the loan, and the unit's sale could not take place due to hurdles created by them. Therefore, the UP Financial Corporation's action was not deemed unfair or unjust.
3. Charging Compound Interest:
The petitioner contended that the UP Financial Corporation should not charge compound interest after taking possession of the unit. The court rejected this contention, stating that the liability for interest is dependent on the loan agreement terms. Interest would continue to accrue in accordance with the agreement until the loan is repaid, regardless of the possession status of the unit.
4. Recovery Against Mortgaged Property:
The petitioner argued that recovery should first be made against the mortgaged property before proceeding against other personal properties. The court directed the tehsildar to determine whether any personal property of the petitioner had been mortgaged. If mortgaged, recovery should first be made against such property, and only thereafter against other personal properties, provided the Collector issues a certificate as per Section 4(2)(b) of the UP Public Moneys (Recovery of Dues) Act, 1972. The tehsildar was instructed to decide this within one month, and recovery proceedings against the petitioner were stayed until then.
Conclusion:
The court allowed the writ petition to the extent of directing the tehsildar to determine the mortgage status of the petitioner's personal property and proceed accordingly. The court emphasized that the UP Financial Corporation's actions were legally permissible and not unfair or unjust. The decision underscores the co-extensive liability of guarantors and the creditor's right to choose the remedy.
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