2019 (3) TMI 1079

Bogus purchases u/s 69C - scrutiny assessment - assessee explained that only profit element can be added against the addition made by the AO - HELD THAT:- The assessee is engaged in the business of construction and development work. The case of the assessee was selected for scrutiny, therefore, notice u/s 143(2) and thereafter notice u/s 142(1) were issued to the assessee. The assessee filed the copies of audit report, profit and loss account and balance sheet etc. Admittedly, there cannot be any development work/construction work without using the material, therefore, in such type of cases, the profit element can be added. At the same time, it was the duty of the assessee to prove consumption.

Thus, considering the totality of facts, we deem it appropriate to sustain the addition @ 25% (minus the GP already declared by the assessee) of such bogus purchases as against the total addition made by the ld. Assessing Officer. Thus, the appeal of the assessee is partly allowed.

2019 (3) TMI 1071

Capital gain computation - FMV determination as on 01.04.1981 - set-off of loss from shares against capital gain - as per Tribunal AO has to rework the capital gains by adopting the FMV for each cent of land as on 1.4.81 at ₹ 9,900 and if the “capital gains” as arrived at exceeds the amount of loss from purchase and sale of shares, the income from capital gains would become the main source of income and therefore, the loss from purchase and sale of shares would be allowed to be set off against such capital gains - HELD THAT:- No substantial question of law arises in the present Appeal filed by the Revenue and we hold that the findings of fact arrived at by both the Appellate Authorities below are based on relevant and cogent materials before them. Since both the sale deeds of comparable cases were produced by the Assessee before the CIT (Appeals), who had opportunity to compare the location and area of land involved in the said comparable cases, the findings of fact arrived by him on that basis cannot be said to be perverse. It cannot also be said to be perverse merely because the survey numbers are not discussed in the orders passed by the Appellate Authorities.

Since the two documents were on the record of the Appellate Authority, in our opinion the said authority rightly held that the value depends upon several factors like area of the property, location and proximity of the area, comparative factors like instances of sale, guideline value etc. Since all these relevant factors were taken into account by the Appellate Authorities below, we do not find any perversity in those orders and therefore, the same does not give rise to any substantial question of law requiring our further consideration under Section 260-A - Decided against revenue.

2019 (3) TMI 1070

Rectification u/s 154 - deduction allowed under 80IA requires to be reduced from the profits and gains for the purpose of computing the deduction under Section 80HHC - HELD THAT:- Tribunal was perfectly justified in rejecting the Revenue's Appeal on the ground that a debatable issue could not have been the subject matter of proceedings u/s 154 and that the Assessing Authority by invoking Section 154 providing for the rectification of a mistake apparent on the face of the record, could not restrict the benefit of deduction under Section 80IA and 80HC of the Act.

It is true that the question of law as to whether the relief under Section 80IA should be deducted from the profits and gains by the business before computing the relief under Section 80 HC or not, is a question which is still open and has been referred to a Larger Bench of this Court in the case of MM Forgings [2002 (3) TMI 10 - MADRAS HIGH COURT] and the matter is also said to be pending before the Hon'ble Supreme Court in the case of Micro Labs. [2015 (12) TMI 708 - SUPREME COURT]

Since in the present case, the said benefit of deduction was restricted by invoking Section 154 of the Act, we are satisfied that no substantial question of law arises for our consideration.

2019 (3) TMI 1069

Stay petition on recoveries - additional time to deposit demand - HELD THAT:- In our order dated 28th February, 2019, we had directed the Petitioner to present revised time table for depositing amount on affidavit. Pursuant to such directions, the Petitioner has filed an affidavit dated 7th March, 2019, in which, revised time schedule for meeting with the requirements of deposit of ₹ 10 Crores.

We find that the additional time as requested, can be granted, however, subject to certain conditions.

We are informed that the parent company of the Petitioner has to receive a subsidy from the State of Maharashtra for ₹ 48 Crores. The subsidy is not yet received. If such an amount is received, the Petitioner should deposit the entire amount of ₹ 10 Crores minus what is already recovered by the department, as soon as subsidy is received. If the Petitioner misses any if the installments, it would be open for the department to recover the tax.

2019 (3) TMI 1068

Appropriate method of income recognition in hire purchase transaction - Internal Rate Return (IRR) OR Equated Sum (ESM) - CBDT Circular dated 13.01.1998 - SOD method for book keeping - HELD THAT:- The said questions are covered by a decision of this Court in the case of Commissioner of Income Tax Vs. Ashok Leyland Finance Ltd. [2012 (7) TMI 156 - MADRAS HIGH COURT] admittedly, the Assessee has been following the same method of E.M.I for bifurcation of its income into Principal and interest component for all these years in question. The S.O.D method gives higher finance charges (interest) for the initial years and lower finance charges (interest) for the later years, i.e, the Sum of Digits is sum total of the number of years e.g. If the Hire Purchase Agreement is for 10 years, the SOD is 55 (1+2+3+4+5+6+7+8+9+10 = 55).

Therefore, total financial charges for the first year would be 10/55, for the second year 9/55, for third year 8/55 and so forth which would clearly give higher financial charges for interest taxable in the first year. This SOD method even though adopted by the Assessee in its Book of Accounts on the basis of Guidelines issued by the Institute of Chartered Accountants of India was not adopted in the Returns of Income filed by it which consistently adopted EMI method for taxability of interest income all these years. Since, for the previous assessment years, this Court has already approved such bifurcation of income and has held that interest income (Finance charges) on consistently adopted basis of E.M.I. would be taxable in the hands of the Assessee, the mere change of Accounting method in its Book of Accounts on the basis of S.O.D. does not alter the position in the tax in the hands of the assessee.

Since in the case of Ashok Leyland Finance Ltd., (supra) the Coordinate Bench of this Court has upheld the taxability with regard to interest income on EMI method, which has been consistently followed, there is no reason to take a different view in the matter for the present Assessment years, in this case. - Decided in favour of assessee.

2019 (3) TMI 1067

Addition of capital gain - sale of property as taxable u/s 50C - transfer of asset u/s 2(47) - possession of property given in which year? - property purchased through agreement to sale - HELD THAT:- Assessee had purchased the property through an agreement to sell in 1987 and had sold the same again through an agreement to sell in 1991.The assessee had given possession to the buyer in the year 1987.

The buyer had also confirmed the same in response to the enquiry conducted by the AO. The buyer has also filed evidences to support that she was in possession all along from the year 1991. AO has not brought any material to the contrary to rebut the evidences submitted by the assessee and by the buyer Smt. Santosh Sareen.

The contention of the assessee is supported by the definition of transfer in section 2(47) clause (v) of the Act whereby ‘transfer’ in relation to capital assets includes any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act. As per section 53A of the Transfer of Property Act, as applicable in the year 1991, an agreement to sell need not be registered if the transferee has, in part performance of the contract, taken possession of the property and continues in possession of the same.

In the present case, the transferee has taken possession in the year 1991 and has continued to be in possession of the property and hence, transfer was complete in the year 1991 in view of clause (v) of section 2(47) of the Income Tax Act.

In the sale deed the total consideration has been stated at ₹ 4,50,000/- and the details of the cheque and mode of payment is stated in this sale deed at internal page 8 Paper Book page 24. This fact supports the case of the assessee that the assessee had sold this property way back in the year 1991. In view of these facts, the AO and the Ld. CIT (A), both, were not justified in drawing an adverse inference merely on the ground that the assessee had failed to produce the bank statement for the year 1991.

From the assessment order, it is also evident that the assessing officer has made a direct inquiry from the buyer Smt. Santosh Sareen and she also has confirmed having bought this property from the assessee in the year 1991.

The allegation of the assessing officer that the property has been sold in the year 2009, when the assessee has executed the sale deed also ignores the fact that the sale deed has been executed by the assessee in the capacity of General Power of Attorney holder and not as an owner. This fact is evident from the sale deed itself which is between Smt. Lilawati Kapur, the original owner as the seller and Smt. Santosh Sareen as the buyer.

We hold that the sale of this property by the assessee has taken place in the year 1991 and the AO was not justified in taxing the capital gain arising on the sale of this property in the year under consideration. As regards invoking the provision of section 50Cof the Act, the same will come to be attracted only when sale has taken place during the year. As we have held that the sale by the assessee stood completed in the year 1991, there is no question of invoking the provision of section 50C. Accordingly, the addition made by the assessing officer as long term capital gains is directed to be deleted. - Decided in favour of assessee.

2019 (3) TMI 1066

Addition u/s 69 - cash deposit explained by the assessee as gift received from his father-in-law and mother-in-law - link the sale proceeds of agricultural land received by her father-in-law with the amounts given as hand loans to various persons - HELD THAT:- The assessee was unable to explain as to why the sale proceeds received on 05.04.2006 were deposited in the bank account of assessee between the period 01.04.2007 to 31.03.2008. The perusal of deposits made by the assessee shows that the amounts were deposited in bits and pieces totaling ₹ 13,88,500/-. In case the amount was available with the assessee on the sale of properties by her in-laws, then where was the need to deposit the amount in bits and pieces during the month of December, 2007 and thereafter, in March, 2008. The said tabulated details are available at page 21 of appellate order.

The assessee has failed to link the sale proceeds of agricultural land received by her father-in-law with the amounts given as hand loans to various persons. The whole exercise is an afterthought by the assessee and the amount if received after the death of father-in-law should be available with the assessee in lump sum and there was no requirement to deposit the amount in bank in bits and pieces on different dates. There is no merit in the stand of assessee in this regard. Hence, the assessee has failed to explain the source of deposits and in the absence of any evidence linking its claim to the evidences available, the addition made by authorities below is upheld in the hands of assessee. - Decided against assessee.

2019 (3) TMI 1065

Addition u/s 69C - bogus non-genuine expenditure - GP rate determination - HELD THAT:- As per the chart reproduced by Ld. CIT(A) at Pg. No. 16 of the impugned order, assessee was having a turnover of ₹ 10.19 Crores in AY. 2008-09 and in that year, the assessee reported GP percentage at 5.20%. In AY. 2011-12, the turnover reported by the assessee is ₹ 21.83 Crores and assessee disclosed GP rate at 3.44% and the tribunal adopted GP rate of 3.50% in that year. Going by these facts and the basis adopted by the Tribunal in that year that when the turnover goes up, GP rate goes down slightly.

Thus we feel it proper to adopt GP rate of 3.84% being average of GP rate declared by the assessee at 3.73% and GP rate of 3.95% after considering the addition made by the AO. - Decided partly in favour of assessee.

2019 (3) TMI 1064

Disallowance u/s.40A(3) - payment to a single party in a single day - payments made to the transporters in cash in excess of ₹ 20,000/- - HELD THAT:- Payment more than ₹ 20,000/- in aggregate to a single party in a single day could not be declined prior to the A.Y.2009-10. It is not in dispute that the present case is in connection with the A.Y.2005-06, therefore, undoubtedly, the provision of aggregate payment to a single party in a single day would not applied in the present assessment year of the assessee i.e.2005-06.

Addition on account of payment made to transporter in excess of ₹ 20,000/- u/s.40A(3) the assessee has given the PAN Nos. of some parties to whom the payment was made. With regard to some parties whose PAN Nos. have not given. Since the claim of the assessee has not been verified on the basis of evidence given by the assessee, therefore, we are of the view that the claim of the assessee is liable to be verified in the light of evidence adduced before us in accordance with law. Accordingly, we set aside the finding of the CIT(A) on this issue and direct the Assessing Officer to examine the claim of the assessee afresh after providing an opportunity of being heard to the assessee in accordance with law. Accordingly this issue is decided in favour of the assessee.

Addition as suppressed production - information was received from Commissioner of Central Excise and Customs Aurangabad that the assessee indulged in suppression of production and clandestine removal of finished products without payment of excise duty - HELD THAT:- The addition was raised on the basis of the information received from the Central Excise and Customs, Aurangabad dated 29.03.2010. The suppression of production was assessed on the basis of different criteria reported by the IIT, Kanpur in their Technical Opinion Report. The assessee challenged the addition before the Custom Excise and Service Tax Appellate Tribunal (CESTAT) who deleted the addition. The CIT(A) has also deleted the addition raised by the Assessing Officer on the basis of the decision of the Custom Excise and Service Tax Appellate Tribunal (CESTAT). We also find that this question has already came up before the Hon’ble ITAT which has been answered in favour of the assessee. See BHAGYALAXMI STEEL ALLOYS PVT. LTD. [2015 (11) TMI 14 - ITAT PUNE]and SRJ PEETY STEELS (P) LTD. VERSUS ADDL. CIT [2015 (1) TMI 1228 - ITAT PUNE] - Decided in favour of the assessee

2019 (3) TMI 1063

Reopening of assessment - receipt of accommodation entries - proof of independent application of mind by AO - as per AO assessee had not filed any return of income - information received from the Investigation Wing that the assessee was a beneficiary of accommodation entries received from certain established entry operators identified by the Investigation Wing - HELD THAT:- As decided in PR. COMMISSIONER OF INCOME TAX VERSUS RMG POLYVINYL (I) LTD. [2017 (7) TMI 371 - DELHI HIGH COURT] there was a failure of application of mind by the AO as it had proceeded on two wrong premises, one regarding non-filing of the return and second regarding the extent of accommodation entries - The court was unable to discern the link between the tangible material and the formation of the reasons to believe that income had escaped assessment. The information received from the Investigation Wing cannot be said to be tangible material per se without a further inquiry being undertaken by the Assessing Officer and in the present case, the AO had deprived himself of that opportunity by proceeding on the erroneous premise that the assessee had not filed the return when in fact it had.

we uphold the findings of the Ld. CIT (A) in holding that the initiation of reassessment proceedings in the instant case was bad in law and not sustainable - Decided in favour of assessee.

2019 (3) TMI 1062

Tribunal power to extend the period of stay - Stay of recovery of outstanding demand - delay in non disposal of the appeal - HELD THAT:- The law is by now well settled that if the delay in non-disposal of the appeal is not attributable to the assessee, then the Tribunal has power to extend the period of stay even beyond the time limit laid down in third proviso to section 254(2A) of the Act.

Reference may be made to the decision of Pepsi Foods (P) Ltd. v. ACIT, [2015 (5) TMI 655 - DELHI HIGH COURT] which was followed by M/s. SAP Labs (I) Pvt. Ltd. v. ACIT, [2016 (2) TMI 398 - ITAT BANGALORE]. There are no change in the facts and circumstances of the case as it existed when the tribunal granted an order of stay. In these circumstances, we are of the view that there should be an order of stay for a period of 6 months from today or till the disposal of the appeal of the assessee, whichever is earlier.

2019 (3) TMI 1061

Penalty u/s 271(1)(c) - sale proceeds of the agricultural land - capital gain tax - land sold by the assessee was a ‘capital asset’ within the meaning of section 2(14)(ii) and, therefore, the assessee was liable to capital gain tax - HELD THAT:- An identical issue had come up in the case of CIT vs. Rajeev Bhatara [2014 (2) TMI 71 - PUNJAB AND HARYANA HIGH COURT] wherein it was the assessee’s plea before the AO that no capital gain tax was imposable in his case as the property which he had sold was situated beyond 8 Kms from the municipal limits of Panipat.

After collecting information regarding the distance from various authorities, the Assessing Officer came to the conclusion that the property was situated within 8 Kms of municipal limits of Panipat. Consequently, the Assessing Officer rejected the assessee’s claim and brought capital gain to tax and also levied penalty. While allowing the claim of the assessee, the ITAT noted that the assessee had furnished a certificate from the Sub Divisional Engineer wherein it was specified that the distance from the Panipat Municipal Board to the village where the impugned land was situated was 8.2 Kms. It was also noted by the Tribunal that there were various certificates wherein different distances had been mentioned. After considering the matter, the ITAT came to the conclusion that there was no intention on the part of the assessee to furnish inaccurate particulars of income. - Decided in favour of assessee.

2019 (3) TMI 1060

Disallowance u/s 14A r.w.r 8D - own funds far exceeded the investment - HELD THAT:- We find that it is undisputed fact that assessee’s own funds far exceeded the investments made by the assessee, the details of which have been placed on record.

Therefore, in terms of binding decision of Hon’ble Bombay High Court rendered in CIT Vs. Reliance Utilities & Power Ltd. [2009 (1) TMI 4 - BOMBAY HIGH COURT] & CIT Vs. HDFC Bank Ltd. [2014 (8) TMI 119 - BOMBAY HIGH COURT], a presumption was to be drawn in assessee’s favor that the investments were made out of interest free funds available with the assessee unless the revenue authorities could prove the nexus of borrowed funds with the investments made by the assessee. Nothing on record suggest such nexus. Therefore, interest disallowance u/r 8D(2)(ii) could not be held to be justified

additional expense disallowance - As held by ACIT Vs. Vireet Investment (P.) Ltd. [2017 (6) TMI 1124 - ITAT DELHI] wherein it has been held that only exempt income yielding investments were to be considered to arrive at the said disallowance. Therefore, the additional expense disallowance, as computed by Ld. AO could not be sustained. Therefore, we find no infirmity in the stand of Ld. first appellate authority.

Provision for Mark to Market Losses [MTM] - HELD THAT:- CIT(A) correctly deleted both the additions by relying upon its own decision in assessee’s own case for AY 2011-12.

Aggregate disallowance u/s 14A read with Rule 8D which comprised-off of interest disallowance u/r 8D(2)(ii) and expense disallowance u/r 8D(2)(iii) - AY 2012-13 - HELD THAT:- The assessee’s submissions as extracted in the quantum assessment order reveal that assessee’s own funds far exceeded the investment and therefore, no interest disallowance was justified in the absence of nexus of borrowed funds with the investments. So far expenses disallowance is concerned, it is undisputed fact that no exempt income has been earned by the assessee during impugned AY and therefore, no disallowance on this account

2019 (3) TMI 1059

TDS u/s 194C - payment made to Vehicle Booking Agents who have arranged vehicles for the company on a contractual basis as and when required - addition u/s 40(a)(ia) - HELD THAT:- There is no material on record to determine whether expenditure was incurred for payment to contractors, who are in the business of plying, hiring or leasing goods carriage and provisions of section 194C(6) has application.

A.O. had also merely mentioned in the impugned assessment order that the payments are made to vehicle booking agents, since there is no clarify as to whether payments are made to contractors or agents, in the interest of justice and equity, we are of the view that the matter needs to be examined afresh by the AO. The assessee shall produce necessary evidences that the payment was made to contractors, who are in the business of plying of vehicles, goods carriages etc. and not to agents as alleged by the Assessing Officer - Decided in favour of revenue for statistical purposes.

Disallowance being employees’ contribution to PF and ESI u/s 36(1)(va) - payment was made within the due date specified u/s 139(1) - HELD THAT:- The Hon’ble jurisdictional High Court in the case of Merchem Limited (2015 (9) TMI 560 - KERALA HIGH COURT) had categorically held that employees’ contribution to PF and ESI, if not paid within the due date mentioned in the respective statute cannot be allowed as a deduction u/s 36(1)(va) - We hold that the Assessing Officer has correctly disallowed the sum - Decided in favour of revenue

2019 (3) TMI 1039

Entitlement to deduction u/s 80HHC (1A) - Non compliance with the mandatory conditions - HELD THAT:- We have no iota of doubt that the conditions prescribed under Section 80HHC (1A) of the Act read with Section 80HHC (4A) of the Act are mandatory and cannot be held to be directory in nature and the Assessee cannot claim benefit under the said provisions as Supporting Manufacturer, in the absence of relevant Certificate from the Export House, and the Report of the Chartered Accountant, as stipulated therein.

The definition of 'Supporting Manufacturer' in Clause (d) of Explanation to the said proviso also clearly stipulates that to the Supporting Manufacturer, who is manufacturing or processing goods or merchandise and selling such merchandise to an Export House or a Trading House, for the purpose of export, the claim of deduction is given under Sub-section (1A) of Section 80HHC to support and give incentive to such Supporting Manufacturers, as indicated above. The contention raised on behalf of the assessee that these conditions can be taken as directory is, therefore, liable to be rejected and the compliance of these conditions is, therefore, held to be mandatory. Since, admittedly, the assessee, in the present case before us, in none of the Assessment Years, has complied with these conditions, he is not entitled to deduction under Section 80HHC (1A) of the Act, at all.

Reopening of assessment - Reopen on the basis of CIT(A) order in subsequent year - HELD THAT:- Coming to the issue of Reassessment under Section 147/148 of the Act, we not only find that pre-amendment, the time limit for issuance of notice was up to 10 years, as pointed out by the learned Standing Counsel for the Revenue, but, we also are of the view that once we come to the conclusion that in the absence of compliance with the mandatory conditions the Assessee is not at all entitled to the said deduction under Section 80HHC (1A) of the Act, the resort to Section 147/148 of the Act by way of Reassessment for disallowing the said deduction to the assessee or in the original assessment proceedings becomes academic and on the ground of limitation alone, the law, as interpreted by us, about the mandatory compliance of the conditions cannot be allowed to be defeated for those years also, if the contention raised by the Assessee in this regard were to be accepted for Assessment Years 1992-1993 and 1993-1994. The said question also, therefore, deserves to be answered against the Assessee.

No merit in these Appeals filed by the Assessee and the questions framed above deserve to be answered in favour of the Revenue and against the Assessee

2019 (3) TMI 1038

Income attribution to trust - invoking section 61 - income taxable in the hands of the beneficiaries OR trust - recoverable units - tribunal held that the Assessee Trust could not be taxed in its own hands in respect of the income earned by it as the aforesaid three contributors/beneficiaries which had already been taxed in respect of the said income distributed to them by the said Trust - whether income arising by virtue of a revocable transfer of assets shall be chargeable to the income of the transferor and shall be included in his total income? - section 164 applicability - HELD THAT:- Not only the 3 companies in question viz., HDFC, ICICI and IL&FS but the Government of Tamil Nadu itself contributed the funds from time to time in the said Trust Fund created in the Trust Deed. Both of them were entitled to revoke the same after a period of 3 years. The number of shares, their extent of benefits and their identity have not been found in dispute. Therefore, the question of applying Section 164 of the Act to the facts of the present case does not simply arise because will be applicable only if the share of the beneficiaries is unknown or indeterminate.

Tribunal was perfectly justified in invoking Section 62(2) of the Act read with Section 61(1) of the Act which would apply only to the Revocable Transfer of the funds made for a period which is not specified and these above circumstances, it would be taxable in the hands of the Transferor/beneficiaries and not in the hands of the Trust. As a matter of fact, the findings rendered by the Tribunal are mere findings of facts and on application of relevant provisions of the Act which, in the facts of the case, does not give rise to a substantial question of law requiring our consideration under section 260A of the Act. The appeals are, thus, found devoid of merits and the same are liable to be dismissed. - Decided in favour of assessee.

2019 (3) TMI 1037

Reference to the DVO - Proceedings u/s 153-C has been held without jurisdiction - whether reference to DVO in 153-C proceeding is valid - differential value of investment shown in the construction - HELD THAT:- A survey was conducted on 17.10.2006 at the Banarasi Misthan Group of cases and thereafter, proceedings u/s 153-C were initiated on 27.09.2007, which was challenged by the respondent – assessee at the appellate stage and the CIT (Appeals), by the order dated 19.01.2010, has decided the appeal in its favour, against which, the Revenue filed an appeal before the Tribunal, which was decided in favour of the respondent – assessee. Against the order of the Tribunal, the Revenue filed Income Tax Appeal 2014 (5) TMI 158 - ALLAHABAD HIGH COURTbefore this Court and the same was dismissed by this Court.

The very basis for referring the matter to Departmental Valuation Officer in the disputed years, where the proceeding has been initiated under section 153-C has been held without jurisdiction. Once the very basis for referring the matter to the Departmental Valuation Officer has vanished, the entire proceedings cannot be held to be justified. Moreover, at the time of referring the matter to the Departmental Valuation Officer, neither returns were filed, nor the books of account maintained by the respondent – assessee were rejected, nor any assessment or reassessment proceedings were pending.

In view of the judgement of Sargam Cinema [2009 (10) TMI 569 - SUPREME COURT OF INDIA] and M/S. GOPI APARTMENT [2014 (5) TMI 158 - ALLAHABAD HIGH COURT] the basis for referring the matter to Departmental Valuation Officer itself vitiates and is liable to be quashed. - Decided in favour of assessee.

2019 (3) TMI 1036

Initiation of prosecution - Penalty upheld by ITAT - substantial question of law relating to penalty u/s 271(1)(c) pending before High Court - Motion moved in pending appeal - Competent Authority has issued a show cause notice to the appellant why the prosecution should not be launched pursuant to such penalty order - HELD THAT:- We are informed that the appellant has paid up the entire penalty in terms of the penalty order. Considering such fact and also considering the fact that the appeal against the penalty is admitted and the substantial question of law framed by the Court is pending for consideration, we stay the operation of the penalty order. Resultantly, at this stage, there would no question of launching prosecution. With these directions,Followed Motion is disposed of. Followed - SHRI SUPARAS D JAIN [ASSOCIATE VICE PRESIDENT (CORPORATE FINANCE) ] [FOR DEEPAK FERTILIZERS AND PETROCHEMICALS CORPORATION LIMITED VERSUS ADDL CIT, RANGE3 (1)2017 (8) TMI 1508 - BOMBAY HIGH COURT

2019 (3) TMI 1035

Unexplained cash credit u/s 68/69 - assesse is salaried employee - not maintaining books of accounts - identity, genuineness and creditworthiness of the creditors - CIT's non speaking order - ex-parte order - HELD THAT:- In our view, these sections are applicable when the books of account are maintained by the assessee and entry appears in the books. When such requirement is not there, AO’s decision in invoking the said provisions becomes unsustainable. However, on perusal of the order of the CIT(A), this angle of an argument was not taken by the assessee. As such, the assessee failed to file relevant decisions to support his argument relating to sustainable of the addition u/s 68/69 of the Act. Therefore,the matter should travel to the file of the CIT(A) for want of a speaking order after considering the above stated arguments raised by the assessee before us - Appeal of the assessee is allowed for statistical purposes.

2019 (3) TMI 1034

Deduction u/s 54 - investment in multiple flats - HELD THAT:- Interpretation of the word "a" preceding the expression "residential house" has been given wherein it has been observed that "a residential house" should not be understood to indicate a singular number. In the cited case of CIT vs. Devdas Naik [2014 (7) TMI 173 - BOMBAY HIGH COURT] observed that deduction u/s 54 would be available if the flats were used a single unit and used as one house for purpose of residence even if acquisition of flats were done independently.

From the above factual matrix coupled with binding judicial precedents, it is clear that deduction u/s 54 would be available to the assessee on account of investment in multiple flats it the same were being used as a single unit. In the present case, we find that this condition has been fulfilled by the assessee. Therefore, in our considered opinion, the assessee was eligible to claim deduction on account of investment made in multiple adjoining flats.

computation of capital gain u/s 48 - Deduction of property tax and other payment made to BMC - HELD THAT:- So far as the deduction of BMC Property Tax for ₹ 12 Lacs is concerned, the same could not be said to have been incurred wholly and exclusively in connection with the transfer of the property in terms of Section 48 and the deduction of the same has rightly been denied to the assessee. - decided against assessee

The other amount stated to be paid by the assessee has been denied for want of requisite explanation before AO. The assessee, in support of the same, has placed on record the relevant receipts. Therefore, the issue of deduction of ₹ 21 Lacs stands remitted back to the file of AO for re-adjudication after appreciating the nature of the payment. The assessee, in turn, is directed to substantiate his claim, in this regard with supporting documents. This ground stand partly allowed for statistical purposes.

2019 (3) TMI 1033

Penalty u/s 271(1)(c) - computation of short term capital gains on sale of various office premises - WDV taken as per The Companies Act as against Income Tax Act - bonafide computational error - HELD THAT:-we find that the genesis of the impugned penalty lies in the wrong computations made by the assessee. The mistake has already been admitted during assessment proceedings.

It is observed that the assessee was required to take WDV as per Income Tax Act as against The Companies Act as taken by the assessee and secondly, all the premises were to be considered as single block of assets. Nevertheless, the same could not be termed as furnishing of inaccurate particulars of income which justifies imposition of penalty u/s 271(1)(c). The computational error, at best, be termed as bona fide error on the part of the assessee and the assessee stood benefitted by the judgment in Price Waterhouse Coopers Pvt. Ltd. Vs. CIT [2012 (9) TMI 775 - SUPREME COURT] and CIT Vs. Reliance Petroproducts Pvt. Ltd. [2010 (3) TMI 80 - SUPREME COURT]. Therefore, we are inclined to delete the same. - Decided in favour of assessee.

2019 (3) TMI 1032

Addition u/s 14A - Expenses incurred for earning dividend income - assessee itself suo moto made the disallowance - recording proper satisfaction - HELD THAT:- The undisputed position that emerges is that the assessee had offered suo-moto disallowance of ₹ 3 Lacs against the exempt income. AO, without recording proper satisfaction as envisaged by Section 14A read with Rule 8D, proceeded to apply Rule 8D, which was not in accordance with law.

The onus was on AO to reject the assessee’s computations and record a finding, having regard to accounts of the assessee, as to how those computations were not satisfactory. The failure to do so oust the jurisdiction of AO to apply Rule 8D. Another factor to be noted is that the said disallowance, considering exempt income yielding investments works out to ₹ 3.75 Lacs, against which the assessee has already offered suo-moto disallowance of ₹ 3 Lacs. Therefore, the net additional disallowance of ₹ 5.52 Lacs could not be sustained. - Decided in favour of assessee.

2019 (3) TMI 1031

Penalty u/s. 271(1)(c) - Non striking off one of the limbs and without specifying the specific charge in the notice initiating penalty proceedings for inaccurate particulars of income in the Assessment Order - defective notice - non specification of charge - HELD THAT:- An identical situation has been considered by the Coordinate Bench in Meherjee Cassinath Holdings v. ACIT [2017 (5) TMI 904 - ITAT MUMBAI] as to whether the action of the AO in initiating penalty proceedings u/s. 271(1)(c) without striking off one of the limbs and without specifying the specific charge in the notice initiating penalty proceedings for inaccurate particulars of income in the Assessment Order and in the case of CIT v. Samson Perinchery [2017 (1) TMI 1292 - BOMBAY HIGH COURT] and also various decisions held that action of the Assessing Officer in non-striking off relevant clause in the notice shows that the charge being made against the assessee is not firm therefore proceedings suffer from non-compliance with principles of natural justice in as much as the Assessing Officer himself is not sure of the charge and the assessee is not made aware as to which of the two limbs of section 271(1)(c) he has to respond.

We hold that the notice issued by the AO u/s. 274 r.w.s 271(1)(c) is on account of non-application of mind and therefore the penalty proceedings initiated are bad in law. Thus, we direct the Assessing Officer to delete the penalty levied U/s. 271(1)(c). - Decided in favour of assessee.

2019 (3) TMI 1030

Fees for technical services - assessment u/s 44BB or 115A - amounts received by the assessee from B.J Services Company (Middle East) Ltd. for rendering of Fracturing Flow Back Services in connection with extraction or production of mineral oil - order passed by the A.O under Sec. 143(3) r.w.s 144C(13)- computing the profit and gains of a non-resident engaged in the business of providing services or facilities in connection with or supplying plant and machinery on hire used, or to be used, in the prospecting for or extraction or production of mineral oils - HELD THAT:- As perused the observations of the Tribunal and find that the issue involved in the present case is squarely covered by the order passed by the Tribunal in the assesses own case for A.Y 2011- 12, A.Y 2012-13 and A.Y 2013-14. [2018 (2) TMI 1859 - ITAT MUMBAI]

In the said preceding years, it was observed by the tribunal that the amount received by the assessee from M/s B.J Services Company (Middle East) Ltd. for rendering of Fracturing Flow Back Services was rightly offered by the assessee for tax as per the provisions of Sec. 44BB of the I.T Act. We thus finding ourselves to be in agreement with the view therein taken by the Tribunal, are thus of the considered view that the assessee during the year under consideration had rightly offered the amount for tax under Sec. 44BB of the I.T Act. In the backdrop of our aforesaid observations the order passed by the A.O under Sec. 143(3) r.w.s. 144C(13) is set aside. - Decided in favour of assessee.

2019 (3) TMI 1029

Disallowance of interest expenses u/s 36(1)(iii) - corresponding loans availed by the assessee were diverted for giving interest free advances to the sister concerns for non business purpose - CIT-A allowed the claim - HELD THAT:- Out of the loans and advances so given totalling to ₹ 5.37 crores, a sum of ₹ 4.75 crores was given to the two partners of the assessee firm namely Meghna Bhattar and Padma Bhattar. As further explained on behalf of the assessee, the remaining advances were given for the purpose of business. As regards the advances of ₹ 4.75 crores given to the partners, it is observed that this entire amount was withdrawn by them at the fag end of the previous year and interest calculated @ 16% on the said amount was disallowed in the assessment originally completed u/s 143(3). Moreover a sum of ₹ 2.20 crores was available in the partners Capital A/c at the relevant time which was also available with the assessee to give interest free advances. Thus we are of the view that the disallowance of interest made by the AO was not sustainable and the CIT(A) is fully justified in deleting the same. - Decided in favour of assessee

Disallowance of business promotion expenses - ad-hock disallowane @ 30% - HELD THAT:- The AO however treated the business promotion expenses claimed by the assessee as unverifiable for want of supporting bills and vouchers and made a disallowance of 30% without making any enquiry whatsoever from the parties to whom the said expenses were paid by the assessee. He also did not point out even a single instance to show any unverifiable element involved in the business promotion expenses claimed by the assessee. Keeping in view all these facts and circumstances of the case, we find ourselves in agreement with the Ld. CIT(A) that the adhoc disallowance of 30% made by the AO out of business promotion expenses is not sustainable. - Decided in favour of assessee

Disallowance of salary expenses - addition @8% on allegation that the entire salary expenses claimed by it were wholly and exclusively for the purpose of its business - CIT-A delete the addition - HELD THAT:-salary expenses of ₹ 9.13 crores incurred during the year under consideration were justified by the assessee by explaining the nature of its business as well as the necessity of incurring the said expenses for the purpose of such business. As rightly contended by the learned counsel for the assessee, the business expediency of the salary expenses thus was duly established by the assessee and even the reasonableness of the quantum of such expenses incurred during the year under consideration for earning insurance commission of 14.27 crores was also established by the assessee.

Even the AO did not dispute the same but still made a disallowance of 8% out of salary expenses on adhoc basis on the ground that the claim of the assessee for the salary expenses was not fully justified. It is observed that no reason whatsoever was given by the AO to come to this conclusion and there was no basis whatsoever given by him to make an adhoc disallowance of 8% without disputing the business expediency of the salary expenses claimed by the assessee or the reasonableness thereof - Adhoc disallowance of 8% made by the AO out of salary expenses was not sustainable - Decided in favour of assessee

2019 (3) TMI 1078

Application for withdrawal of Advance Ruling application - classification of services - services received by M/s. Robo silicon Private Limited from the state of Karnataka for which Royalty is being paid by M/s. Robo silicon Private Limited - rate of GST - Held that:- The application filed by the Applicant for advance ruling is dismissed as withdrawn.

2019 (3) TMI 1077

Application for withdrawal of Advance Ruling application - Classification of services - services received by M/s. Robo Quarries Private Limited from the state of Karnataka Tor which Royalty is being paid by M/s. Robo Quarries Private Limited - rate of GST - Held that:- The application filed by the Applicant for advance ruling is dismissed as withdrawn.

2019 (3) TMI 1076

Input Tax Credit - procurement of goods and services for construction of the project during the Construction Period - entire revenue received during the said period is subject to GST - Held that:- The works contract services by way of construction of road was exempt from service tax. However, service tax was leviable only on the service component of such works contract (40%). The material or goods component of the works contract was leviable to VAT. However, it was subject to State VAT (composition rate). Construction of roads is now subject to 12% GST. EPC contractor (Engineering, Procurement and Construction) pays 12% GST on the service of road construction to the concessionaire - In the present case,

Input Tax Credit - procurement of goods and services during the O & M period after reversal of ITC as per Section 17(2) of the Central Goods and Services Tax Act, 2017 read with Rule 42 of the Central Goods and Services Tax Rule, 2017 - Annuity Payment received during the said period is exempt whereas O & M payments received are subject to GST - Held that:- there is a free flow of ITC from EPC Contractor to the concessionaire and thereafter to NHAI. As a result, the GST of 12%leviable on the service of road construction provided by concessionaire to NHAI would be paid partly from the ITC available with him.

Also, there is no hitch in providing the benefit of the Entry No. 23A ibid to the annuity payments i.e. road construction payments received after COD (during O&M phase). But this benefit does not come free. It comes with a rider that only 50% ITC of the GST paid on the Input and Input service used in the construction phase is available to the Appellant because annuity (50% of the construction payments) is not taxable and the appellant is not having any other non-business and/or exempted supply.

Grant of exemption to annuity paid by NHAl/State Highways Construction Authority to concessionaires for construction of roads - Held that:- Full ITC of the tax paid on the inputs and input services used in the O&M phase is available to the Appellant if they are having no other outward supply during this phase.

2019 (3) TMI 1075

Applicability of Entry No. 72 of Notification No. 12/2017- CT (Rate) - services provided by the Appellant under the ICT project - artificially-bundled and composite supply - no principal supply - training provided is not predominant supply - non-fulfilment of pre-requisites of Entry No. 72 of the notification - Held that:- It is seen from the documents produced by the appellant that the National Policy of ICT school was framed in the year 2012 and the aim of the policy is to transform all government and government aided schools into smart schools where each school would have a computer lab and students are provided with computer training. For the effective implementation of the project, the policy allows the State or Union Territory Governments to take on private partners and implement the ICT project by adopting the BOOT- “Build, own, operate and transfer” model. The project also has to be implemented based on the guidelines issued by the Central Government.

The contention of the appellant in the present appeal is that it is a composite supply as the supply of computer hardware and training are supplied in conjunction and it is naturally bundled - As per Section 2(30) a supply will be a composite supply only when it is naturally bundled - We understand that what the AAR wanted to say that the supply is a composite supply of two items but is not naturally bundled. However, we do not agree with the AAR on this aspect.

The Education Guide, at para 9.2.4, clarifies that whether services are naturally bundled in the ordinary course of business would depend upon the normal or frequent practices followed in the field of business to which services relate - the Government of India in its nationwide policy called the National Policy on Education, 1986, stressed the need to employ information technology to improve the quality of education. This was the old policy which included schemes like computer literacy and studies in school and educational technology. Subsequently, the HRD Ministry revised its old policy and a new nationwide ICT scheme (Information and Communication Technology in School) was introduced to replace the earlier scheme. Thereafter, in the year 2012, the Department of School Education and Literacy framed guidelines under the National Policy on ICT in school.

Thus, it is a Central Government driven project and the training along with supply of computers is an inherent part of the project and the project is imagined as such. Therefore, a major pre-requisite for a supply to be a composite supply- that the said bundle should be naturally bundled- is satisfied here. The supply of computers along with training is itself envisaged and conceived as such by the Ministry of Human Resources Development and therefore by its very nature, the supply can be said to be naturally bundled.

Thus, the training provided by the appellant is advanced training or training aided by technology which helps in easy delivery of the contents to the student through visual mediums. The project is nothing but a training project aided by technology. Merely because hardware and software is provided by the appellant, it does not mean that the training to be done is not a principal supply.

2019 (3) TMI 1074

Requirement of registration - Rajiv Gandhi Centre for Aquaculture [RGCA] is a society under Marine Products Export Development Authority, Ministry of Commerce & Industry, Govt. of India - whether RGCA is required to register under GST Laws? - Held that:- From the statutory provisions, it is evident that if the aggregate turnover exceeds the ₹ 20 lakh limit or if a person was registered under an existing law, he is liable to be registered under this Act - In the case at hand, it is a stated fact that RGCA was registered under VAT laws. So, as per Section 22(2), they are liable to be registered under GST with effect from the appointed day. RGCA have also referred to Sec. 23, which specifies the persons who shall not be liable for registration. They have expressed their view that since their supplies are exempt from tax, they are covered under Sec.23 (1) (a), under which there is no liability for registration.

If no registration is required for RGCA, whether compulsory registration u/s 24 is required to be made against any of the provisions of Section 24? - Held that:- It is clear that all the supplies of RGCA are not exempt and some are taxable supplies. RGCA has also stated that their aggregate turnover is above ₹ 20 Lakhs and that they are also receiving consultancy services from abroad and receiving legal services, which are covered under reverse charge mechanism. In any case, RGCA is making taxable supplies and hence is not covered under the exemption from registration under Section 23. Therefore RGCA is liable for registration under Section 22 of CGST/TNGST Act.

If so, whether separate registration is to be taken from all the states where the offices of RGCA is situated? Explain the procedure to obtain registration? - If registration is required to be made, what are the tax rates applicable to the transactions of RGCA? - Held that:- It is observed that Section 25(1) of the CGST Act, 2017 provides that every person who is liable to be registered under section 22 or section 24 shall apply for registration in every such State or Union territory in which he is so liable. Therefore, registration is required to be taken in the states or union territory from where taxable supplies are made.

- Held that:-

Since RGCA-Head office is having GST Registration (Migrated from TNVAT) at Tamil Nadu only other various project sites are located at different states but doesn’t having the GST registration so far, If they want to purchase materials through interstate from Mumbai to its one of the branch at Kerala, how the purchases of the materials to be made and what are the documents to be carried for the transport of such purchased goods under GST? - Held that:- It is observed that this question is not on any of the specified issues in respect of which advance ruling may be sought in terms of Section 97 (2) of the CGST Act, 2017. Therefore, the provisions of Advance Ruling are not applicable to this question and no ruling is provided in this regard.

2019 (3) TMI 1073

Scope of Advance Ruling - Benefit of the N/N. 03/2017-Central Tax (Rate) dated 28.06.2017 - supply of Copper XLPE insulated armoured low tension cables - Whether the power cables supplied by the Appellant would be covered under the scope of Sl. No. 1 of N/N. 03/2017-CT? - Held that:- The supplies mentioned in the Certificate had been effected in the month of Jan.,2018, actual date of the transactions as per GSTR-1 is 22.01.2018 and 24.01.2018 - Since the Appellant has asked for ruling on the transactions effected prior to the date of filing of the application before AAR, the definition of 'Advance Ruling' given under Section 95(a) of the CGST Act is perused.

From the definition, it is very much clear that the scope of the Advance ruling for both i.e. AAR (Authority for Advance Ruling) and AAAR (Appellate Authority for Advance Ruling) is limited to the transactions being undertaken or proposed to be undertaken - In the instant case, as already narrated, the application seeking advance ruling was filed on 09.05.2018 before the AAR with respect to supplies undertaken in the month of Jan.,2018. Hence the case is out of the purview of the Advance Ruling.

Thus, as the question posed by the Appellant is related to supplies undertaken by them prior to the date of filing of the application for advance ruling, no ruling can be given on the question.

2019 (3) TMI 1072

Issuance of writ of Habeas Corpus - Illegal detention - case of petitioner is for issuance of writ especially in the nature of Habeas Corpus commanding the respondents to produce the detenue as he is in the illegal detention of the respondents and has been detailed illegally without following the mandatory provisions of law - Held that:- This Court is of the considered view that as per view taken by Larger Bench of Hon’ble Apex Court in Tasneem Rizwan Siddiquee's case [2018 (9) TMI 1782 - SUPREME COURT OF INDIA], writ of Habeas Corpus under Article 226 of the Constitution of India shall not be maintainable when a person is in custody on the basis of orders passed by a Court of competent jurisdiction.

As regard to passing of reasoned order under Section 69 of the CGST Act, copy of the order has been placed on the rile and the said order was passed by the competent authority in this case and on that ground, the present writ petition is not maintainable.

Petition dismissed being not maintainable.

2019 (3) TMI 1015

Educational institution or not - IIM, Calcutta - Exemption under Entry No. 66(a) of the Notification No. 12/2017 Central Tax (Rate) dated 28.06.2017 - refund of tax - Held that:- The Indian Institute of Management Act, 2017, which came into force on and from 31.01.2018, granted IIMs the status of “institutions of national importance” and they were empowered to grant degrees, diplomas and other academic distinctions or tiles. Thus the Respondent is an “Educational Institution” within the meaning of sub-clause (ii) of clause 2(y) of Notification No. 12/2017-Central Tax (Rate) dated 28/06/2017, with effect from 31.01.2018.

Circular No. 82/01/2019-GST (F. No. 354/428/2018-TRU) dated 01.01.2019 issued by the Government of India, Ministry of Finance, Department of Revenue, Tax Research Unit, dealt with the applicability of GST on various programmes conducted by the IIMs. It clarified that from 01.07.2017 to 30.01.2018, 11Ms were not covered by the definition of education institutions as given in Notification No. 12/2017-Central Tax (Rate) dated 28/06/2017 thus they were not entitled to exemption under serial No. 66 of the said Notification. However, 11Ms were entitled to exemption for specific programmes falling under serial No. 67 of the Notification.

Thus, the Indian Institute of Management, Calcutta, the Respondent, is an 'education institution' in terms of meaning of clause 2(y) of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 after the enactment of IIM Act on and from 31.01.2018 - The exemption from GST under serial No. 66 of the said Notification was not available to the Respondent from 01.07.2017 to 30.01.2018, however, during this period exemption was available for specific programmes under serial No. 67. Further, for the period 31.01.2018 to 31.12.2018, the Respondent could avail exemption for the eligible programmes either under serial No. 66 or serial No. 67. After the deletion of serial No. 67 with effect from 01.01.2019, the exemption is available under entry 66.

2019 (3) TMI 1014

Classification of goods - rate of GST - articles, consisting of gold, diamond, precious stones like ruby, emerald, sapphire, pearls etc., wherein a watch movement is fitted - whether the above articles fall under entry 13 of Schedule V to Notification No. 1/2017– Central Tax (Rate) dated 28/6/17 prescribing rate of 1.5% CGST and 1.5% SGST? - challenge to AAR decision - Held that:- The Chapter Notes of Chapter 91 of the Customs Tariff Act, 1975 as well as Explanatory Notes of Harmonised System of Nomenclature of Heading 9101 and 9102 covers watches with case wholly of precious metal or of metal clad with precious metal, or of the same materials combined with natural or cultured pearls, or precious or semi-precious stones (natural, synthetic or reconstructed). Wrist-watches, pocket-watches, fob-watches, watches for carrying in handbags, watches mounted in brooches, rings etc. are covered under Chapter 91 of the Customs Tariff Act, 1975 - on the basis of relevant Chapter Notes of Customs Tariff Act, 1975 and Explanatory Notes of Harmonised System of Nomenclature, it is found that products supplied by the appellant are appropriately classifiable under Chapter Heading 9101 of the Customs Tariff Act, 1975.

Various arguments put forth by the appellant in their appeal are devoid of any merit and the advance ruling given by the GAAR does not suffer from any infirmity.

The decision of AAR upheld.

2019 (3) TMI 1013

Classification of goods - rate of GST - import of various goods/spares, which are supplied on ships and these equipment form an essential part of the ship, and makes the ship “sea worthy” - whether classifiable as “Parts of goods of headings 8901, 8902, 8904, 8905, 8906, 8907” under entry 252 of Schedule 1 of CGST N/N. 01/2017-Central Tax (Rate) dated 28th June, 2017 (Amended from time to time)? - GST @ 5% or IGST-5% as specified in entry 252 of schedule 1 of N/N. 01/2017-lntegrated Tax 28-06-2017?

Held that:- The appellant is engaged in the business of sale and distribution of Marine Distress Signals, EPIRB, SART, marine chemicals navigation and communication and also providing lifesaving equipment related to the marine industries. The appellant imports various goods and spares which are supplied to ships.

It is seen from the grounds of appeal that NAVTEX, SART and Two Way RT Walkie Talkie, AIS and Voyage Data Recorder along with other equipment constitute the list of equipment comprising GMDSS (Global Maritime Distress & Safety System). GMDSS is an international system which uses terrestrial and satellite technology and ship board radio system to ensure rapid alerting of shore based rescue and communication operations in the event of an emergency - SART, NAVTEX are essential components of the GMDSS and as per SOLAS Convention of IMO, ships are required to carry the above equipment. SART -A search and rescue transponder is a self-contained, waterproof transponder intended for emergency use at sea. These devices may be either a radar-SART, or a GPS-based AIS-SART. The radar-SART is used to locate a survival craft or distressed vessel by creating a series of dots on a rescuing ship’s radar display. It is used to ease the search of a ship in distress.

The National Maritime Search and Rescue Manual (for the Indian Coast Guard) makes SART mandatory for all ships. It is also an essential part of the GMDSS - EPIRB on SART are a part of the positioning and localization system and NAVTEX is a part of maritime and safety information.

The Two Way RT does not find the place in the GMDSS. It is used for internal communication for the staff of the ship. A walkie-talkie has general application and cannot said to be specific to the functioning of the ship - thus, the walkie-talkie would not form part of the ship and would not be covered by Sr. No.252 of Notification No. 1 of 2017.

2019 (3) TMI 1012

Exemption from GST - activity provided by UCMAS using abacus - applicability of Entry No. 80 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 - challenge to AAR decision - Held that:- N/N. 9/2003-Service Tax dated 20.06.2003 and N/N. 24/2004-Service Tax dated 10.09.2004 provided exemption from taxable services provided in relation to commercial training or coaching by a recreational training institute. ‘Recreational Training Institute’ was defined in those Notifications as a commercial training or coaching centre which provides coaching or training relating to recreational activities such as dance, singing, martial arts, hobbies.

Hon’ble CESTAT in the case of FAST ARITHMETIC VERSUS ACCE, ST & EOU DIVISION, MANGALORE [2009 (5) TMI 70 - CESTAT, BANGALORE] held that the abacus training programme imparted is mainly to create interest in children for mathematics and also to enhance their thinking capacity. It is held that the entire thing is done by employing methods of play so as to make the whole thing interesting and by no means, this activity could be compared with the activities undertaken by commercial coaching or training centre. It was further held that Notification Nos. 9/2003-Service Tax dated 20.06.2003 and Notification No. 24/2004-Service Tax provided specific exemption for recreational training institute and vocational training institute. It was held that the activities of the appellant therein would more appropriately be classified as recreational.

It is settled principle of law that exemption notification has to be read strictly so far as the eligibility is concerned. When the wordings of the Notification are clear and unambiguous, they must be given effect to. By a strained reasoning, benefit cannot be given when it is clearly not available. The appellant has failed to establish that activities carried out by them are covered under Entry No. 80 of N/N. 12/2017-Central Tax (Rate).

Decision of AAR upheld.

2019 (3) TMI 1011

Levy of GST - Supply of services to SEZ - supply of services by way of providing accommodation services, supplying food and beverages and supplying services ancillary to providing accommodation services - zero rated supply or not - Section 16 of the IGST Act, 2017 - Accommodation services to a visitor other than a visitor located in SEZ - Held that:- It is evident that clause (b) of sub-section (1) of Section 16 of the IGST Act, 2018 provides that supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit, is covered under ‘zero rated supply’. Thus, to be qualified as ‘zero rated’ supply, the law specifically refers the supply ‘to’ SEZ developer/unit and not ‘to or by’ SEZ developer / unit. Therefore, the supply of service by the appellant would be liable to Goods and Services Tax, unless specifically exempted by law.

There is no doubt that supplies made by units or developers / co-developers of SEZ are treated as inter-state supply under Section 7(5) of the IGST Act, 2017 and are liable to IGST under Section 5(1) of the IGST Act, 2017. Out of these, only supplies made to SEZ developer / unit for authorized operations have been made zero rated, other are liable to IGST.

The sub-section (1) of Section 53 of the SEZ Act, 2005 provides a deeming fiction whereby the Special Economic Zone shall be deemed to be a territory outside the customs territory of India and that too for the specific purposes of undertaking the authorized operations. The term “customs territory” cannot be equated to the territory of India. Further, the interpretation advanced by the appellant would lead to a situation where a Special Economic Zone would not be subject to any laws of India whatsoever. The entire SEZ Act, 2005 would be rendered redundant since it is stated to extend to the whole of India. Section 51 of the SEZ Act, 2005 provides for overriding effect in case there is anything inconsistent contained in any other law. However, no inconsistency between the provisions of the SEZ Act, 2005 and IGST Act, 2017 or CGST Act, 2017 / GGST Act, 2017 has been pointed out by the appellant - the reliance placed by the appellant on Section 53 and 51 of the SEZ Act, 2005 in support of contention that their activity in SEZ is not liable to IGST, is not acceptable.

Section 53(2) of the SEZ Act, 2005 creates a deeming fiction whereby a SEZ is deemed to be a port, airport, inland container depot, land station and customs stations under section 7 of the Customs Act, 1962. On the other hand, Circular Nos. 46/2017-Cus dated 24.11.2017 and 3/1/2018-IGST dated 25.05.2018 clarified applicability of IGST / GST on goods transferred / sold while being deposited in a warehouse registered under section 57 or 58 or 58A of the Customs Act, 1962 (customs bonded warehouse), without payment of duty. The purpose of appointing any port, airport etc. under Section 7 of the Customs Act, 1962 is quite different than the purpose of licensing any warehouse under Section 57, 58 or 58A of the Customs Act, 1962. Therefore, the clarification issued for customs bonded warehouse are not applicable to the appellant even if a SEZ is deemed to be a port etc. under Section 7 of the Customs Act, 1962.

Application disposed off.

2019 (3) TMI 1010

Warehousing services - Agricultural Produce or not - rate of tax - Circular No. 16/16/2017 GST dated 15-11-2017 - challenge to AAR decision - ppellant submitted that none of the products goes through any processing till they come to the cold storage which changes the essential character or marketability of these produce purchased from the farmers/cultivators by the traders. - Held that:- These products are sold in primary market by Cultivator as raw and green. Various processes like cleaning, deshelling, specialized drying, sorting, grading, packing etc. are then undertaken before these goods become ready for consumption by the consumer. These are not the processes which can be undertaken at the farm. These processes substantially add to the value of the produce - the above produce do not fall under category of Agricultural Produce and Services of storage or warehousing of such produce would not remain exempt under the above said notifications No. 11/2017-Central Tax (Rate) and 12/2017-Central Tax (Rate) both dated 28.06.2017.

Reference is also invited to Circular No. 16/16/2017-GST dated 15.11.2017 which squarely delineates applicability of GST on agricultural produce. It has been made very much clear vide this circular that what is an agricultural produce and what is not. This circular is an excellent guide to determine whether a particular produce can be termed as an agricultural produce or not. Vide this circular it has also been made clear that any clarification issued in the past contrary to this circular in the context of Service Tax or VAT/ Sales Tax is no more relevant.

There is no reason to interfere with the Ruling given by the Authority for Advance Ruling - AAR decision upheld.

2019 (3) TMI 1009

Rate of GST - outdoor catering - business of caterers and supply food, beverages and other eatables (nonalcoholic drinks) - complete services at various places of their customers, who have in house canteens at their factories - Circular issued from F.No. 354/03/2018 (Circular No. 28/02/2018-GST dated 08.01.2018) - Sr. 7(v) of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, as amended, issued under the Central Goods and Services Tax Act, 2017 and Notification No. 11/2017-State Tax (Rate) dated 30.06.2017, as amended - challenge to AAR decision.

Held that:- The terms ‘outdoor catering’, ‘restaurant’, ‘mess’ and ‘canteen’ have not been defined in the CGST Act, 2017 and the GGST Act, 2017 or the Notifications issued there under. However, in the catering industry, the term ‘outdoor catering’ refers to service wherein the kind, quantum and manner in which food / eatable/ drinks is to be served is decided by the service recipient and the service provider provides service of catering at the place other than his own. This meaning of ‘outdoor catering’ has legal precedence as the term ‘outdoor catering’ was specifically defined in Chapter V of the Finance Act, 1994.

In the present case, the service recipient has engaged the appellant for running of the canteen and rates for the meal, snacks, tea have been fixed and payable by the service recipient. The menu is required to be decided by the canteen committee of the service recipient. Further, the appellant is providing these catering services from other than his own premises. Therefore, the nature of service provided by the appellant is that of ‘outdoor catering’ service in view of the meaning of the said term as commonly understood, even though there is no statutory definition of the said term provided in the CGST Act, 2017 and the GGST Act, 2017.

The issue whether the nature of service provided by the appellant would change since the meal, snacks, tea etc. are consumed by the workers / employees of the recipient, the AAR has referred to the judgement of Hon’ble High Court of Allahabad in the case of Indian Coffee Workers’ Co-Op. Society Ltd. Vs. CCE & ST, Allahabad [2014 (4) TMI 407 - ALLAHABAD HIGH COURT]. In the said judgement, it has been held that the taxable catering service cannot be confused with who has actually consumed the food, edibles and beverages which are supplied by the assessee. It is also held that the taxability or the charge of tax does not depend on whether and to what extent the person engaging the service consumes the edibles and beverages supplied, wholly or in part.

The situation where the food / eatables/ drink are the choice of the recipient and the kind, quantum and manner in which the food is to be served is also decided by the recipient, as is the issue in the present case, has not been covered by the said Circular and hence the same is not applicable in the facts of the present case - thus, the supply of services by the appellant is covered under Sr. 7(v) of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, as amended, issued under the Central Goods and Services Tax Act, 2017 and Notification No. 11/2017-State Tax (Rate) dated 30.06.2017, as amended, issued under the Gujarat Goods and Services Tax Act, 2017, attracting Goods and Service Tax @ 18% (CGST 9% + SGST 9%) and reject the appeal filed by M/s. Rashmi Hospitality Services Private Limited.

AAR decision upheld.

2019 (3) TMI 1008

Exemption from tax or not - amount charged as interest on transaction based short term loan given by the Del Credere Agent (DCA) to buyers of material - N/N. 12/2017-Central Tax (Rate) dated 28.06.2017 (Serial Number 27) - Section 15(2)(d) of the CGST Act, 2017 - Sr. No. 27 of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017

Difference of opinion. - Both members passed separate order.

2019 (3) TMI 1007

Seizure of goods with vehicle - validity of e-way bill had expired - interim relief sought - Section 129(1)(c) of The Central Goods and Services Tax Act, 2017 - Held that:- As an interim measure, it is directed that the vehicle of the petitioner shall be released forthwith provided the petitioner furnishes a security before the authority concerned as per the provisions contained under clause (c) sub-section (1) of Section 129 of The Central Goods and Services Tax Act, 2017 - Application disposed off.

2019 (3) TMI 931

Classification of supply - supply of transport tank by mounting the same on chassis - whether amounts to ‘tank’ classifiable under Heading 7311 or supply of ‘motor vehicle’ classifiable under Heading 8704 in the GST regime? - Explanation (iii) and (iv) of the Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017 - Held that:- On going through the Chapter Notes of Chapter 87 of the First Schedule to the CTA, 1975, it is observed that there is no Chapter Note in the said Chapter analogous to Chapter Note 5 of Chapter 87 of the CETA, 1985. In absence of any Chapter Note in Chapter 87 of the CTA, 1975 analogous to Chapter Note 5 of Chapter 87 of the CETA, 1985, the ‘Transport Tank’, even if mounted or fitted on the Chassis of customer, would not fall under Chapter 87 of the CTA, 1985. Therefore, the product ‘Transport Tank’ would have to be independently classified without having any bearing on the fact whether the same has been mounted or fitted on the Chassis of customer or otherwise.

The product ‘Container for compressed or liquefied gas, of iron or steel’ is specifically covered under Chapter Heading 7311 - the mounting process undertaken by it mainly involves bolting and the mounted ‘Transport Tank’ can be easily de-mounted - the product ‘Transport Tank mounted on chassis of customer’ is appropriately classifiable under Chapter Heading 7311 of the CTA, 1975.

2019 (3) TMI 930

Classification of goods - rate of CGST - “Papad and papad pipes” of different shapes, sizes and varieties (commonly known as un-fried Fryums) - sale to intra state and inter-state dealers - N/N. 1/2017 Central Tax (Rate) dated 28.06.2017 - Held that:- What is ‘Papad’ has not been defined or clarified under Customs Tariff Act, 1975, the Central Goods and Services Tax Act, 2017 (herein after referred to as the ‘CGST Act, 2017), the Gujarat Goods and Service Tax Act, 2017 (herein after referred to as the ‘GGST Act, 2017’), Integrated Goods and Services Tax Act, 2017 (herein after referred to as the IGST Act, 2017 or the Notifications issued under the CGST Act, 2017 / GGST Act, 2017 / IGST Act, 2017 - It is now well settled principle of interpretation of statue that the word not defined in the statute must be construed in its popular sense, meaning ‘that sense which people conversant with the subject matter with which the statue is dealing would attribute to it’. It is to be construed as understood in common language.

The Determination Orders under section 80 of the Gujarat Value Added Tax Act, 2003 were not pertaining to classification under First Schedule to the Customs Tariff Act, 1975 and therefore are not applicable in the present case - the ‘Un-fried Fryums’ are not classifiable as ‘Papad’ under Tariff Item 1905 90 40.

Appropriate classification of ‘Unfried Fryums’ - Held that:- Heading 2106 is an omnibus heading covering all kind of edible preparations, not elsewhere specified or included. Chapter Note 5 provides an inclusive definition of this heading and covers preparations for use either directly or after processing, for human consumption. Chapter Note 6 pertaining to Tariff Item 2106 90 99 also provides inclusive definition and products mentioned therein are illustrative only - the product ‘Un-fried Fryums’ is appropriately classifiable under Tariff Item 2106 90 99.

Goods and Service Tax rate of 18% (CGST 9% + GGST 9% or IGST 18%) is applicable to the product ‘Un-fried Fryums’ as per Sl. No. 23 of Schedule III of Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017, as amended, issued under the CGST Act, 2017 and Notification No. 1/2017-State Tax (Rate) dated 30.06.2017, as amended, issued under the GGST Act, 2017 or IGST Act, 2017.

2019 (3) TMI 929

Classification of services - royalty - lease transfer agreement for obtaining mining lease - N/N. 11/2017-CT (Rate) dated 28.06.2017 - to be classified under 9973 specifically Licensing services for the right to use minerals including its exploration and evaluation or as any other service? - Held that:- The activity undertaken by the applicant is classifiable under Heading 9973 (Leasing or rental services, with or without operator), as mentioned in the annexure at Serial No. 257(Licensing services for the right to use minerals including its exploration and evaluation) sub heading 997337 of notification number 11/2017-CT (Rate) dated 28.06.2017. The applicant is liable to discharge tax liability under reverse charge mechanism vide N/N. 13/2017-CT (Rate), dated 28.06.2017 (as amended from time to time) of the CGST Act, 2017.

The activity undertaken by the applicant attracts 18% GST (9% CGST+ 9% SGST).

2019 (3) TMI 928

Input tax credit - Post purchase discount - Whether the MRF Ltd can avail the ITC of the full GST charged on the supply of invoice or a proportionate reversal of the same is required in case of post purchase discount given by the supplier of the goods or services? - Section 16 of CGST Act 2017/TNGST Act 2017.

Held that:- Section 16(1) states that a registered recipient is eligible to take credit on the input tax charged on any supply of goods or services. As per Section 9(1) of the act, CGST tax is leviable on the value of supply as determined by Section 15 of the Act - Time of supply of goods as per Section 12 is the earlier of the following dates, namely the date of issue of invoice by the supplier or the last date on which he is required, under sub-section (1) of section 31, to issue the invoice with respect to the supply or the date on which the supplier receives the payment with respect to the supply.

In the instant case, the invoices are all raised before the payment dates, so the time of supply is the date of raising invoices. The discount is given after the invoices are raised and supply of goods is made and no discount is recorded in the invoice. Hence, Section 15 (3) (a) does not apply. All the invoices are uploaded by the supplier in the C2FO software after they are raised. Based on various parameters such as desired annual percentage discount rate, cash availability set by the recipient and the varied offers of discounts made by the suppliers based on their need for an early payment, C2FO software optimizes the dates of early payment for each invoice and determines the final discounted transaction value of a particular invoice - the value of supply in such transactions is the full undiscounted value mentioned on the invoice.

Proviso to Section 16 states that where a recipient fails to pay to the supplier of goods or services or both, the amount towards the value of supply along with tax payable thereon within a period of one hundred and eighty days from the date of issue of invoice by the supplier, an amount equal to the input tax credit availed by the recipient shall be added to his output tax liability, along with interest thereon, and the recipient shall be entitled to avail of the credit of input tax on payment made by him of the amount towards the value of supply of goods or services or both along with tax payable thereon - In the instant case, the value of supply is the full undiscounted value indicated in the tax invoice and the recipient / Applicant only makes payment to the extent of invoice value less the discount thrown up by the C2FO software. As per proviso to Section 16, the recipient is entitled to avail the credit of input tax on the payment made by him alone and if any amount is not paid as per the value of supply and the recipient has availed full input tax credit, the same would be added to his output tax liability.

The Applicant can avail Input Tax Credit only to the extent of the invoice value less the discounts asper C2FO software. If he has availed input tax credit on the full amount, he should reverse the difference amount equal to the discount, to avoid adding to his output liability.

2019 (3) TMI 1058

Restricted import or not - Raw Pet Coke (RPC) - apportionment of unutilised quota of Raw Pet Coke (RPC) amongst various applicants including the petitioner - Held that:- It is apparent that the manner in which the distribution of the excess quantity has been distributed, is manifestly irrational. This is so because the respondents have allocated quantities for making up the shortfall with reference to the production capacity of the applicants and not their requirements to meet their production capacity. Admittedly, the production capacity of the manufacturers of CPC is significantly lower than the input (RPC) required to exhaust the said capacity.

It is also apparent that the manner in which the surrendered quantity is distributed also does not exhaust the surrendered quantity. A aggregate of 73,516.661 MT of RPC has been surrendered out of which only 2903.79 MT of RPC has been allocated to the three applicants - RPC can be freely imported but its overall import has been restricted to 1.4 Million MT per annum (0.7 Million MT for the period October, 2018 to March, 2019) by virtue of the order of the Supreme Court in the case of M.C. Mehta v. Union of India [2018 (11) TMI 1352 - SUPREME COURT] - There is, thus, no reason not to permit manufacturers from importing RPC up to the aforesaid limit.

In the present case, there are only three applicants who had applied for distribution of the utilised quantity and the shortfall in their cases - Since, it is apparent that the endeavour of the respondents was to allocate the unutilised quantity on the basis of the shortfall, it would be apposite for the respondents to allocate the same on the basis of the shortfall, subject to the limit that the total allocated quantity does not exceed the half yearly input capacity.

The allocation as made in the impugned minutes, is set aside and the respondents are directed to re-compute the allocation of the aforesaid basis; that is on the basis of shortfall between the quantity of RPC applied for and the quantity allocated - Petition disposed off.

2019 (3) TMI 1057

Monetary amount involved in the appeal - maintainability of appeal - Whether the Tribunal is correct in dismissing appeal filed by the department on the ground of Monetary limit issued in the circular issued by the Board, when there is no request from the department/appellant/litigant to invoke the said instructions? - Held that:- It is contended that the issue involved in the case of the assessee is a case of refund and it is also recurring in nature and therefore, in terms of sub-Clause (c) of paragraph 3 of the circular instructions dated 17.08.2011, as modified on 17.12.2015, the Revenue is entitled to pursue the appeals on merits - the Revenue cannot be foreclosed from raising such a plea before the Tribunal and if the Revenue is able to satisfy the Tribunal that the case of the respondent-assessee falls within the exceptional circumstances as mentioned in the circular instructions, then the matter is required to be dealt with on merits or otherwise, the Tribunal will be well within its jurisdiction to close the appeals on the ground of low tax effect, however, such a finding needs to be recorded by the Tribunal.

We have come across cases where the assessee would contend that the Revenue's appeal is hit by the monetary limit fixed in the circular instructions. The Revenue would not have given any instructions to the Standing Counsel to not press the appeal.

We will examine the facts of the case and ascertain as to whether the case would fall in one of the exceptions mentioned in the circular instructions and we find that it is not one such case, we have applied the monetary circular and closed the proceedings leaving the substantial questions of law open. Therefore, in our considered view, this would be the right approach to cases where the Revenue does not have specific instructions to withdraw an appeal either before the Tribunal or before a Court - the matter should be remanded to the Tribunal for fresh consideration.

The appeals are restored to the file of the Tribunal. The Tribunal shall hear the Revenue regarding their contention that the dispute raised by the Revenue is relating to refund and recurring in nature and they are entitled to contest the appeals irrespective of the monetary limit fixed in the circular instructions dated 17.12.2015 as reiterated in the instructions dated 25.05.2018.

2019 (3) TMI 1056

Rectification of mistake - error apparent on the face of record - Held that:- In para 3 of the order dated 03.12.2018, it was wrongly stated as on the date of dictation the order was available. Hence, there is an apparent error - the error stands corrected and ROM application is allowed.

2019 (3) TMI 985

Issuance of duty credit scrip (authorization) in terms of paragraphs 3.14.4 and 3.14.5 of the Foreign Trade Policy - refusal of duty scrip by invoking paragraph 3.14.5 (C)(i) of the Foreign Trade Policy 2009­2014 read with Notification No.43(RE­2009­14) dated 25/9/2013 - applicability of binding judgment of this Court in the case of JSW Steel Ltd. Vs. Union of India [2016 (1) TMI 957 - BOMBAY HIGH COURT].

Held that:- In view of the Incremental Export Growth achieved by the petitioner and having realized the sale proceeds in convertible foreign exchange, vide online application dated 24th March, 2015, the petitioner claimed duty scrip for ₹ 7,59,65,508.03 in the prescribed form ANF­3F. However, the EDI system, at that point of time, did not accept application for issuance of scrips for value above ₹ 1 crore - the judgment in JSW Steel Ltd. [2016 (1) TMI 957 - BOMBAY HIGH COURT] is applicable to the facts of the present case, where it was held that None can claim any benefit or incentive as an absolute right. However, a definite policy is enunciated in the present case. That policy extends an incentive for a demonstrated increase in exports. Its purpose is also clear, viz., to encourage more exports. The policy’s terms must, therefore, receive an interpretation as would advance its stated purpose, viz., to promote and encourage exports.

Petition allowed.

2019 (3) TMI 984

100% EOU - Release of benefit at 5% under the Merchandise Exports from India Scheme (MEIS) - In case of export, shipping bill is filed claiming applicable and admissible export benefits under the MEIS. According to the petitioner, it is entitled to MEIS benefit at 5% which has been denied - principles of natural justice.

Held that:- We find force in the submission of learned counsel for the petitioner that before passing any final orders, the 2nd respondent should have given the petitioners an opportunity to deal with the order-­in­-original dated 20/11/2018 - From the record it appears that the order-­in-­original dated 20/11/2018 was received by the petitioner only on 5/12/2018, that is after the impugned order is passed by the 2nd respondent.

This Court in the case of AXIOM CORDAGES LTD. VERSUS UNION OF INDIA AND ORS. [2018 (8) TMI 1243 - BOMBAY HIGH COURT] had in clear terms directed the 2nd respondent to consider the Petition and its annexures as a representation of the petitioner and to pass a speaking order after hearing the petitioner. If at all the 2nd respondent wanted to rely upon the order-­in­-original dated 20/11/2018, the least the 2nd respondent should have done is to give an opportunity to the petitioner to deal with the order-­in­-original dated 20/11/2018 for considering its effect/impact on the proceedings before the 2nd respondent.

The matter is remitted back to the 2nd respondent for a fresh decision on merits and in accordance with law.

2019 (3) TMI 983

Relevant date for fixing redemption fine - seizure of Gold - Held that:- The provision contained in Section 14 says that the value of the goods has to be arrived on the date of import / export. The delay in adjudication cannot be a factor for deciding the market value of the goods by the department. In the case of enhancement alleging non-declaration of correct value of goods, the basis of the similar imports during the relevant period is to be taken into consideration and not the value of the goods at the time of passing the order by the authority. In this line, when the redemption fine is imposed, the relevant date for fixing the redemption fine should be the market value of the goods prevailing at the time of seizure and not at the time of passing the order.

The Five Member Larger Bench of the Tribunal had addressed the very same issue in the case of Omex India Vs. Commissioner of Customs [1992 (12) TMI 57 - CEGAT, NEW DELHI]. It was held that the market price at the time of importation has to be taken into consideration for calculating the fine that has to be paid for redeeming the goods.

The appellant is liable to pay redemption fine on the market value of the goods as it stood at the time of seizure which is ₹ 7,35,247.81 - The Commissioner (Appeals) has held that the margin of profit would range from 30% to 50%. Therefore, the redemption fine is reduced to ₹ 3,70,000/- - appeal disposed off.

2019 (3) TMI 982

Misdeclaration and undervaluation of imported goods - Timber - rejection of declared value - enhancement of value - reliability on statements - demand of differential duty - Held that:- In the present case the Appellant has imported goods on correct transactional value and the allegation of undervaluation are not supported by any cogent evidence. Further the goods by other importers are also on same price. Hence, the declared value cannot be doubted.

It is also found from the data submitted by the Appellant that the contemporaneous imports of such or like goods were allowed to be cleared only at the same price or comparable price, but in fact at price lower than those declared by the Appellant. There is no reference of any excess payment made to any of the suppliers, the mode of such payment, manner of payment or person through whom such payments were made. In absence of same, it cannot be held that the Appellant has under-valued the imported goods. Even though the other importers were importing same quality, quantity of goods at the same prices, no question has been raised against such importers.

The case of the Appellant is squarely covered by the Tribunal’s order in case of Vijay Leather Stores [2007 (2) TMI 498 - CESTAT, BANGALORE] as the same and similar goods were also imported on same price and the allegation of undervaluation thus would not sustain. The records of contemporaneous imports and the data have not been considered by the adjudicating authority and in such cases, we find that there is no case of demand against the Appellant.

The goods at the time of importation were physically examined by Customs authorities and were found as per the declared description. Thus, in absence of any contrary evidence, the value of rejected grade timber cannot be enhanced on the basis of good quality timber.

Reliability on statements - Held that:- The burden to prove under-valuation lies upon the Revenue by bringing credible and cogent evidence, whereas the submissions made by the Appellant clearly shows that in the present case, except third party documents and statements, no evidence has been brought by the Revenue on record - The statements of Shri Avinash Jindal and Shri Rajendra Agarwal and their employee corroborated which was corroborated with their own record is not a tangible and cogent evidence and cannot form the basis of under-valuation in respect of value declared by the Appellant.

Demand do not sustain - appeal allowed - decided in favor of appellant.

2019 (3) TMI 966

Valuation of imported goods - enhancement of value - Penalty - Held that:- The exchange of E-mail, the content of which has not denied by appellant establishes that there was undervaluation in respect of Mobile Charging Connector and Memory Card Reader. We therefore, do not interfere with the finding of lower authorities in respect of the same - However, in respect of the other items revenue has enhanced the value on the basis of data available in respect of similar goods imported during the relevant period.

There is no evidence established by revenue that said data was applicable to the imported goods and in respect of the goods such as Mobile Adopter, Mobile Zipper Cover Plastic and Mobile Batteries, revenue could not establish that the Price reflected in the invoice is not actual price paid by the appellant to the foreign supplier.

The value declared by the importer in respect of Mobile Adopter, Mobile Zipper Cover Plastic and Mobile Battery is restored - appeal allowed in part.

2019 (3) TMI 965

Condonation of delay of 2 days in filing the appeals - Held that:- The Bills of Entry were assessed on 15th & 16th November, 2017 and the due date of filing the appeals before the lower appellate authority was within sixty days. We further observe that all the six appeals were filed beyond the statutory period of 60 days but within the condonable period of thirty days. Accordingly, the delay in filing the appeal before the lower appellate authroity is condoned.

The impugned order set aside and matter remanded to the lower appellate authority for deciding the issue on merits.

2019 (3) TMI 964

Import of prohibited goods - import of drugs - Revenue entertained a view that the items in question being 'Homeopathic Medicines' are not permitted to be imported at Dadri - absolute confiscation - penalty - scope of SCN - Held that:- Having seen the Tariff Heading which covers 'Dental Cement', there is no merits in the above allegation of the Revenue in holding Dental Cement as Homeopathic Medicines - In any case and in any view of the matter, the notice raised dispute only in respect of the goods falling under said Tariff Item i.e. Dental Cement. There was no allegation in respect of the other items so imported by the appellant. In spite of that, the Adjudicating Authority has ordered absolute confiscation of all the items.

The notice proposed confiscation of the goods on the basis of the same being Homeopathic Medicines whereas the Adjudicating Authority has travelled beyond the show cause notice and has confiscated the goods by holding the same as Medical devices covered by the definition of Drugs. It is well settled law that show cause notice is the basis for initiation of proceedings and it is not proper for any Adjudicating Authority to travel beyond the allegations made in the notice - Having accepted that such goods are not Homeopathic Medicines which was the basic charge against the notice, the Adjudicating Authority should have vacated the proceedings instead of moving ahead for confiscation of goods on an altogether different ground.

The denial of import of the same at ICD Dadri is not in accordance with provisions of Rule 43A, Drugs and Cosmetics Rule, 1945 - appeal allowed - decided in favor of appellant.

2019 (3) TMI 890

Principles of natural justice - demand based on audit objections without issuing SCN - case of appellant is that the order of assessment was confirmed without giving an opportunity to the importer for being heard - Whether principles of natural justice have been violated vis-à-vis less charge demand and adjudication order issued to the appellants? - Held that:- During the relevant period copies of the letters were given to the CHA while they were sent by post to the appellants. The letters or orders did not come undelivered as per the averment of the department. It is also not the appellant’s contention that they have changed their address during the relevant period. Therefore, there appears to be no cogent reason to suspect that the letters/orders were not delivered to/ received by the appellants. The appellants being regular importers/ exporters at that time, the CHA could have also handed over them the letters - both the sides have contributed to the condition where principles of Natural Justice have been violated in spirit, if not in Letter. Normally, the issue may have to go back to the Original adjudicating authority for a fresh consideration.

Demand of interest - Whether the provisions of interest which came into effect in 1996 can be made applicable to the imports made in 1992? - Held that:- The relevant date should be the date of occurrence of taxable event. It is not the intention of Law to penalize importers where the taxable event has occurred before the new legislation came in to effect. Moreover, the appellants were not put to Notice on the requirement of paying interest vide the adjudicating order. Therefore, the appellants are not required to pay any interest on the duty confirmed - Thus, the appellant is not required to pay any interest. It was not correct for the department to collect Interest.

Freezing of appellant's accounts - Whether the Revenue was within their right to freeze the accounts of the appellant? - Held that:- Going by the above provisions of Section 142, it is seen that the Commissioner of Customs is empowered to recover sums due to government by distraining any movable or immovable property belonging to or under the control of the defaulter. Therefore deducting the amount due from the ums payable to the defaulter or detaining / selling the goods belonging to the defaulter and lying in the custody of customs or detaining the movable or immovable property are within the ambit of powers conferred under Section 142 - there is no infirmity in the said orders issued by the Commissioner in freezing the bank accounts of the Appellants. However, freezing of accounts for recovery of interest which is not payable is incorrect.

Whether there is a case for contempt proceedings against the Commissioner? - Held that:- Contempt proceedings at this stage would not solve any purpose rather than to further increase the litigation which in no way was the intention of the above cited orders of the Tribunals. As the accounts have been defreezed and a speaking order has been passed by the Learned Commissioner, no further justice could be achieved by pursuing the contempt proceedings. Therefore, at this juncture when the final order is ready to be issued I am not inclined to pursue the contempt proceedings.

Appeal disposed off.

2019 (3) TMI 889

Levy of export cess on Mica Products - Section 28 (1) of the Customs Act, 1962 - Held that:- Admittedly, in the Shipping Bills filed by the Respondents and self assessed under Section 17 of the Customs Act, the export cess has not been levied or paid. There is no dispute on this fact. The Revenue has issued the Show Cause Notices in these cases for demand of cess within a period of five years from the dates of export by invoking the proviso to Section 28 by alleging suppression etc. on the part of the exporters.

A perusal of the Show Cause Notices reveal that the only reason cited for alleging suppression and willful mis-statement is the exporters, on self assessed shipping bills, did not pay the export cess. The act of not paying the cess which was otherwise payable, has been cited by Revenue to allege suppression of the part of the exporters - This alone cannot constitute proper justification for invoking extended period under Section 28. Perusal of the Order passed by the Commissioner (Appeals) reveals that he has taken a similar view - Appeal dismissed - decided against Revenue.

2019 (3) TMI 888

Rectification of mistake - apparent mistake on the face of record or not - Held that:- All the submissions raised by the learned counsel of the appellant have been noted. There is no averment in the Application filed by the appellant that this ground was urged at the time of final hearing of the Appeal but was not considered - there is no mistake apparent from the record which needs to be rectified - application for ROM rejected.

2019 (3) TMI 829

Rectification of mistake - power of Appellate Tribunal u/s 129B(2) of the Act to rectify mistake - scope of 'mistake' and 'apparent' - Held that:- It is no doubt true that evidence cannot be re-appreciated to come to a different conclusion and that ‘mistake apparent from the record’ cannot be something which is established by a long drawn process of reasoning of points on which there may conceivably be two opinions, but it is equally true that the purpose behind the enactment of Section 129B(2) of the Act is based on the fundamental principle that no party appearing before the Tribunal, be it an assessee or the Department, should suffer on account of any mistake committed by the Tribunal and that if a decision is based on a material which could not have been used, then the Tribunal would have the power to rectify the mistake.

If the Tribunal has not considered the material evidence which was available on the record, it would amount to a mistake apparent on the face of the record and the Tribunal would have the jurisdiction to correct the said mistake. It is not merely an arithmetical or clerical mistake that can be rectified because ‘mistake’ in taxation laws has a different connotation and is mostly subjective. The mistake should be such which no Court would permit it to remain on the record for rectification of the order stems from the fundamental principle that justice is above all. If a decision is based solely on a material which is irrelevant or could not have been used then the mistake can be rectified.

When it has been brought to the notice of the Tribunal that an issue was framed by the Commissioner of Customs (Preventive), Jodhpur as to whether the Commissioner of Customs (Preventive) had the jurisdiction to issue the show cause notice and a detailed finding has been recorded that it had the jurisdiction, then it would be a fit case for exercise of powers under Section 129B(2) of the Act to rectify the mistake committed by Tribunal, which mistake is so apparent on the face of the record.

The Appeals were disposed of earlier on 11 August, 2017 by remanding the matter to the adjudicating authority for taking a fresh decision as the parties had agreed that the Commissioner of Customs (Preventive), Jodhpur was not the competent authority to issue notice. To rectify this mistake of the Tribunal, the entire order dated 11 August, 2017 would have to be recalled. It can be urged that this may not amount to rectification of mistake in the Final Order, but, in the peculiar facts and circumstances of the case, as it has been found that the Tribunal committed a mistake in view of the consent given by the Respondent against the record, it has become necessary to recall the Final Order, as the issues raised in the Appeals, including that relating to jurisdiction of the Commissioner of Customs (Preventive) to issue the notice, have now to be decided on merits.

Thus, it is a fit case for exercising the powers under Section 129B of the Act to correct the mistake apparent from the record and, accordingly, recall the order dated 11 August, 2017 - Let the Appeals be listed on 13 March, 2019.

2019 (3) TMI 720

Release of seized consignments - issuance of ‘Detention Certificate’ for waiver of Demurrage and Container Detention Charges' - Regulation 6(1)(l) of Handling of Cargo in Customs Areas Regulations 2009 - relevant date for the reckoning the date of the imports would be the date of Bill of Lading or Bill of Entry? - Held that:- An identical issue decided in the case of M/S. ROYAL IMPEX VERSUS THE COMMISSIONER OF CUSTOMS, THE ASSISTANT/DEPUTY COMMISSIONER OF CUSTOMS, GROUP -1 [2019 (3) TMI 312 - MADRAS HIGH COURT], where it was held that the Regulation 9.11 of the Foreign Trade Policy specifically states that for the purpose of reckoning the date of import, the relevant date would be the date of Bill of Lading only.

The petitioners will remit the entire duty component of the consignments imported by them in cases were such duty is leviable as per paragraph 15(iii) above along with a bank guarantee for the 10% of the invoice value. In cases where the duty impact is neutral, the petitioners shall furnish a bank guarantee for the 10% of the invoice value. Upon satisfaction of the aforesaid conditions, the consignments shall be released forthwith.

Waiver of demurrage charges incurred in respect of the detained consignments - Held that:- In the light of Rule 6(l) of the Handling of Cargo in Customs Areas Regulations, 2009, which provides that the Customs Cargo Provider shall not, subject to any other law for the time being in force, charge any rent or demurrage on the goods seized or detained or confiscated by the Superintendent of Customs or Appraiser or Inspector of Customs or Preventive officer or examining officer, as the case may be, there shall be a waiver of demurrage charges.

Petition disposed off.

2019 (3) TMI 719

Provisional release of goods - genuineness of the certificates of origin produced by the petitioner - Held that:- The power under Section 110A of the Customs Act is a discretionary power vested with the adjudicating authority. The petitioner approached this Court challenging the seizure mahazar contending that the same is illegal. In the said Writ Petition, interim direction was issued by giving liberty to the petitioner to approach the authorities under Section 110A of the Act requesting for provisional release of the goods. In terms of Section 110A of the Act, any goods/documents/things seized under Section 110A, may, pending the order of the adjudicating authority be released to the owner on taking a bond from him in the proper form with such security and conditions as the adjudicating authority may require. The scope of judicial review on the exercise of such discretionary power is undoubtedly limited.

This Court, in several decisions, have granted orders directing provisional release of the cargo subject to certain conditions. However, there can be no universal rule as to what would be the appropriate directions to be issued while granting provisional release bearing in mind the interest of the stake holders, namely, the importer/exporter and the revenue. Therefore, we have to examine each case on its own merits and come to a correct conclusion - In the instant case, the task of establishing that the petitioner is entitled to clearance of the goods on furnishing of a simple bond is an uphill task. This is so because the petitioner claims the benefit of an exemption notification, whereby the benefit of treaties entered into between the Government of Sri Lanka and the Government of India is pressed into service. If such benefit is extended to the petitioner, then the petitioner would be entitled to clear the goods at concessional/NIL rate of duty.

In the case on hand, the petitioner has produced certificates of origin stating that the goods imported are of Sri Lankan origin. However, investigation has commenced on the authenticity of the certificates of origin not at the instance of the DRI or the Customs Department, Chennai, but at the instance of Revenue Intelligence Unit in Sri Lanka. As explained by the Deputy Director, DRI in the affidavit dated 12.02.2019, the communications, which was sent by DRI were only addressed to the competent officer/nodal officer, as notified by the Sri Lankan Authorities. These communications are letters dated 31.10.2018 & 30.11.2018. However, a reply was sent by the Director of Export, Sri Lankan Customs, dated 06.12.2018 referring to letters of the DRI, dated 31.10.2018 & 30.11.2018, addressed to the Nodal Officer in Sri Lanka. This according to the DRI is a suo motu communication by the Director of Export, Sri Lankan Customs and it is not in response to a communication sent by DRI to Sri Lankan Customs. It is interesting to note that in the letter dated 06.12.2018, the Director of Exports, Sri Lankan Customs states that the word transshipment used in the earlier e-mail was in inadvertent error - Thus, it is prima facie clear that there has been a communication from the Nodal officer at Sri Lanka that the containers were transshipped and the goods are not of Sri Lankan origin. However, another authority namely, the Director of Export states that this is an inadvertent error. The correctness of the respective stand cannot be tested by us in a Writ proceedings and it is for the investigating authorities to take forward the matter.

With regard to the plea raised by the petitioner that they are not in a position to produce the export document from their Sri Lankan Exporter stating that they are not parties to the document is a stand which is not convincing. Admittedly, the transaction runs to several crores of rupees and any prudent businessman, if he is of the firm view that the actions done by him are genuine, he will leave no stone unturned to vindicate his cause.

The conditions imposed in the order of the provisional release dated 01.01.2019, under Section 110A does not call for any interference - the petitioner has not been able to make out case of any procedural irregularity or any perversity in the decision. Thus, the condition imposed is not liable to be interfered.

Appeal disposed off.

2019 (3) TMI 718

Rebate claim - DEPB Claim - contention of the respondents was that this amount has been considered as amount deposited during the investigation in the Show Cause Notice at various places and also been considered amount by the Assistant Commissioner (Refund) for appropriating the liability of Customs duty vide his Order dated 29-04-2016, hence they are eligible to get the refund of the said amount.

Held that:- The amount of ₹ 1,24,37,308/- has been considered as the amount deposited during investigation by the department in the Show Cause Notice dated 11.11.2004. It is also undisputed that the Assistant Commissioner (Refund) vide his Order dated 29.04.2016 has appropriated the duty amount of ₹ 59,23,397/- out of the said amount of ₹ 1,24,37,308/-. Thus, there is no hesitation in holding that the amount of ₹ 1,24,37,308/- surrendered by the respondents by way of DEPB/Rebate claim has been considered as an amount deposited during investigation by the department itself and there is no dispute over this fact.

Also, refund claim cannot be denied merely on the ground that there is no provision under law. Once it is accepted that the benefits surrendered by the respondents are in the nature of amount deposited during investigations, then the refund of the excess amount has to be paid/refunded.

Appeal dismissed - decided against Revenue.

2019 (3) TMI 717

10% EOU - Jurisdiction - whether the adjudicating authority has jurisdiction to examine as to whether appellant has fulfilled export obligation by achieving minimum positive NFE or not under Notification No. 53/97-Cus and 01/95-CE or otherwise? - Held that:- On perusal of N/N. 53/97-Cus. dated 03-Jun-1997, in its entirety, we find that the Central Government grants exemption from customs duty to goods imported into India for the purpose of manufacture of articles for export out of India, or for being used in connection with the production, packing or job work for export of goods or services out of India by 100% an EOU, as notified by the Board under Ministry of Industry, Department of Industrial Policy and promotion, subject to the conditions specified therein.

It can be seen from the reproduced final Exit Order, the Development Commissioner has specifically held that appellant has achieved positive NFEP and fulfilled its export obligations as per the prescribed norms. This finding has not been challenged and attained finality. Though the Customs Authorities do not have jurisdiction to decide whether an assessee has fulfilled the export obligation, the Development Commissioner considered the provisions of the policy as applicable during the relevant period as it arrived at a definitive conclusion that the appellant has achieved positive NFEP and fulfilled its export obligations - thus it cannot be held that appellant has violated any of the conditions of the notifications.

In any case, the re-computation of the NFEP by the Adjudication Authority is without any jurisdiction, especially when the Development Commissioner has found that minimum NFEP and minimum export obligations met. Even otherwise, minimum NFEP calculated by the Adjudicating Authority after the exports at Gopalapuram Mandal have exculded. We find that the Development Commissioner in final order has considered the proceeds from both the units, the adjudicating authority could not have re-computed the same after excluding the proceeds from one of the unit, this is especially so when development commissioner expressly considered its earlier order dated 03.05.2002 while holding that appellant has achieved net positive NFEP.

In the present case, the appellant vide a specific application dated 15.04.2003 has sought exit from EOU scheme stating that it had achieved positive NFEP and minimum export performance as stipulated under the EXIM policy as on date. The Development Commissioner has examined the same and found that the appellant had achieved net positive NFEP and fulfilled the export obligations under the EXIM policy read with the handbook of procedures. Thus the findings of the Development Commissioner that appellant has achieved minimum NFEP and minimum export obligation, is in exercise of his powers under the EXIM Policy and as to be accepted by the authorities.

Limitation - Held that:- There could not have been any suppression or mis-statement of facts when it is held that there was no evidence of suppression or mis-statement in the orders dated 12.10.1999 - The Department was in appeal challenging the above order, before the Tribunal. The Tribunal finally upheld the order dated 12.10.1999 dismissed the appeal on 19.01.2004, in such conditions neither the show cause notice nor the Order-in-Original in question shown any different circumstances that demonstrate that the appellant had suppressed any information with a view to evade taxes - The allegation of suppressions with intention to evade duty cannot be upheld in the given facts and circumstances of this case.

Appeal allowed - decided in favor of appellant.

2019 (3) TMI 716

Doctrine of Promissory Estoppel - EPCG Scheme - non-fulfillment of export obligation - concessional rate of duty as per N/N. 97/2004 dated 17.9.2004 - Held that:- Admittedly appellants have imported the capital goods at concessional rate of duty under EPCG license as per N/N. 97/2004 – Cus. and saved the duty amount of ₹ 4,90,185/-. Further, as per the said Notification, appellant was required to discharge the export obligation but they have failed to comply with the conditions of the Notification as a result of which both the authorities have confirmed the demand and short-levy amounting to ₹ 4,14,274/- along with applicable interest.

The Doctrine of Promissory Estoppel is not applicable in the facts and circumstances of this case because the appellant have admittedly failed to discharge the export obligation as required under the said Notification. In the absence of not discharging the export obligation, the Commissioner (A) has rightly confirmed the demand - Appeal dismissed - decided against appellant.

2019 (3) TMI 715

Transferred Duty Free Import Authorization (DFIA) Scheme - import of plastic granules of various grades - 40/2006-Cus. dt. 1.5.2006 - N/N. Amendment by way of N/N. 17/2009-Cus. dt.1.9.2009 - Held that:- Discernably, the periods of dispute in the appeals are clearly before the amendment caused w.e.f. 19.02.2009 vide Notification No.17/2009-Cus. dt. 19.02.2009. The retrospective application of that amendment, sought to be brought about by the Government by Section 93 (1) of the Finance Act, 2009 w.e.f. 1.5.2006 has been set aside by the Hon’ble High Court.

The dispute subsequent to the cut off date of 19.02.2009 will have to be necessarily debated by both sides on merits since same will not be covered by the High Court - impugned order do not sustain - appeal allowed.

2019 (3) TMI 963

Application for grant of injunction made - maintainability of the suit - High court jurisdiction in the matter - suppression of material facts - praying for similar reliefs simultaneously before two different forums - HELD THAT:- It can be said without hesitation that a person whose case is based on falsehood has no right to approach the Court. He can be summarily thrown out at any stage of the litigation. A litigant, who approaches the Court, is bound to produce all the documents executed by him which are relevant to the litigation. If he withholds a vital document in order to gain advantage on the other side then he would be guilty of playing fraud on the court. Furthermore, a person who seeks equitable relief from the court must come to the court with clean hands and disclose all facts which are relevant to the case. In my considered view, the statement in the plaint that the plaintiff is intending to file an application before the NCLT, when the truth was that the application had already been filed is a case of misrepresentation and amounts to suppression of material facts. On this count itself, the application for injunction needs to be dismissed.

Proviso to Section 58(2) states “provided that any contract or arrangement between two or more persons in respect of transfer of securities shall be enforceable as a contract”. This power under Section 58 read with Rule 70(5)(b) that gives the power to the Tribunal to generally decide any question which is necessary or expedient to decide in connection with the application for rectification read with Section 70(4)(a) that gives the power to the Tribunal to pass any interim order including any orders as to injunction or stay makes it clear that it is the Tribunal that has the power to decide all issues in relation to transfer of shares by way of an oral or written contract. The very fact that the Tribunal has been empowered with these powers leads one to the inference that all issues relating to transfer of shares, registration and rectification of register of members and any matter incidental to the same including oppression and mismanagement would be retained by the Tribunal.

Under these circumstances, it is of the prima facie view that this High Court does not have jurisdiction in the above matter.

Plaintiff praying for similar reliefs simultaneously before two different forums - HELD THAT:- A litigant cannot be allowed to seek similar reliefs in different forums at the same time. It would have been a different matter if the application before the NCLT had not been filed or was withdrawn before the filing of the suit. In the event both the applications before the NCLT and the interim application before this Court are allowed to run parallelly, a dichotomous situation would arise as the vital issues involved in both the suit and NCLT petition are the same. The rectification sought for before the Tribunal also proceeds on the argument that the defendants have acted in a fraudulent manner and did not register the name of the plaintiffs as shareholders. The same argument finds place in the suit and the interim application before this Court. The two parallel proceedings may result in diametrically opposite orders being passed with regard to the same core issue. Such a situation is not acceptable and contemplated in law.

The present application for an ad interim order of injunction cannot be allowed on two counts – (a) suppression of material facts and (b) the plaintiff praying for similar reliefs simultaneously before this Court and NCLT that would require adjudication on the identical core issue.

2019 (3) TMI 962

Outstanding dues - undefended suit - Plaintiff entitlement to get the decree prayed for in the instant suit - HELD THAT:- As established from the evidence on record that the defendant was to supply 92,000 Metric Tonnes (MT) of Iron Ore fines to the plaintiff company after the advance payment for the same was made. The plaintiff company paid a sum of ₹ 15,66,50,000/- to the defendant in lieu of the agreement with the defendant, but the plaintiff company received Iron Ore fines worth only ₹ 5,84,10,000/-, thus supply of iron ore fines worth ₹ 8,82,40,000/- remained outstanding. The plaintiff company tried to approach the defendant on various occasions demanding the outstanding amount but the defendant never repaid the said amount to the plaintiff company.

The defendant through an e-mail dated 13th November, 2011 acknowledged the sum due and also promised to refund an initial amount of ₹ 4,20,00,000/- by January, 2012 to the plaintiff company. When the defendant on various occasion failed to pay the amount due to the plaintiff company, the plaintiff company on 31st March, 2014 through its advocate filed a Civil Suit in this Court with regard to the outstanding claim of the plaintiff. It is to be noted that the suit is well within the period of limitation. It is to be noted that the defendant has entered appearance but chosen not to file any written statement. In view of the same the suit has been treated as an undefended suit.

The plaintiff company has prayed for ₹ 12,00,06,400/-, out of which ₹ 8,82,40,000/- is the principal amount and ₹ 3,17,66,400/- is the interest amount (calculated @ 18% p.a. from January, 2012 to December, 2013). In view thereof, the plaintiff company is entitled to get an ex-parte decree against the defendant for the principal sum of ₹ 8,82,40,000/- along with the interest @ 9% p.a. from 13th November, 2011 till the date of payment.

2019 (3) TMI 961

Misstatement in public issue of shares - Rectification of shareholder register - seeking an order against the respondent company to rectify the shareholder register of the respondent Company and to delete the name from the ownership of 1,49,300 shares allotted to the appellant on the basis of prospectus dated 11.03.1996 containing misstatement - issue was not 100% underwritten and that the respondents No. 1 to 9 who signed and issued the prospectus are personally and jointly liable for consequences and to refund the appellant’s entire amount with 24% compound interest - period of limitation - HELD THAT:- No worthwhile document is placed on record to show existence of a fraud. The evidence is sketchy. There is nothing to show what was the fraud played on the appellant.

Company Law Board has already recorded a finding of fact that the petition is barred by limitation. The petition was barred by limitation as it pertains to the year 1996 and the petitioner/appellant has been enjoying all the benefits as a shareholder. No reason to disturb the findings of fact recorded by the Company Law Board.

That apart, it is difficult to believe the version of the appellant. The public issue came in January 1996. The appellant has enjoyed the fruits of the shares allotted to it for more than 8 years and suddenly wakes up in 2004 to claim a fraud based on some hearsay evidence gathered from some proceedings pending in the Supreme Court. Even the copies of the proceedings that were pending before the Supreme Court are not sought to be placed on record.

There is no worthwhile and credible evidence led before this court to come to a different conclusion. There are no substantial questions of law which would persuade this court to exercise jurisdiction under Section 10 (F) of the Companies Act.

2019 (3) TMI 960

Winding up petition - whether suit prior to filing of winding up petition an impediment against the petitioner in filing the present petition? - calculation of amount due - as submitted claim of interest is based on an alleged oral agreement between the parties and is not in any manner reflected in any written documents exchanged between the parties - HELD THAT:- As per the records available with the respondent company, they have accepted a liability of ₹ 50,16,189/- in favour of the petitioner as on 31.03.2008, which is clear from the communication dated 13.08.2010 sent by the respondent company to the Income Tax Department. It is also a matter of fact that TDS certificate had been issued by the respondent company to the petitioner for the said dues. Further in their reply, the respondent company accepted that the amount relied upon by the petitioner was duly received in their account though it was claimed that the same was returned by Mr.R.P.Mittal. Clearly, prima facie amount appears due and payable to the Petitioner.

As decided in Bank of Nova Scotia vs. RPG Transmission Ltd [2002 (10) TMI 696 - HIGH COURT OF DELHI] mere filing of a proceeding before the DRT would not negate the right of the banks to file a petition for winding up of the respondent company. Hence, in view of the dicta of the Division Bench filing a suit prior to filing of winding up petition may not be an impediment against the petitioner in filing the present petition. By the present petition what the Petitioner seeks is to wind up the Respondent Company.

An opportunity should be given to the respondent company to prove its case before a civil court. However, it is necessary to secure the claim of the petitioner. The petitioner has claimed outstanding amount in the notice sent for a sum of ₹ 39,17,007/- which includes interest @ 12% per annum. There is some merit in the plea of the learned counsel for the respondent that the claim of interest is based on an alleged oral agreement between the parties and is not in any manner reflected in any written documents exchanged between the parties. Keeping in view the above facts the principal amount outstanding prima facie payable by the respondent is ₹ 17,57,000/-. Let the respondent deposit a sum of ₹ 20 lacs in court with the Registrar General of this court.

2019 (3) TMI 886

Transfer of the winding-up proceedings to any Tribunal - Transfer of pending proceedings of Winding up on the ground of inability to pay debts - Company gone into liquidation pursuant to an order passed by the company Court on a creditor’s winding-up petition - HELD THAT:- On a reading of Section 434(1)(c) of the Act of 2013 with clause 5(1) of the Notification of December 7, 2016 that it is only where a petition for winding-up instituted under Section 433 (e) of the Act of 1956 has not been served on the company, will such winding-up petition stand transferred to the relevant Bench of the Tribunal.

In the present case, the creditor’s winding-up petition resulted in an order of winding-up being passed on June 14, 2016. Thus, as at December 7, 2016, there was no question of transfer of the winding-up proceedings to any Tribunal.

The appeal that has been carried from an order passed in the winding-up proceedings is not contemplated under the Act of 2013 or any notification issued thereunder to stand transferred to any tribunal. In any event, it can scarcely be expected that an order passed by a High Court would be carried by way of an appeal to any tribunal.

In this context, it may be apposite to record qua the judgment in India Steam Laundry [2018 (9) TMI 337 - CALCUTTA HIGH COURT] that the ratio decidendi in a judgment is exactly what the judgment decides in the context of the issues before it and not what the judgment may imply to say.

Without going into the legality of the answers rendered in India Steam Laundry the decision and the dictum therefore, be confined to a case of oppression and mismanagement instituted in this Court prior to the 1988 Amendment coming into effect in 1991. The dictum has no bearing on other company proceedings, far less any impact on proceedings that have been saved and are required to be continued in the High Courts pursuant to the first proviso to Section 434(1)(c) of the Act and as prescribed by the Central Government by the notification of December 7, 2016. The only alteration to such position now is that any party to the pending proceedings in this Court has a right to apply for the transfer of the proceedings to the relevant tribunal.

The objection taken by IIBI Limited and IFCI Limited as to the maintainability of the present appeal is, thus, overruled.

These matters pertaining to New Central Jute Mills Company Limited (in liquidation) will now appear one week after the puja vacation.

2019 (3) TMI 882

Oppression and mismanagement - maintainability of petition - exceptional circumstances for grant of waiver to maintain an application under Section 241-242 - individual eligibility to maintain application under Section 241-242 having more than 10% of the share of the company - HELD THAT:- Except two members all the member are individually eligible to maintain application under Section 241-242 having more than 10% of the share of the company. It is not necessary that they will have to join with one or other member to maintain their petition.

In ‘Cyrus Investment Pvt. Ltd. & Anr. Versus Tata Sons Ltd. & Ors.’ [2017 (9) TMI 1500 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] this Appellate Tribunal noticed the shareholding pattern and taking into consideration the fact that majority of the shareholder having less than 10% of the shareholding, except 2 got more than 10% and that the Appellant ‘Cyrus Investment Pvt. Ltd.’ has invested about ₹ 1,00,000 Crore in ‘Tata Sons Ltd.’ out of the total investment of ₹ 6,00,000 Crore, held that the Appellant of the said case namely ‘Cyrus Investment Pvt. Ltd.’ has made out an exceptional case to maintain a petition for waiver under Proviso to Sub-section (1) of Section 244 of the Companies Act, 2013.

The present case of the 1st Respondent ‘Ronny George’ is not only different but a reversal case where majority of the shareholder have more than 10% of shareholding except two who are less than 10% shareholding. Therefore, it cannot be held that the 1st Respondent has made out a case of exceptional circumstances for grant of waiver to maintain an application under Section 241-242 on such ground. This apart, no exceptional circumstance has been shown by the Tribunal to grant waiver. The factors recorded by NCLT in Para 17 of the impugned order are no grounds to treat them as exceptional circumstances keeping in view our Judgment in the matter of ‘Cyrus Investment Pvt. Ltd. & Anr. Versus Tata Sons Ltd. & Ors.’ (Supra).

The impugned order of Tribunal being based on wrong presumptions of fact and law and as the1st Respondent has failed to make out a case for waiver, the said order is set aside. We hold that the petition under Section 241 and 242 preferred by 1st Respondent (Petitioner) before the Tribunal in respect to 2nd Respondent Company – ‘Professional International Couriers Private Limited’ is not maintainable and to be dismissed

2019 (3) TMI 673

Failure to repay the amounts borrowed from the depositor - section 73 of the Companies Act, 2013 - Held that:- The petitioner has not given all the material facts with regard to the invoking of section 73 of the Companies Act, 2013, no company shall invite, accept or renew deposits under this Act, from the public except in a manner provided under this Chapter - Admittedly, the petitioner has not filed any document to show any invitation was issued by the company from the public including the petitioner. The petitioner has not produced any material to show that in response to notification they have deposited the money primary company petition (sic).

It is very clear that the applicant has not deposited the amount pursuant to any invitation made by the company. However, for inviting any public deposit. Therefore, the claim of the petitioner is not maintainable under section 73(4) of the Companies Act, 2013 and is misconceived - petition dismissed.

2019 (3) TMI 620

Maintainability of winding up petition - bonafide dispute or not - reliance by the respondent on the communication dated 03.04.2014 - Held that:- The reliance on communication appears to be an afterthought. This is also apparent from the fact that this communication was written by Mr. I.C. Kalra, Vice President (Technical) who had himself signed the final running bill. The same person is now turning around and giving a completely different story - The respondents are clearly taking contrary stands regarding the authority of Mr.I.C.Kalra to take decisions on behalf of the respondent company.

Communication dated 07.06.2011 written to Sehrawat Marbles - Held that:- The learned counsel for the petitioner in court on instructions had clarified that the petitioner does not deal in Kotha Stones. Clearly, this communication/the alleged order relied upon by the respondents is make belief and cannot be relied upon.

The settled legal position is that where the respondent company raises a bona fide dispute then no winding up petition would lie - in the facts of the above case the respondent company has failed to show any bona fide dispute.

Present petition is admitted - List on 27th May, 2019.

2019 (3) TMI 619

Compounding of offences - imposition of fines on Ishwarlal Jariwala who died after the Impugned Order was passed - Held that:- We are of the view that delays in compliance of the provisions of Companies Act regarding submission of Returns and Forms are source of mischiefs in various instances. These lapses need to be viewed seriously. Even if on facts in a given case, leniency may be shown, it cannot be so much that fear of law gets taken away. There is no illegality in the Impugned Order - We do not think that for the misconduct, as noticed in the present Appeals, further leniency is required to be shown - appeal dismissed.

2019 (3) TMI 591

Principles of natural justice - case of appellant is that appellant’s right to be heard, audi alteram partem, one of the principles of natural justice, has been violated in as much as the appellant has neither been served with notice of appeal before the NCLAT nor been given a hearing before it - Held that:- In the instant case, the NCLAT, vide order dated 02.01.2019, issued notice both on the question of limitation as well as on the merit of the appeal. Subsequently, judgment was reserved vide order dated 08.01.2019 - It is to be noted that in the rejoinder affidavit before us the appellant has submitted that, pursuant to issuance of notice vide order dated 02.01.2019, neither did respondent no. 1 file process fee for issuance of summons in terms of the said order, nor was the same served upon the appellant. Thus the judgment which was reserved on 08.01.2019 by the NCLAT, and consequently pronounced, was done without hearing the appellant and the observation of the NCLAT that all the parties were heard is erroneous. In fact, even the impugned order does not note the appearance of the counsels on behalf of appellant herein.

Rule 48 of the NCLAT Rules clearly stipulates service of notice on the other side, pursuant to issuance of notice by the NCLAT in the appeal, regardless of supply of advance copy of appeal paperbook prior to the issuance of notice by NCLAT. 9. Further, Rule 52 of the NCLAT Rules categorically states that the judicial section of the registry of the NCLAT shall record, in the “Notes of the Registry” column in the order sheet, the details regarding completion of service of notice on the respondents.

The material placed before us do not indicate that the aforementioned stipulation has been complied with - the instant appeal can be disposed of by setting aside the order of NCLAT and remanding the matter back to the NCLAT for fresh consideration - appeal allowed by way of remand.

2019 (3) TMI 521

Stock brokers - misuse of clients’ funds / securities - Disciplinary action including monetary penalty/ suspension/ expulsion in accordance with National Stock Exchange of India Limited Rules, Regulations and Bye Laws - failure to abide the Code of Conduct for trading members under Regulation 4.5.1 and Regulation 4.5.2 of the National Stock Exchange (Capital Market) Trading Regulations, 1994 as well as under the National Stock Exchange of India Limited Rules - doctrine of proportionality - imposition and quantum of penalty - Held that:- Admittedly, the appellant had committed violation which is clear from his submissions in reply to the show cause notice. Thus, the appellant had failed to abide by the Code of Conduct for trading members under the aforesaid Rules and Regulations. The appellant had failed to act in a diligent manner and had failed to protect the interest of his clients. It was found that the appellant had failed to ensure availability of clients’ assets and misappropriated clients’ funds to meet the proprietary obligation and, therefore, the appellant failed to perform its fiduciary duty. Using clients’ funds is a misuse of clients’ funds and securities and thus, the appellant was liable for imposition of penalty.

In the instant case, it was urged by the learned counsel that if the penalty is to be calculated under this provision, a maximum penalty of ₹ 5 lakhs could have been imposed whereas, in the instant case the NSE has imposed a penalty of ₹ 15 lakhs which was excessive - Normally, the penalty indicated in the Circular should be followed in letter and spirit and if a departure is to be made, it would be necessary for the NSE to give reasons for such departure and give a finding as to whether there was repetitive nature of the violation or the gravity of the violation was such that a higher penalty was required to be imposed. If the violation was having a high impact the seriousness and gravity of such violation was required to be indicated - In the absence of any allegation of the violation being repetitive in nature and, in the absence of any finding that the violations had a high impact or that the violations were grave in nature, having serious consequences, we find that the imposition of suspension of trading membership of 5 days was excessive and unwarranted. We are further of the opinion, that considering the admission of the appellant that they had misused the client funds and securities the imposition of penalty of ₹ 15 lakhs over and above the amount indicated in Annexure 1 was justified in the given circumstances.

Doctrine of proportionality - Held that:- In the instant case, the doctrine of proportionality is fully applicable. In the test of proportionality, the Courts will quash the exercise of discretionary powers if it finds that there is no reasonable relation between the objective which is sought to be achieved and the means used to that end or where the penalty imposed is wholly out of proportion to the relevant misconduct. Thus action which is arbitrary or discriminatory cannot be sustained. In the instant case, the penalty of suspension, in the facts of the given case is out of proportion and thus cannot be sustained.

Appeal allowed in part - that part of the order is quashed by which the trading membership of the appellant was suspended in all segments for a period of 5 days.

2019 (3) TMI 354

Validity of Arbitral Award - Default in repayment of mortgaged loan - Held that:- Having not disclosed the factum of the pendency of the Company Petition to the Arbitrator and not disclosed the order of winding up to the learned Single Judge hearing the Arbitration Petition, the Appellant cannot turn around and seek to invalidate the Award on the ground of non-compliance of Section 446 - If according to the Appellants the learned Single Judge should not have proceeded with the matter because of the order of winding up, the Appellants should have brought this to the notice of the learned Single Judge. Having remained silent, not even filing a reply to the Arbitrator, the Appellants are attempting to nullify the Award of the admitted liability by putting forth an argument which has no basis.

The legislative policy and the series of decisions of this Court and the Apex Court envisages a lean towards upholding the Arbitral Awards. In the present case what we have before us is a clear case of debtors refusing to pay back the loan. The Arbitrators gave ample opportunity to file reply yet the Appellants did not do so. The challenge raised on the same ground against the Respondent in identical circumstances stands concluded against the Appellants up to the Apex Court.

The sole contentions advanced by the Appellants cannot be accepted - appeal dismissed.

2019 (3) TMI 353

Professional misconduct on the part of Chartered Accountant - case of Revenue is that the Respondent No 1, being the Statutory Auditor of the Respondent No 2 Company has miserably failed to fulfill the statutory duty entrusted to him as per the provisions of the Companies Act, 2013 - Held that:- In the present times when the national economy is highly dependent upon the profitability and credibility of commercial institutions, the role of Statutory Auditors is becoming a very important tool of keeping a check and preventing re-occurrence of scams like Satyam. This Tribunal while exercising its power under the Insolvency and Bankruptcy Code, 2016 and the Companies Act, 2013 has on several occasions made crucial decisions in important matters relating to Amalgamations and Merger, Oppression and Mismanagement, Voluntary Liquidation, Insolvency petitions, etc.and for such matters, it has to rely upon the reports of the Independent Auditors.

It is not only the Company or the Board of Directors or promoters of a company, but the investors, both current and prospective, Securities Market, and the Courts/Tribunals too, that often rely upon the reports of independent Auditors - The role of Statutory Auditor is thus vital, and the auditor owes a fiduciary duty towards Nation. It is, therefore, necessary to take stern action against the person who has tried to diminish the credibility of the Auditor’s profession.

The conduct of the Respondent no. 1, who happens to be a senior member of the ICAI, amounts to a gross violation in the form of professional misconduct and has challenged the credibility of the whole Profession. The respondent no. 1 has brought disrepute to the Institute of Chartered Accountant and the profession itself. We hope the ICAI will take necessary action against Respondent No. 1 for his professional misconduct.

It is clear that the R-1 Mr Mukesh Maneklal Choksi colluded with the Director of R-2 company and has given a false Audit certificate relating to the Profit & Loss Account and Balance Sheet of the R-2 company, without even examining and verifying the books of accounts, The Statutory Auditor has not given any plausible explanation for such irresponsible fraudulent activities. Thus the charges levelled against the R-1 Mr Mukesh Maneklal Choksi have been found correct - petition allowed.

2019 (3) TMI 292

Disbursement of subsidy - Requisite capital investment for grant of subsidy - Special Incentive Package - refuse disbursement of subsidy on the ground that the petitioner’s viability in question - HELD THAT:- The learned counsel appearing for the applicant seeks to withdraw the present application. The application is dismissed as withdrawn.

2019 (3) TMI 198

Disbursement of subsidy - Requisite capital investment for grant of subsidy - Special Incentive Package - refuse disbursement of subsidy on the ground that the petitioner’s viability in question - HELD THAT:- Since there appears to be no dispute that the petitioner had defaulted in payment of liabilities towards lease rentals related to the assets, which are capitalized as investment, the decision that the petitioner has not made the requisite investment cannot be faulted.

The respondents were entitled to verify the capital investments made by the petitioner and since the petitioner had failed to provide the necessary documents evidencing such investments, the same could not be considered by the respondents. This Court finds no infirmity with this decision. If the investment of ₹ 96.95 crores is excluded, the NPV of the investments made would fall within the threshold limit of ₹ 1000 crores and the petitioner would not be entitled for any subsidy under the scheme.

The subsidy was required for sustaining the project and not necessarily incurring capital expenditure. More importantly, there is no material to indicate that the subsidy would be used for capital investment as originally envisaged that the same would result in the petitioner meeting the criteria of capital investment (NPV of ₹ 1000 crores).

The decision of the respondents to refuse disbursement of subsidy on the ground that the petitioner’s viability in question also cannot be faulted. Plainly, the object of the Scheme was to support eligible projects. In the given set of facts where the viability of the petitioner’s project is itself under serious question, the respondent cannot be expected to disburse any subsidy – which was envisioned for long term benefits. The opening paragraph of the Scheme indicated that the same was in expectation of return by way of contribution to the GDP of the country.

Petitioner could not dispute that even if the NPV was calculated on the basis as accepted in Indosolar (supra), the NPV of the petitioner’s capital investment would not exceed the threshold of ₹ 1000 crores if the outstanding lease rentals and the capital expenditure amounting to ₹ 96.95 crores was excluded from such calculation. - Petition dismissed.

2019 (2) TMI 1502

Condonation of delay in filing the present appeal beyond the period of 60 days as provided under section 10F of the Companies Act 1956 - HELD THAT:- There is a merit in the contention of the learned counsel for the respondents that the dates relied upon by the appellant are not reliable. In fact, in the application for condonation of delay, the appellant himself states that copy of the impugned order dated 12.08.2014 was received by him on or before 25.08.2014. In case, copy of the order was received after 25.08.2014, the delay in filing the appeal would not be condonable.

The grounds stated for seeking condonation of delay inspire no confidence. As per the application, it is claimed that appellant being the brother-in-law tried to resolve the matter out of court. It is pleaded that settlement talks between the parties ultimately failed due to the greed of respondent No.2 and hence, the appellant could not file the appeal within the statutory period. Hence, condonation of delay is sought. As noted, the grounds so stated inspire no confidence and the delay cannot be condoned on the said grounds.

There is a merit in the contention of the respondents that the present appeal has been filed against the order by which the review petition filed by the appellants against the order dated 30.04.2014 was dismissed. The appellant herein seeks to also assail the original order dated 30.04.2014. Keeping in view the above conduct of the appellant and the legal position, in my opinion, no grounds are made out to condone the delay in filing the application.

2019 (2) TMI 1453

Injunction restraining encashment of Bank Guarantees (BGs) and the objection of the defendants to the subject jurisdiction of this Court to entertain these suits - delayed the receipt of payment under the BBG by nearly over three months. HELD THAT:- As the Civil Court of Original Jurisdiction to be not having jurisdiction to entertain the dispute subject matter of the present suits. Resultantly, the plaints in the suits are liable to be rejected.

What emerges on going through all the documents is that the plaintiff, after submitting the resolution plans and after the same were approved by the CoC, has had second thought and/or was not in a position to furnish PBG and started making counter- offer, of conversion of BBG into PBG and opening of an Escrow Account for the balance amount of the PBG and which was not acceptable to the RP/CoC who, after giving sufficient latitude to the plaintiff have invoked the BGs.

It cannot also be lost sight of that in the whole process, considerable time, out of the time bound schedule in terms of the Code for the resolution process, has been wasted and wastage of which time may ultimately result in the possibility of Castex and ARGL Limited being restructured ceasing to exist and being inevitably required to be liquidated, all at the cost of the creditors thereof and wastage of the stressed assets of the said two companies. The loss caused by such conduct of the plaintiff is thus mammoth, having adverse consequences on all the creditors and shareholders of the said two companies and also on the economy of the country and to remedy which, the code was enacted. The NCLT is best equipped to also deal with apportionment of the amount of the BBGs in proper account.

The present case thus also falls in the category of cases envisaged in SAW Pipes Ltd. [2003 (4) TMI 438 - SUPREME COURT OF INDIA] where loss caused on account of delays in construction of say, a public road, though does not cause loss to any individual or person or company in particular but causes loss to the residents of the country and which is unmeasurable and in which regard a pre-estimate is permitted to be forfeited without proof of any loss. The loss likely to be caused by the conduct of the plaintiff similarly, is to the country as a whole and thus the amount of the BBGs which the plaintiff was required to furnish to ensure that the plaintiff, after furnishing resolution plan does not withdraw, as the plaintiff has done, though not expressly but by conduct, qualifies as a genuine pre-estimate of the loss. On merits also thus, I do not find the plaintiff entitled to a restraint against encashment/payment under the BG. However since this Court has been found to be not having subject jurisdiction to entertain the suits, the plaint in both the suits is rejected.

The plaintiff, by instituting the suits has delayed the receipt of payment under the BBG by nearly over three months.

The law requires Courts to, while vacating the interim injunction, balance the equities. Though I am refraining from directing the plaintiff to reimburse SBI with interest on the amounts of the BGs but burden the plaintiff in each of the suits with costs of ₹ 25,00,000/- considering the expense incurred by the defendants in contesting the suits including by engaging senior counsels. The plaintiff is directed to pay the said costs to SBI within four weeks of today.

2019 (2) TMI 1451

Allotment of land to the petitioner cancelled by Indore Development Authority - plot, which was allotted to the respondent was a commercial plot and the Indore Development Authority also allotted various plots to various newspapers irrespective of their circulation again without adhering to tender process on concessional rates - HELD THAT:- After termination of allotment to other newspapers, no fresh allotment has been done till date nor any regularization has taken place. No lease deed has been executed in respect of any newspaper, whose allotment was terminated. The respondent before this Court has not be able to point out from any document to establish that any regularization has taken place in respect of other newspapers nor has been able to point out nor able to bring on record any lease deed, which has been executed in favour of any newspaper, whose allotment was terminated

The State Government has framed Rules for allotment of land and now there is a prescribed procedure for allotting the land belonging to public body like Indore Development Authority. It is not a case where the land is being allotted to the respondent and the decision has been taken for social good, public good or common good like allotment of affordable houses to members of Scheduled Caste and Schedule Tribe or implementation of housing scheme for Below Poverty Line families.

If allotment of land and execution of sale deed in favour of respondent is not for social good, public good or common good, it cannot be dissipated in favour of private entrepreneur virtually free of cost or for consideration not commensurate with its worth without attracting Article 14 and 39(b) of the Constitution of India.

No allotment can be done in the manner and method it has been directed by the learned Single Judge in the present case. The land in question is situated in commercial area. Undisputedly, it is not a part of Press Complex and the plots in the Press Complex cannot be compared with the plots which are situated in commercial area and is valued at about ₹ 200 Crores. The State Government has framed Rules for allotment of land and the Indore Development Authority does not have any choice except to follow the Rules framed on the subject.

In the present case, the respondent wants the land belonging to Indore Development Authority for almost negligible consideration that too dehors the statutory provision governing the field on the ground that in similar circumstances land has been allotted to various other newspapers. It has been stated at bar by the learned Advocate General that after the judgment was delivered by the Division Bench in the first round of litigation, leases have not been renewed in respect of other newspapers and no final order has passed by the Indore Development Authority, otherwise also no relief can be claimed on the ground of negative equality.

This Court would like to clarify one more thing that the land for which the petitioner is staking his claim is not a land in the area which is marked for Press Complex, on the contrary the piece of land is situated in a commercial area surrounded by commercial buildings and therefore, the petitioner can never said to be an identically placed person claiming the land, which is situated in identical place, where the land was allotted to other newspaper groups.

Resultantly, the impugned judgment dated 14/11/2013 passed by the learned Single Judge in Writ Petition No.2801/2012 is quashed. The Indore Development Authority shall be free to dispose of the land in question in accordance with law, keeping in view the statutory provisions as contained under the Rules of 2018. With the aforesaid, writ appeal stands allowed.

2019 (2) TMI 1410

Oppression and mismanagement - contesting Respondents were restrained from interfering with the affairs of the Company by holding themselves out as Managing Director/Directors - HELD THAT:- As seen the consents which were filed with the Company Petition, which were titled as 'Power of Attorney' and detailed recitals are there empowering original Petitioner No.1 to engage and appoint Counsel to conduct and defend legal proceedings in any Court of Law, Tribunal or Company Law Board and to sign Vakalatnama, pleadings etc. These documents are of 2007, copies of which are at Pages - 641 to 667.

Going through these documents, it cannot be said that the concerned members, who were referring to their Share Folio numbers and number of shares and who were authorizing the original Petitioner No.1, did not know that they were authorizing the Petitioner No.1 to move Courts, Tribunals, CLB with regard to protecting their interests as well as the interests of the Company. Those Petitioners have not questioned the act of Petitioner No.1 maintaining the Petition on their consent. Contesting Respondents cannot profess to have entered their brains to say that they did not give intelligent consent. Thus, on this count, we do not find that there is any defect made out.

No reason to interfere with the Impugned Order except for a small portion. Direction 'A' of the operative order of para - 23 of the Impugned Order (reproduced earlier) was not well worded and needs to be modified. The original Petitioners have not sought declaration of termination of the agreement dated 9th October, 2003. It was an agreement between original Respondents 2 and 3. Whatever legal effect it had viz-a-viz original Respondent No.2, was matter between original Respondent Nos.2 and 3. In the absence of any material to show that the original Petitioners were party to such agreement or that the Company was party to such agreement, the declaration should have been that the said agreement is not binding on the original Petitioners and the Company and would not confer any rights on the contesting Respondents viz-a-viz the shareholders of the Company.

2019 (2) TMI 1183

Oppression and mismanagement - Holding BOD meetings outside India - Company incurred heavy expenses for shifting the Office - HELD THAT:- Nothing is shown that there is any restriction on the place where Board of Directors should hold their meetings. Respondents has rightly pointed out even earlier meetings which were being held in Malaysia and which were held without any grievances. The disputes now being raised regarding travelling and other allowances, we find, are only for the purpose of raising grievances. The point, which is pinching the original Petitioner, is the termination of the agreement and rest of the disputes, it appears to us, are being raised to drag the matter to the NCLT.

Even regarding the meetings dated 29.12.2010 and 31.03.2011, we have already referred to Notices being sent to the representatives of the original Petitioner. The pleadings of the original Petitioner itself showed receipt of Notices and added that the Petitioner had informed its inability to attend the meeting on 29.12.2010 and had sent its comments/submissions. Even regarding the Meetings of 31.03.2011, the Petitioner had informed by communication dated 24.03.2011 claiming that there was no need to hold the meeting. As regards the letter of protest dated 14.06.2011, original Respondent No.7 accepted receipt of letter dated 06.06.2011 proposing to hold meeting on 29.06.2011 in Malaysia. This Respondent claimed that he was travelling abroad and could not attend the Meeting at Malaysia and sought leave of absence. He noted that he could participate by teleconferencing and wanted to know the procedure. He wanted the Company to inform the policy regarding payment of to and fro air fare, hotel and other dues, etc.

Alternately, he suggested holding of the Meeting at Hyderabad. With regard to the Agenda which had been proposed, he offered his comments Agenda-wise. With regard to the Agenda No.5, he mentioned that he was interested as Managing Director of “Starlite Global Enterprises (India) Ltd.” He stated that he should not comment with regard to the portion of material events and commitment in the Directors Report. Thus, he had sought leave of absence with so many other queries being raised. Going through the material, we do not find that there was anything procedural which could be termed as illegal or in the facts of the matter of such a nature which could be called oppressive.

No oppression and mismanagement is proved. We do not find any substance in the arguments raised by the Counsel for the Appellants in this Appeal.

2019 (3) TMI 1016

Withdrawal of application for insolvency admitted u/s 7, 9 or 10 - withdrawal after issue of invitation for expression of interest - HELD THAT:- The only reason why the withdrawal was not allowed, though agreed to by the Corporate Debtor as well as the Financial Creditor -State Bank of India and the Operational Creditor-Respondent No.3, is because Regulation 30A states that withdrawal cannot be permitted after issue of invitation for expression of interest.

According to us, this Regulation has to be read along with the main provision Section 12A which contains no such stipulation.

Accordingly, this stipulation can only be construed as directory depending on the facts of each case. We allow the Settlement that has been entered into and annul the proceedings.

2019 (3) TMI 981

Corporate Insolvency Resolution Process - arbitration proceeding is pending and some order has been passed by the Hon’ble Supreme Court - HELD THAT:- The payment of dues of ₹ 550 Crores to ‘Ericsson India Private Limited’- (‘Operational Creditor’) by three Reliance Companies has not been linked with the assets of the ‘State Bank of India’/ ‘Joint Lenders Forum’ or any other Bank, who are third party to the settlement between the three Reliance Companies and the ‘Ericsson India Private Limited’.

By interim order dated 30th May, 2018, this Appellate Tribunal noticed the terms of the agreement/ settlement between the parties. One of the terms of the settlement is with the ‘RCom Group’ and the ‘State Bank of India’/ ‘Joint Lenders Forum’. The other part of the settlement/ agreement is between three Reliance Companies and ‘Ericsson India Private Limited’- (‘Operational Creditor’). Once such settlement is reached, it is for the parties to comply with the terms of settlement without any interference by this Appellate Tribunal. This Appellate Tribunal is only to find out whether the parties have settled the matter in terms of the order dated 30th May, 2018 or have failed to settle. On failure, it is open to this Appellate Tribunal to vacate the interim order of stay dated 30th May, 2018 and in absence of any merit, the appeal can be dismissed.

As per the interim order, the ‘Financial Creditors’/ ‘Joint Lenders Forum’ with whom the assets of the ‘Corporate Debtors’ have been mortgaged have been allowed to sell the assets of the ‘Corporate Debtors’ and to deposit the total amount in the ‘Joint Lenders Forum’ subject to the decision of these appeals. It was made clear that if the appeals are rejected, the ‘Financial Creditors’/ ‘Joint Lenders Forum’ and other Banks with whom the amount is deposited, will have to return the total amount in the respective accounts of the ‘Corporate Debtors’.

Admittedly, the ‘Financial Creditors’/ ‘Joint Lenders Forum’ and other Banks have failed to recover any amount by selling the mortgaged properties of the ‘Corporate Debtors’ in spite of the interim order of stay passed on 30th May, 2018. We have also noticed that the ‘Corporate Debtors’- ‘Reliance Infratel Ltd.’; ‘Reliance Telecom Ltd.’ and ‘Reliance Communications Ltd.’ have failed to pay the total amount of ₹ 550 Crores (jointly) till today. As per the interim order, in case of non-payment of the amount and part of the same, the concerned appeal(s) may be dismissed and this Appellate Tribunal may direct to complete the ‘Corporate Insolvency Resolution Process’ and may pass appropriate order. The payment of ₹ 550 Crores in favour of ‘Ericsson India Private Limited’ is also subject to the decision of the appeals.

In an appeal filed under Section 61 of the ‘I&B Code’, no direction can be given to any party to the settlement (particularly the third party) to perform certain duties to ensure settlement between other parties.

This order will not come in the way of the Appellants to ask for relief as sought for in this interim application from the Hon’ble Supreme Court, which has the jurisdiction to pass appropriate order under Article 142 of the Constitution of India (Enforcement of decrees and orders of Supreme Court and orders as to discovery, etc.).

For the reasons aforesaid, no interim order is passed in these Interlocutory Applications in question and they stand disposed of.

2019 (3) TMI 980

Corporate Insolvency Resolution Process - Corporate Debtor failure in payment of principal amount and interest thereon @ 24% in respect of goods supplied and delivered to the Corporate Debtor despite repeated demands - delay in completing the resolution process by the IRP - proof of any pre-exiting dispute - HELD THAT:- An overall screening of the documents produced on the side of the Corporate Debtor as well as on the side of the applicant, it appears to me that the case trying to set up on the side of Operational Creditor is more believable and more credit worthy than that of the case attempted to be established on the side of the corporate debtor.

In view of the above said discussion, no hesitation in holding that the invoices referred to in the Application and challans referred to in the Rejoinder were delivered to the Corporate debtor and thereby the amount in demand is found due and payable by the corporate Debtor. The amount found due was not repaid. No pre-existing dispute as per S. 5(6) of the Code stands proved on the side of the Corporate debtor.

Whether the applicant proved compliance of the requirement to be meted out u/s. 9(5) of the Code? - HELD THAT:- he applicant also succeeded in proving that the application filed is complete as per sub-section 2 of S.9 of the Code, that there is no payment of unpaid amount found liable to be paid by the Corporate Debtor, that the invoices and notice were delivered to the Corporate Debtor, that affidavit is filed in compliance of Section 9(3)(b) to the effect that there is no notice given by the Corporate Debtor relating to a dispute of the unpaid operational debt and that the bank statement copy is produced in compliance of S.9(3)(c). Since no resolution professional name was proposed, compliance of section 9(5)(i)(e) does not at all arise. The Application filed under Section 9 being proved to be complete, it is liable to be admitted.

Taking judicial notice of delay in completing the resolution process by the IRP because of lack of adequate fund for meeting the initial expenses for initiating CIRP like publications in leading news papers etc. by the IRP. To overcome the said circumstances and to discourage IRP from spending the initial expenses from his or her own pocket, it appears to me that it is fair and just to direct the Applicant/Operational Creditor to deposit ₹ 2,00,000/- (Two lakhs) for the initial expenses to be spent by the IRP.

2019 (3) TMI 959

Travel restraint to respondents nos. 2 to 5 from leaving the country without prior permission of this Bench - overseas trip to Abu Dhabi, UAE to attend the wedding ceremony of friend's son as per e-invitation received by the present applicant - Respondent moved seeking direction against the respondent Nos. 2 to 5 to deposit their passports with the Registry of this Tribunal during the pendency of IA - allegation of applicant as siphoned off huge amounts of the Company and is not cooperating with the liquidator in the liquidation proceedings

HELD THAT:- There are various allegations levelled upon the friend of the present applicant and in view of those allegations, applicant should also be restrained to travel abroad. In fact, no clinching evidence produced against the present applicant (respondent No. 2) so as to make any ground to restrain him from travelling abroad and/or for attending wedding ceremony of his friend's son. All the allegations are only against third party.

That the present applicant has filed his travel program along with e-invitation card specifying the place of visit for a period from 19.02.2019 to 24.02.2019.

The respondent has also failed to produce any evidence of the recent past about the conduct of the present applicant (respondent No. 2 ). Moreover, it is the domain of the liquidator to raise objection, if any, when the company is already under liquidation.

It is pertinent to mention herein that as per Section 35 of the IBC, the moment, the order of liquidation is passed, the Liquidator takes into his custody or control, all the assets, properties, effects and the actionable claims of the corporate debtor.

It is only the Resolution Professional and/or Liquidator as the case may be, is/are competent to file an application before the Adjudicating Authority under sections 60(5)(c), 66 and 67 of IBC.

Under the facts and circumstances and the discussions in sequel, we do not find any reason for not granting permission to the present applicant (respondent No. 2) to attend the wedding ceremony of his friend's son for a limited period.

However, with abundant caution, we hereby direct the present applicant to furnish Indemnity Bond of ₹ 5.00 lakhs and the surety of a like amount with the Registry of this Tribunal.

The present applicant is also directed to inform this Bench immediately through his authorised counsel, after return from his overseas trip to Abu Dhabi, UAE. It is further directed that the applicant shall produce order of this Bench at the Indian Embassy at Abu Dhabi, UAE.

2019 (3) TMI 958

Corporate Insolvency Resolution Process - Outstanding loan - respondent company has taken a loan from the applicant in the year 2010, however the respondent company failed to repay the loan amount as per the agreed terms and conditions - whether claim of the applicant is barred by the limitation? - HELD THAT:- The applicant clearly come within the definition of Financial Creditors. The material placed on record further confirms that applicant financial creditor had disbursed various loan to the respondent corporate debtor and the respondent has availed the loan and committed default in repayment of the outstanding financial debt. On a bare perusal of Form - I filed under Section 7 of the Code read with Rule 4 of the Rules shows that the form is complete and there is no infirmity in the same. It is also seen that there is no disciplinary proceeding pending against the proposed IRP. Applicant has placed on record voluminous and overwhelming evidence in support of the disbursement as well as to prove the default. We are satisfied that the present application is complete in all respect and the applicant financial creditors are entitled to claim their outstanding financial debts from the corporate debtor and that there has been default in payment of the financial debt.

As a sequel to the above discussion and in terms of Section 7(5)(a) of the Code, the present application is admitted.

2019 (3) TMI 957

Initiation of Corporate Insolvency Resolution Process - pre-existing disputes - HELD THAT:- No reply-affidavit has been filed by the ‘Operational Creditor’ against the statement made by the Appellant that there were pre-existing disputes intimated by letter dated 10.04.2017.

Taking into consideration the aforesaid fact, that there were pre-existing disputes between the parties and the matter have been settled subsequently on 08.02.2018 and the ‘Committee of Creditors’ have not yet been constituted, we set aside the impugned order dated 08.02.2019.

In effect, order (s) passed by AA appointing ‘Interim Resolution Professional’, declaring moratorium, freezing of account and all other order (s) passed by Adjudicating Authority pursuant to impugned order and action taken by the ‘Resolution Professional’, including the advertisement published in the newspaper calling for applications all such orders and actions are declared illegal and are set aside. The application preferred by the Respondent under Section 9 of the "I&B Code" is dismissed.

2019 (3) TMI 883

Corporate insolvency process - Outstanding dues - per-existing dues - Respondent issued one legal notice under Section 433 (e) and 434 of the Companies Act, 1956, by letter asking the ‘Corporate Debtor’ to pay the dues - ‘Corporate Debtor’ by its legal reply dated 9th November, 2016, raised dispute relating to late supply of raw material and the poor quality of products and made counter claim - HELD THAT:- It is not denied that the dispute relating to quality of raw material and loss was raised by the ‘Corporate Debtor’ on 9th November, 2016 i.e. much prior to the issuance of the demand notice dated 18th March, 2017 issued under Section 8(1).

In the aforesaid background, as we find that there is pre-existence dispute prior to the issuance of the demand notice under Section 8(1), we hold that the application under Section 9 of the ‘I&B Code’ preferred by the Respondent was not maintainable. The impugned order dated 22nd August, 2017 is accordingly set aside.

Adjudicating Authority appointing any ‘Interim Resolution Professional’, declaring moratorium, freezing of account, and all other order (s) passed by the Adjudicating Authority pursuant to impugned order and action, if any, taken by the ‘Interim Resolution Professional’, including the advertisement published in the newspaper calling for applications all such orders and actions are declared illegal and are set aside.

2019 (3) TMI 881

Corporate insolvency proceedings - NCLT admitted the insolvency petition stating that there was no record to show that there was existence of a pre-existing dispute - NCLAT set aside the judgment of the NCLT solely on the ground that the said notice was issued by a Law Firm and not by the Operational Creditor itself - HELD THAT:- We have, by our judgment in Macquarie Bank Limited Ltd. vs. Shilpi Cable Technologies Limited [2017 (12) TMI 850 - SUPREME COURT OF INDIA] held that this view of the law is incorrect.

This being the case, we set aside the judgment of the NCLAT and remand the matter for hearing on the merits.

2019 (3) TMI 880

Corporate insolvency resolution process - pre-existing dispute - HELD THAT:- Taking into consideration that the parties have settled the matter prior to constitution of the ‘Committee of Creditors’ and ‘pre-existing dispute’ as emanating from the FIR enclosed at page 138, we set aside the impugned order dated 17th December, 2018.

In effect, order (s) passed by Adjudicating Authority appointing ‘Resolution Professional’, declaring moratorium, freezing of account and all other order (s) passed by Adjudicating Authority pursuant to impugned order and action taken by the ‘Resolution Professional’, including the advertisement published in the newspaper calling for applications all such orders and actions are declared illegal and are set aside. The application preferred by the 1st Respondent under Section 9 of the I&B Code is dismissed. The Adjudicating Authority will now close the proceeding. The 2nd Respondent Company is released from all the rigour of law and is allowed to function independently through its Board of Directors from immediate effect.

2019 (3) TMI 879

Corporate Insolvency Resolution Process - pre-existing dispute - application under Section 9 filed - HELD THAT:- Corporate Debtor has taken a specific plea that in view of lack of expertise, the Operational Creditor (Appellant herein) was not in a position to execute the contract awarded to it and miserably failed to fulfill its obligations. In fact, the Operational Creditor abandoned the project midway without any notice; all the personnel of the Operational Creditor were also removed from the project site in August, 2017. In this background, the Corporate Debtor was forced to engage another contractor by issuing second work order dated 15th August, 2017 to one M/s KSV Infrabuild for a sum of ₹ 2,99,73,003/- The Corporate Debtor had also sought for damages from the Operational Creditor but the notice which was retuned on 3rd May, 2018 with remarks ‘door locked’.

From the aforesaid facts we find that there is a pre-existing dispute about performance of the Operational Creditor. For the said reason, the Adjudicating Authority rightly refused to entertain the application under Section 9.

2019 (3) TMI 878

Corporate Insolvency Resolution Process - petition has been filed in the required format and duly complies with the requirements of Section 9(3)(b) and 9(3)(c) of the Code - Corporate Debtor did not respond to the demand notice issued under Section 8 of the Code - Corporate Debtor submits that the goods having booked by the Operational Creditor with the concerned transporter, they were responsible for the shortfall - HELD THAT:- Till the filing of the present petition, no dispute has been raised directly with the Operational Creditor. There is nothing on record to accuse the Operational Creditor of the shortfall in the quantity received. At this stage, raising such a dispute as a defence to ward off the resolution process is unsustainable. There is nothing on record to directly indict the Operational Creditor of being accused or being held guilty for the short supplies. Even otherwise, in the event of short supplies under the 3 invoices, the liability would be far in access of the threshold required for initiating the CIR process against the Corporate Debtor for non-payment of the dues. The claim that recoveries on the alleged ground of shortfall in supplies is vague and unenforceable.

The dispute sought to be raised does not justify rejection of the petition. In view of the same, this petition merits consideration and is Admitted.

2019 (3) TMI 826

Approval of Resolution Plan - Resolution Plan has been approved by the Committee of Creditors in its 7th COC meeting with a vote share of 83.02% - after Hon’ble High Court’s order for liquidation of the company, this petition was filed under section 10 of the Code without disclosing that the company has been wound up by order of the Hon’ble High Court - HELD THAT:- After liquidation order passed in a winding-up petition against the corporate debtor then it is barred from filing a petition under section 10 of the Code. Here the corporate debtor has not only suppressed the material fact that the winding up petition has not only been filed and admitted, but liquidation order has also been passed against the corporate applicant/corporate debtor liquidator has been directed to expedite liquidation proceedings expeditiously. The corporate applicant suppressed this material fact, knowing it to be material, and filed the petition under section 10 and in contravention of Rule 10 of Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. The alleged act of the corporate applicant is punishable under section 77 (a) of the Insolvency and Bankruptcy Code 2016. The Registrar of Companies, Mumbai is directed to lodge prosecution against the corporate applicant under section 77(a) of the insolvency and bankruptcy code in 2016.

Since the petition has been filed under section 10 of the Insolvency and Bankruptcy Code 2016 after the suppression of the material facts, which were known to be material, therefore the petition is rejected with cost ₹ 10 lakhs which shall be paid by the Corporate Applicant. The cost will be deposited in the account of the Prime Ministers National Relief Fund. It is to be clarified that by the order dated 25.1.2017 of Hon’ble Bombay High Court, the Corporate Applicant stands wound up and the Ofifical Liquidator has already been directed to expedite process of liquidation expeditiously.

2019 (3) TMI 825

Default by Insolvency Professional (IP) - contraventions of several provisions of the Insolvency and Bankruptcy Code, 2016 (Code), the IBBI (Insolvency Resolution process for Corporate Persons) Regulations, 2016 and the IBBI (Insolvency Professionals) Regulations, 2016 - Mr. Kejriwal is a professional member of the ICSI Institute of Insolvency Professionals and an Insolvency Professional (IP) - Mr. Kejriwal [IP] did not conduct CIRP as required under section 23 of the Code. He did not submit progress report to AA in time, make public announcement in time, appoint registered valuers, prepare and circulate information memorandum, invite resolution plans under section 25(2)(h) of the Code, convene the meetings of CoC with adequate notice, etc.. He did not run the CDs as a going concern, as required under section 20 of the Code and resigned as RP in both the CIRPs, without prior permission of the AA, though he consented to act as IRP and as RP in both cases

HELD THAT:- An IP is not just another professional. He is dealing with a CD in distress. He needs to go beyond the call of duty to address the distress. The DC unfortunately finds that Mr. Kejriwal did not discharge any of his statutory responsibilities as IRP or RP either to manage the operations of the two CDs as going concern under section 20 of the Code or to conduct the resolution processes of the two CDs under section 23 of the Code. He has, therefore, violated provisions of sections 18, 20, 23, 25(2)(g), 25(2)(h), 29, 208(2)(a), and 208(2)(e) of the Insolvency and Bankruptcy Code, 2016, regulations 6(1), 19(1), 27 and 36 of the IBBI (Insolvency Resolution process for Corporate Persons) Regulations, 2016 and regulation 7(2)(a) and 7(2)(h) of the IBBI (Insolvency Professionals) Regulations, 2016 read with clauses 1, 2, 3, 5, 10, 12, 13, 14, and 25 of the Code of Conduct under the said Regulations. It, however, finds in his favour two mitigating factors, namely, (a) Mr. Kejriwal was not well for some time during the relevant period, and (b) the CDs were practically not going concerns to start with.

Disciplinary Committee thus imposed monetary penalty equal to one hundred percent of the total fee payable to him as IRP and as RP in the CIRPs of respective companies and directs him to deposit the penalty amount by a crossed demand draft and undergo the pre-registration educational course specified under regulation 5(b) of the Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016 from his Insolvency Professional Agency to improve his understanding of the Code and the regulations made thereunder, before accepting any assignment under the Insolvency and Bankruptcy Code, 2016.

2019 (3) TMI 657

Initiation of the Corporate Insolvency Resolution Process - alleged existence of default in repayment of loan advanced to the ‘Corporate Debtor’ - I&B Code - maintainability of application under Section 7 of the Insolvency and Bankruptcy Code, 2016 - Held that:- The facts as narrated and the order passed by the Hon’ble High Court clearly shows that till date the Hon’ble High Court of Calcutta has not passed any order of winding up/liquidation of the ‘Corporate Debtor’. The Adjudicating Authority has failed to notice the aforesaid relevant orders passed by the Hon’ble High Court of Calcutta.

In the present case, as there is no specific order of winding up/liquidation has been passed by the Hon’ble High Court of Calcutta and whatever the order of admission or winding up earlier issued has been recalled by the Division Bench, it can be held that the application under Section 7 preferred by the ‘State Bank of India’ is maintainable.

Matter remanded to the Adjudicating Authority, Kolkata Bench, Kolkata with direction to admit the application under Section 7.

2019 (3) TMI 618

Initiation of Corporate Insolvency Resolution Process - corporate debtor - credit facilities availed - default in repayment of the outstanding huge debt to the applicant financial creditor - main objection raised by the respondent corporate debtor is that despite several request the applicant financial creditor failed to provide no objection Certificate (NOC) in favour of buyers of the corporate debtor for registration of the ownership of the commercial space in respect of the buyers.

Respondent company has also raised objection of forum shopping and submitted that applicant has already initiated action under the provisions of SARFAESI Act and also has filed original application for adjudication of the claim before DRT which is still sub judice - Held that:- Insolvency and Bankruptcy Code, 2016 being a complete Code and Union Law, will prevail over other later laws like the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and SARFAESI Act, 2002. As per Section 238 of the Code, the provisions of the Code are to be given effect to notwithstanding anything contrary contained in any other later laws - the objection in this regard will not sustain as initiation and pendency of proceedings in different forums is no bar for initiation of Corporate Insolvency Resolution Process under Section 7 of the Code in view of the overriding effect given to the provisions of Section 238 of the Code.

Respondent has raised another objection that the present application is not maintainable as applicant bank can only act through its authorized representative - Held that:- In the present case Applicant bank has filed specific power of attorney in favour of Shri Rajesh Kumar dated 11th August, 2017 stating that pursuant to board resolution dated 27th July, 2017 passed by board of directors of applicant bank the specific power of attorney dated 27th August, 2017 has been executed in favour of Shri Rajesh Kumar. Admittedly Shri Rajesh Kumar is working in a senior post in Scale-V as Asst. General Manager of the applicant bank and has preferred the present application on behalf of the applicant bank. In the facts there is no doubt that Shri Rajesh Kumar not only has been authorized but is also competent to file the present application on behalf of the applicant bank.

Respondents have also taken a stand that the Corporate Debtor has valuable asset for future earnings and shall meet the default - Held that:- Such contention has no force when respondent company has committed default and has failed to repay the dues as per the loan agreement. Mere contention that the corporate debtor will clear the dues in future would not help the corporate debtor as admittedly default continues. Once there is a default in repayment of debt the applicant has a right to press for initiation of Corporate Insolvency resolution Process under the Code.

The procedure in relation to the Initiation of Corporate Insolvency Resolution Process by the “Financial Creditor” is delineated under Section 7 of the Code, wherein only “Financial Creditor”/”Financial Creditors” can file an application. As per Section 7(1) of the Code an application could be maintained by a Financial Creditor either by itself or jointly with other Financial Creditors. The expressions “Financial Creditor” and “Financial debt” have been defined in Section 5 (7) and 5 (8) of the Code and precisely “Financial debt” is a debt along with interest, if any, which is disbursed against the consideration for time value of money - In the present case applicant bank had sanctioned and disbursed loan amounts recoverable with applicable interest by entering in to loan agreements with the corporate debtor. The corporate debtor had borrowed the credit facilities against payment of interest as agreed between the parties. The loan was disbursed against the consideration of time value of money with a clear commercial effect of borrowing. Moreover the debt claimed in the present application includes both the component of outstanding principal and interest. In that view of the matter not only the present claim will come within the purview of ‘Financial Debt but also the applicant bank can clearly be termed as ‘Financial Creditor’ so as to prefer the present application under Section 7 of the Code.

In the case on hand, it is seen that respondent corporate debtor has committed default in repayment of the outstanding financial debt. On a bare perusal of Form - I filed under Section 7 of the Code read with Rule 4 of the Rules shows that the form is complete and there is no infirmity in the same. Accordingly, it is seen that the application of the financial creditor is complete and there is no disciplinary proceeding pending against the proposed IRP. We are satisfied that the present application is complete and the applicant financial creditor is entitled to claim its outstanding financial debt from the corporate debtor and that there has been a default in payment of the financial debt - thus in terms of Section 7(5)(a) of the Code, the present application is admitted.

Application allowed - public announcement shall be made by the Interim Resolution Professional immediately (3 days as prescribed by the IBBI Regulations) - moratorium in terms of Section 14 of the Code declared.

2019 (3) TMI 451

Jurisdiction of Adjudicating Authority to decide the claim or counter claim - Initiation of Corporate Insolvency Resolution Process - Material belonging to the Corporate Debtor - direction to Corporate Debtor to hand over custody of the Materials - restraining Insolvency Resolution Professional from alienating and/or creating any third-party interest in the Materials - Held that:- Sub-section (5) of Section 60 empowers the National Company Law Tribunal (Adjudicating Authority) to entertain or dispose of any application or proceeding by or against the Corporate Debtor or Corporate Person; any claim made by or against the Corporate Debtor or Corporate Person including claims by or against any of its subsidiaries situated in India; apart from any question of priority or any question of law and facts arising out of or in relation to the insolvency resolution or liquidation proceedings of the Corporate Debtor or corporate person under the code - From sub-section (6) of Section 60 it is clear that after period of moratorium, a suit or application can be filed against the Corporate Debtor for which an order of moratorium has been made under the Part II and in such case, the period during which such moratorium is in place shall be excluded for the purpose of counting the limitation.

In the present case the dispute relating to claim and counter claim as made by one or other parties, is brought to our notice by the Resolution Professional. The Resolution Professional while held that the material belongs to the Corporate Debtor, apart from the Appellants, other parties have also made claim that the same very material belongs to them. As the claim is not against the Corporate Debtor or its subsidiaries but includes inter-se claim for the same very material, such dispute cannot be decided by the Adjudicating Authority under Sub-section (5) of Section 60 of the I&B Code. It is only after completion of the period of moratorium and it is finally decided that the material belongs to the Corporate Debtor and order is accordingly passed, it is open to the persons to file a suit before appropriate forum claiming right and title over the material in question and for filing such suit claiming right over the material the moratorium period has to be excluded for the purpose of counting the period of limitation.

The Adjudicating Authority has no jurisdiction to decide the claim or counter claim with regard to the parties - Appeal dismissed.

2019 (3) TMI 352

Dues towards Employees provident fund - Applicant has submitted that Section 11 (2) of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 declares that the amount due as contribution to the employees provident fund shall be made a first charge on the assets of the establishment - Corporate debtor in liquidation - Corporate Debtor defaulted in payment of dues/damages/interest including the Employees' share of contributions, which were deducted from the wages of the poor employees

Held that:- The verification and admission of the claim of the applicant viz., EPFO has correctly been recorded by the liquidator vide his statement of verification, admission, rejection and determination of quantum of claim dated 23.04.2018. Therefore, the application filed by the applicant viz., EPFO is devoid of merits and stands rejected.

2019 (3) TMI 351

Maintainability of proceedings - Inability of repayment on the part of Corporate Debtor - default in paying the loan instalment - Held that:- The proceeding before the DRT, Kolkata has been filed by the bank for recovery of their dues whereas this proceeding is filed to declare the corporate debtor to be insolvent because they are not able to pay their dues and in order to have resolution of their insolvency. Both the laws work in different field. Their object is altogether different. Section 238 of I&B Code states that, “Provisions of this Code to override other law - The provisions of this Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law.” - So provisions of l&B Code supersedes any other law when it comes to the resolution of the Corporate Debtor. Hence, this proceeding is maintainable.

The Financial Creditor proves that there is a debt against the Corporate Debtor of which they committed default. This application is not defective in any manner.

Application allowed.

2019 (3) TMI 350

Maintainability of appeal filed by Corporate Debtor - Held that:- We are not adjourning the case as even on appearance of the counsel we cannot entertain the appeal preferred by Corporate Debtor being not maintainable - Appeal dismissed being not maintainable.

2019 (3) TMI 309

Corporate insolvency process - existence of dispute in relation to quality - HELD THAT:- Dispute can also relate to the quality of goods as supplied by the Operational Creditor to the Corporate Debtor and going by the correspondence as exchanged referred to above, being prior to the notice of demand issued under Section 8 by the Operational Creditor, from the Corporate Debtor clearly shows that an issue of quality has been raised in view of the differing test reports.

By virtue of the notice of dispute as required to be sent under the provisions of Section 8 of IBC, 2016, under Section 8(2)(a) the existence of dispute in relation to quality has also been brought forth by the Corporate Debtor to the Operational Creditor. Further going by Section 9(5)(2) of IBC, 2016, it is seen that under sub-clause (d) of clause 2 of sub-section 5 of Section 9 of IBC, 2016, an onus is placed on this Tribunal in view of the notice of dispute sent, if the dispute raised is not otherwise sham of illusory, to dismiss the petition. In view of the reach of the above said provisions and as rightly contended by learned counsel for the Corporate Debtor delineated and as held by the Hon'ble Supreme Court in Mobilox Innovations (P.) Ltd. case (2017 (9) TMI 1270 - SUPREME COURT OF INDIA) this petition is liable to be rejected

2019 (3) TMI 822

Offence under PMLA - Provisional Attachment Order - attachment confirmed against the properties which were already stand mortgaged in favour of the Appellant, (who is now seeking setting aside of the Impugned Order) - continuation of pending suits or proceedings against the corporate debtor - opinion based on “reason to believe” - proceeds of crime - HELD THAT:- A person must have reason to believe if the circumstances are such that a reasonable man would, by probable reasoning, conclude or infer regarding the nature of the thing concerned. Further, at the initial stage for believing the existence of a thing, condition or a statement of fact, one would collect information and then examine the information and come to a final conclusion on the basis of that information, that such a thing, condition or statement of a fact exists. All these ingredients are pre-requisite for forming an opinion based on “reason to believe”.

Thus, the provisional attachment order is legally erroneous and untenable and could not have been passed more particularly in view of the fact that the complainant was aware of the fact that there is an exclusive and paramount claim of the Appellant Bank, therefore, The Adjudicating Authority had no justification/jurisdiction for confirming attachment of the aforesaid hypothecated/Equitably Mortgaged Moveable and immovable properties.

As in Indian Bank Vs. Government of India [2012 (7) TMI 1085 - MADRAS HIGH COURT] held that the PMLA does not provide for redressing grievances of victims of fraud such that the Enforcement Directorate cannot take away the right of Banks as security holder by provisionally attaching such property and seeking confirmation thereof. Accordingly, in the present case, the Appellant is the victim of the fraud played upon it by Mr. Mehul Choksi and the Gitanjali group of companies. Accordingly, the Adjudicating Authority erred in confirming the attachment of properties already mortgaged to the Appellant.

The Adjudicating Authority has failed to understand that the NCLT Mumbai vide order dated 08.10.2018 has declared moratorium under Section 14 of the IBC, 2016, inter alia, the said section 14 of the IBC, 2016 prohibits the continuation of pending suits or proceedings against the corporate debtor (i.e. Respondent No.2 herein). Therefore, the Adjudicating Authority could not have confirmed the PAO bearing No. 03/2018 dated 28.03.2018 passed by the Respondent No.1.

The said process is promoted by the Government of India. Apex Court has also held in favour of the bank and the main provisions valid in order to recover the amount in the interest of public. One fails to understand why both authorities are against the said process of recovery. In view of the non-obstante clause as contained in Section 238 of the IBC, 2016, the Adjudicating Authority could not have continued with the Attachment proceedings under the PMLA.

The IBC, 2016 being a subsequent legislation than the PMLA, therefore, the Non-obstante clause of the IBC,2016 shall prevail over the PMLA.

The proceedings before the Adjudicating Authority are civil in nature, therefore, in view of the Section 14 of the IBC, 2016 the proceedings before the Adjudicating Authority cannot continue as there is clear prohibition under the said section of the IBC, 2016.

This Tribunal is of the considered opinion that the proceeding u/s 8 of PMLA,2002 before the Adjudicating Authority is a civil proceeding. The Adjudicating Authority should have stayed the proceedings. The continuation of the proceedings after the date of commencement of the moratorium order is contrary to the intention of the legislature, hence the consequential order of confirmation of PAO is contrary to law.

Impugned order is set aside to the extent the Order passed by the Adjudicating Authority confirming the Provisional Attachment Order with regard to properties mortgaged to the Appellant in the present case.

ED is entitled to recover entire proceeds of crime amount from the accused parties in India or from overseas countries from these assets except the mortgaged properties for which the banks are secured creditors. Thus, this tribunal is of view that the public money should come to the public but at the same time the mortgaged properties cannot be blocked. The banks money must come to the banks in the interest of public. All the actions which are pending against the accused parties, the same shall be proceeded further against as per law and without any influence of this order.

2019 (3) TMI 121

Offence under PMLA - Provisional attachment - Held that:- The party may or may not be able to succeed in their relief for quashing the final order, merely on sole ground by stating since the copy of reasons to believe is not served, therefore, the final order be quashed.The proceeding is main factor. In the present appeals, the appellants have requested the ED to supply the copy of reason to believe at least during the pendency of appeals, who refused to accede the request. Thus, the decision referred does not help the case of respondent.

This Tribunal at this stage is not deciding the issue of validity of reasons to believe or whether recordal of reasons to believe prior to passing of provisional attachment order separately or along with the PAO or at the stage of issuance of notice under section 8(1). The said issue has already been argued in other appeals, the same would be considered and decided on merit. In the present, the only issue is with regard to supply of copies thereof. Validity of recording may or may not be challenged by the appellants after supplying copies of the same.

Thus, it is wrong to allege on behalf of respondent – ED that the said judgement rendered by the Hon‟ble Division Bench of the Delhi High Court in J. Sekar [2018 (1) TMI 535 - DELHI HIGH COURT] cannot be relied upon or not applicable. Unless it is set-aside by the Supreme Court, the same remains effective. The same may not be binding upon the parties. Thus, the said judgement passed by the Division Bench in the case of J. Sekar (Supra) has a binding effect to this Tribunal.

During the course of hearing, respondent has produced the photocopy of reason to believe to this Tribunal who also tried to explain that major part of reason to believe are incorporated in the provisional attachment order, therefore, there is no need to supply the copy of reasons to believe to the appellants.

Level playing field - The parties in every case are entitled to apply the principles of equal opportunity to address their respective cases on merit before court regardless of any stringent law. A level playing field is concept of fairness where each party has an equal chance to succeed. Under this concept, one party cannot take advantage against other party (who is unheard)in the absence of reasons of allegations and to stop to prove its innocence.

Unfairness can never be shown to any party not to know allegations raised against him by any agency/authority/tribunal, otherwise it would be called one sided action. Thus, each party should be given equal chance to succeed, even the party may be on weak wickets. Thus, as considered view that the appellants are entitled to know the allegations against them in the reason to believe and are entitled to challenge the same in accordance with law. Mere denial to supply copy shall be treated as injustice to the parties and curtail the fair defense and trial in the matter.

In the present appeals, counsel for the respondent and IO have confirmed before this Tribunal that major part of the reasons to believe are incorporated in order of provisional attachment, then where is the difficulty. Thus, I direct that copy of the reasons to believe be supplied within one week to each of the appellants who shall be entitled to file the response, if any, three weeks thereafter.

2019 (3) TMI 50

Amendments to the PML Act - amendments were made in the years 2015, 2016 and 2018 and per-se unconstitutional and liable to be set aside - specific query from the Court why the petitioner, being a Parliamentarian is challenging the amendments effected in the years 2015, 2016 and 2018 now in the year 2019 - HELD THAT:- The petitioner herein is a Member of Rajya Sabha. The plea of Mr. Chidambram that the petitioner was not aware that such amendments have been carried out as Money Bills, is no reason to challenge the amendments, at least of the years 2015 and 2016 in the year 2019. In any case, merely because the petitioner came to know recently that such amendments have been carried out as Money Bills, would not justify the delay.

Even otherwise, his submission that it was only after the judgment was rendered by the Supreme Court, on a similar issue, did the petitioner thought it fit to challenge the amendments of 2015, 2016 and 2018 by filing this petition, does not answer the submission made by Ms. Acharya that the challenge, apart from being hit by delay and laches, is by a person who has no locus, being not aggrieved by the amendments. Case followed KUSUM INGOTS & ALLOYS LTD. VERSUS UNION OF INDIA [2004 (4) TMI 342 - SUPREME COURT OF INDIA]. We do not think that it is a case where this Court should exercise its extraordinary jurisdiction under Article 226 of the Constitution of India.

2019 (2) TMI 1362

Offence under PMLA - Attachment orders - Appellant Bank has the right to recover the loan amount against the mortgaged properties, under law - HELD THAT:- As per admitted position as that the attached properties are the mortgaged /Hypothecation/pledge agreements and deeds of corporate and personal guarantee, the due amount alongwith the interest is to be realized by the banks/lenders. The trial in the matter against the borrowers may take number of years. The borrowers have cheated not only the bank but also appropriated the public money and left the country by playing the fraud upon this country. No one is aware when the borrowers will return back, and pay the due amount and face the criminal trial and how much time will take to complete the trial. The amount due against the security cannot be delayed. Therefore the resolution process cannot be blocked.

The amount must come to the banks/public sector banks being public money. The approach of the government is appreciable for bringing the law on this as aspect of Resolution process.

Under these circumstance till the next date of hearing the operation of the impugned order shall remain stayed. The Resolution process shall continue but the properties shall not be finally disposed without the permission of this Tribunal till the next date.

2019 (2) TMI 962

Offence under PMLA - provisional attachment - definition of the expression “proceeds of crime” - allegations of the ED in the present case is that wrongful gain to the Appellant M/s. VGN Proprty Developers Pvt. Ltd. and wrongful loss to the Government of India of ₹ 115 Crores has been caused by sale of the property admeasuring about 10.46 Acres in Guindy Village, Chennai (hereinafter referred to as the “said property”) at a sale price of ₹ 272 Crores whereas the guidelines value for the same was ₹ 387 Crores (and hence the loss)

Held that:- No reasons to believe are produced before us in order to satisfy us that the property was attached under second proviso if the same is not attached immediately, the purpose would be frustrated any proceedings. It is also not stated either in PAO or in impugned order that the respondent no. 1 has made any efforts to trace out the other property of VGN and respondent no. 1 is unable to find out any other property of the Managing Director/ Director of the Company in view of impugned mortgaged property. The respondent no. 1 has failed to discuss the interest of the buyers who have stake in the attached property.

The pre-requisite for ordering attachment is that the property to be attached should constitute the proceeds of crime. In the present case, the said project in question prima facie may not be termed as proceeds of crime since the same was acquired by utilizing the money advanced from the appellant and respondent no. 4. Unless the property comes within the definition of the expression „proceeds of crime’ under Section 2(1)(u) of PMLA, it could not have been attached under Section 5(1)(a) of PMLA.

A careful look at the definition of the expression “proceeds of crime” would show that to come within the definition of the said expression, the following pre-requisites are to be satisfied:

a. that the same should be any property or the value of any such property;

b. that it should have been derived or obtained directly or indirectly;

c. that it should have been obtained or delivered by any person as a result of criminal activity relating to a Scheduled Offence.

The Respondent no. 1 did not follow the mandate of Section 8(2) and the finding was given. No cogent and cohesive reason was given for rejection of the submissions in writing. The impugned order is mechanical, without application of judicious mind and as such is liable to be set at naught. In fact, the replies and material produced by the appellants have not been considered by the Adjudicating Authority. There were no discussions about the stand taken by them in their replies.

The respondent no. 1 despite being aware that thelendersthat they prior in time interest in the subject Property, Respondent No. 1 - ED proceeded to pass a PAO No. 02/2018 dated 13.02.2018, wherebyattachedthe subject Property to the value of ₹ 115 crore as proceeds of crime. In the PAO, in the column „Present Status of theproperties‟, the ED identified that the Subject Property wasmortgaged in favour of the lenders and IL&FS i.e.Piramal.

In the light of above and in the interest of justice, the order passed by the Adjudicating Authority is set-aside by allowing the present appealsfiled by the lenders. The findings are not sustainable in law and the facts of the appeals of lenders.

With regard to the appeal of VGN is concerned, we wish to impose certain terms and we pass the order to secure a sum of ₹ 115 crores as per the version of the ED and direct the VGN to give a surety of the equal amount. As a matter of fact, at the interim stage, VGN has already offered security of the land having value more than ₹ 119 crores situated at Sekkadu Village, Avadi Taluk, Tiruvallur District ad-measuring 10.21 acres, the other property is attached which is owned by the Managing Director/Chairman of VGN. The relevant papers alongwith the affidavit have been filed at the interim stage. If the criminal complaints are finally decided by the Special Court in favour of VGN, the said property shall be released. Till that time, VGN shall not dispose the said property directly or indirectly. Subject to above, the impugned property is released forthwith which was attached under the provisional attachment order i.e.admeasuring about 10.46 acres in Guindy Village, Chennai at VGN Fairmont, Thiru Vi Ka Industrial Estate, Guindy, Chennai-32and the impugned order of confirmation was passed.

2019 (2) TMI 961

Attachment orders challenged - PMLA, 2002 and the IB Code - attach the properties of the corporate debtor under the Prevention of Money-laundering Act, 2002 (PMLA) and restore the said properties to the liquidator for the purpose of liquidation under the IBC, 2016 to declare the right of the lenders/creditors on the attached properties of the corporate debtor to recover their dues prevails over the right of the respondent to attach the properties under the PMLA - whether an offence of money laundering has been prima facie made out or not and the properties that are mortgaged to the bank and other lenders, thereby creating security interest are "proceeds of crime", or not ? - whether properties attached are not proceeds of crime?

Held that:- Issue here has to be decided only by the Adjudicating Authority or the Appellate Authority or the Special Court under the provision of the PMLA but not by this Adjudicating Authority exercising jurisdiction under the I and B Code.

Two different enactments, i.e., the PMLA, 2002 and the I and B Code provide two different hierarchies of functionaries to decide the controversies that arise under the respective enactments. When such is the case one authority cannot interfere with the functions of the other authority under a different enactment. It is already said there is no repugnancy in procedure that is being followed for liquidation of the asset of the corporate debtor and the procedure to be followed in case of proceeds of crime, where an offence of money laundering has been committed. It is already said even if an offence of money laundering is committed, the claimant who are having security interest over the properties of the corporate debtor, can still ask for release of the properties, if they are able to establish they acted in good faith and they parted with valuable consideration in the form of sale consideration or debt and/or that the properties attached are not proceeds of crime.

Therefore, the liquidator is at liberty to approach the Authorities under the PMLA and seek order to release the properties from the attachment on the ground that the properties attached are not proceeds of crime and the lenders are bona fide lenders and it is for the authorities under the PMLA Act to decide such issues based on the record of investigation and other material placed on record before then, uninfluenced by any of the findings or observations or opinion expressed in this order.

In view of the above discussion the reliefs prayed in the petition cannot be granted without the liquidator taking recourse to remedies provided under the PMLA.

2019 (2) TMI 883

Offence under PMLA - Provisional Attachment - amount seized from the possession of the Appellant - Held that:- the respondent has sufficiently explained the reason to believe that why the said amount is required to be attached under Section 5(1) of PMLA, 2002. It is not denied by the appellant that the aforesaid amount has been seized from the possession of the Appellant, secondly, the said amount is reflected in the FIR No. 27/2016 and the charge sheet dated 17.06.2016, thirdly, there is no material placed by the appellant that the said criminal case is disposed of in his favour.

There are sufficient reasons explained by the respondent as well as Adjudicating Authority in attaching the amount involved in this appeal and confirmation of the same respectively. We are in agreement with the submission of the respondent that the appellant failed to discharge his burden as required under Section 24 of the PMLA.

The technical objection raised by the appellant is that he has been acquitted in the criminal case in PS case no. 12 dated 30.01.2014 in which the aforesaid amount has been seized. Secondly, it is also submitted by the appellant that the seizure of aforesaid amount in PS case no. 27 dated 03.02.2016 is illegal. In this regard, the Appellant ought to have moved the concerned Trial Court to get the aforesaid amount released in his favour. Appeal dismissed.

2019 (2) TMI 882

Money laundering - infusion of cash from M/s. Jagat Projects Ltd. into bank accounts of entities controlled by Jain Brothers as reflected in the bank accounts of these entities - ITO recorded a finding that M/s. Jagat Projects Ltd had laundered its unaccounted income through a set of companies controlled by Jain Brothers in the guise of share subscription money at a huge premium to the tune of ₹ 64.70 Crores - respondent filed the application under section 17 (4) of PMLA,2002 for retention of the property during the pendency of the proceeding relating to any offence under this Act

Held that:- The PML Act is the Special Act. The provisions of said Act are very stringent which have to be applied strictly. No different meaning or interception can be given in the absence of ambiguity of any provisions.

It is settled law that a particular thing should be done in a particular manner, it must be done in that way and none other.

To retain such property for the purpose of proceeding under section 8 of the Act, the learned counsel appeared on behalf of the appellant has argued that the impugned order is totally contrary to the law passed by the adjudicating authority as due process has not been followed by the ED, which is mandated under section 20 of the Act. After the retention of the property, the respondent has not passed an order for retention or confirmation of freezing of the property for purposes of adjudication under section 8 of the Act. Rule 3 of ‘The Prevention of Money-laundering (The manner of forwarding a copy of the order of retention of seized property along with the material to the Adjudicating Authority and the period of its retention) Rules, 2005 mandates for the same

It appears from the impugned order, there is no discussion at all with regard to retention the property, except it is stated that after considering the original application, submission of the defendant, it is held that the condition laid down for retention are satisfied and original application is allowed. The case on merit of the parties has not been discussed or considered by the adjudicating authority. This said fact is admitted by the learned counsel for the respondent before us.

Under these circumstances, the impugned order is an order in the eyes of law which is not sustainable

2019 (2) TMI 213

Continuation of freezing of the accounts to locate the proceed of crime - section 17 (4) of PMLA - Held that:- The Hon'ble High Court of Delhi in the case of ABDULLAH ALI BALSHARAF & ANR. VERSUS DIRECTORATE OF ENFORCEMENT & ORS. [2019 (1) TMI 515 - DELHI HIGH COURT] has dealt with the issue of Section 102 of Cr.P.C. as to whether such directions could be issued by the Adjudicating Authority under the PMLA and it was held that the contention that officers of the Enforcement Directorate could issue orders of freezing under Section 102 of Cr.P.C. is rejected and the communications issued by the Enforcement Directorate to BSE are, plainly, without authority of law - appeal allowed - decided in favor of appellant.

2019 (2) TMI 96

Release of amount confiscated - alleged proceeds of crime - appellant has admittedly has now furnished surety in the court, therefore, the surety being in excess to the controversial amount of Rs. Twenty Three Lacs pertaining to this account, the appellant seeks suitable directions for release of ₹ 29,96,055 - appellant has filed the appeal against the order dated 20-03-2013 passed by Adjudicating Authority in OC-163-12-PMLA which is pending before this tribunal and is now fixed for hearing for 22-04-2019.

Held that:- In a way, ED wants to secure double the amount, one a surety given by the appellant as per order of Special Court and secondly on deposit, the FDR shall be prepared and shall not be encashed till the final order of PMLA complaint is decided. The contention of ED cannot be accepted on double attachment without prejudice. The surety given by the appellant may be treated as alleged proceed of crime - ED is directed to deposit a sum of ₹ 29,96,055.65/- in the same account within one week from today. In failure to so the attachment shall be treated as released without any further notice with regard to the said amount. The suggestion given on behalf of applicant is allowed. The applicant shall not deal with the said amount till further order of this Tribunal - application disposed off.

2019 (2) TMI 95

Possession of attached property - Interim order - whether the ED is entitled to take the possession once the property is already attached by the Prohibition of Benami Property Transaction Act, 1988 and the subject matter which is holding the property in custodia legis? - Held that:- There is no force of the argument of Shri Nitesh Rana to take the possession of the property at this stage as in the case of Kanhaiyalal V. Dr. D.R. Banaji and others [1958 (3) TMI 79 - SUPREME COURT OF INDIA], it is settled that without leave of that court/tribunal, it would amount committing for contempt of the Court as the property is already held by other authority who, ultimately may be adjudged the proceeding as per law.

The principle of law laid down also helps the facts of this case prima facie in favour of the appellant - List on 20th May, 2019.

2019 (1) TMI 1312

Offence under PMLA - Prevention of corruption - Proceedings adopted by the Anti Corruption Bureau under Section 13(1)( e) of the Prevention of Corruption Act, 1988 - attachment of properties - Held that:- The Appellant / SPCL had advanced to the Nilesh Thakur Group a total sum of ₹ 141.50 Crores from September 2007 to August 2009. A sum of ₹ 111.50 crores was advance between the period 26.9.2007 to 1.6.2009 while the remaining ₹ 30 Crores was advance after 1.6.2009. It is the case and contention of the ACB that the advances / payment by SPCL of the said amount of ₹ 141.50 Crores to the Nilesh Thakur Group, constitutes an offence committed by Nilesh Thakur and Ors. under the provisions of Section 13 of the POC Act. Pertinently, the said offence under the POC Act came to be notified as a scheduled offence under paragraph 5 of Part A of the Schedule of the PMLA only by way of the PMLA Amendment Act of 2009 which was brought into force only on 1.6.2009.

The legal position is that the purported offence under Section 13 of the POC Act was not a predicate / scheduled offence under the PMLA prior to 1.6.2009 and since the Appellant / SPCL had advanced monies to Nilesh Thakur Group to the tune of ₹ 111.50 Crores prior to 1.6.2009, the provisions of PMLA could not have been applied to the said monies or the properties acquired out of the same and the said monies / properties cannot be treated as proceeds of crime for the purposes of the PMLA.

Thus, it was beyond the jurisdiction of the authorities under the PMLA to issue PAO‟s or file Original Complaints in respect of the said monies of ₹ 111.50 Crores or the properties acquired out of the same.

It is evident that the action of the Directorate of Enforcement is in violation of Article 20(1) of the Constitution of India which protects a citizen from being subjected to any penalty greater that what might have been inflicted under the law in force at the time of the commission of offence.

Thus, issuance of PAO‟s or attachment in respect of the said monies of ₹ 111.50 Crores or properties acquired out of the same was clearly beyond the power of authority and the Directorate of Enforcement and the said PAO‟s and the Original Complaints in connection therewith are null and void, a nullity and of no legal effect whatsoever.

There is absolutely no connection between the monies paid by the Appellant to Nilesh Thakur and the discharge of public duties by the brother of Nilesh Thakur [Nitish Thakur]. Nitesh Thakur had effectively not discharged any public duties since 2002.

The Enforcement Directorate has incorrectly attached the properties standing in the name of Ni lesh Thakur Group only by making a bald statement that they are disproportionate assets of Nitesh Thakur. The said properties are of beneficial ownership of the Appellant.

The Appellant is entitled to the said properties to ensure that the said properties come back to the Appellant and has f i led Execution Application for enforcement of the Consent Decree.

However, the attachment made by the Enforcement Directorate is coming in the way of the Appellant enforcing the said Decree against Nilesh Thakur.

Therefore, all appeals f i led by the appellants are allowed, all orders under appeal are set -aside. The provisional attachment orders are also quashed. Al l the attached properties, movable and immovable properties, are released forthwith.The entire amount detained by ED shal l be refunded to the appellant with interest already accrued forthwith.

2019 (1) TMI 1249

Offence under PMLA - provisional attachments - property purchased as proceeds from crime - inter-se dispute between the two brothers - Held that:- Whatever property Shri Nilesh J. Thakur has purchased on behalf of SPCL or invested money for himself and his associate group of company, the said money is invested by Nilesh Thakur which is received from SPCL. There is no direct or indirect evidence available on the record that SPCL has ever taken the favour of the position of Nitish J. Thakur.

No doubt, it appears that there is inter-se dispute between the two brothers. Nitish J. Thakur has been making statements against the SPCL also but from the record, it appears that it was merely the allegation raised by Mr. Nitish J. Thakur in order to save his skin from the various authorities initiated against him, but the fact remains that the entire money is owned by SPCL. The inter-se dispute between two brothers cannot be decided in the present cases.

Similarly, the inter-se dispute between the Nilesh J. Thakur and Kalyani Education Pvt. Ltd. and the connected matters, the same can only be determined in other forum in accordance with law. The scope of these cases is very limited as to whether the amount paid by SPCL to Nilesh J. Thakur is tainted amount or it is a proceed of crime. No such evidence is available on record. Even Mr. Atri admits that it is a clean money and is not a proceed of crime and no case is made out against SPCL for prevention of money laundering.

There is not even prima-facie evidence produced by the Respondent No. 1 in order to show that the subject properties are proceeds of crime and are liable to be attached under the provisions of the Prevention of Money Laundering Act 2002. The question of money laundering does not arise in the present case. Subject matter is a civil dispute. It has already been decided by the Bombay High Court by passing the Decree. No hindrance of any nature is necessary on the part of ED to frustrate the decree.

2019 (1) TMI 1182

Offence under PMLA - provisional order of attachment of the properties made under sub-section (1) of Section 5 - Attachment of the Moveable/immoveable property which has been Hypothecated/Mortgaged with the Appellant Bank is that proceeds of crime received by the Respondent No.2 Company through circular rotation (As alleged by the Respondent No.1) was either used for repayment of loans or for repayment of its term loans as Advanced by the Appellant Bank, therefore, the entire Plant and Machinery of M/s NakodaLts and its factory building are “Proceeds of Crime"

Held that:- There is no denial on behalf of respondent that appellant is a Secured Creditor and is entitled to priority over all other debts and all revenues, taxes, cesses and other rates payable to the Central Government or State Government or Local Authority.

The Adjudicating Authority did not appreciate that a bare perusal of the afore mentioned section 2(1)(u) of PMLA very clearly stipulates that the property can be attached under the provisions ONLY WHEN, Such property has EITHER been derived or obtained, directly or indirectly as a result of a criminal activity relating to a scheduled offence.

The complainant has failed to prove/establish that the immoveable property that has been lawfully Mortgaged with the Appellant Bank has EITHER been derived or obtained, directly or indirectly as a result of a criminal activity relating to a scheduled offence.

The only reason given by the Respondent No.1 in the present OC 974/2018 is that proceeds of crime amounting to ₹ 827.98 Cr. received by the Respondent No.2 Company through circular rotation (As alleged by the Respondent No.1) was either used for repayment of loans or for repayment of its term loans as Advanced by the Appellant Bank, therefore, the entire Plant and Machinery of M/s Nakoda Ltd and its factory building are “Proceeds of Crime‖ and the Factory land of M/s Nakoda is also liable for attachment under PMLA as “Value of Such property."

It is admitted position that the said movebale/immoveable property is not a property that has been derived or acquired, directly or indirectly through the “Proceeds of crime”. Thus, the said mortgaged property in which the bank is the secured creditor is not liable to be attached in lieu of even value therefore. Therefore, the OC 974/2018 is not maintainable as the Respondent No.1 had no jurisdiction to attach the aforementioned immoveable property under the provisions of the PMLA and that the PAO bearing No. 01/2018 is quashed against the appellant.

The Adjudicating Authority did not consider that the provisions of The Prevention of Money-Laundering Act, 2002 cannot be construed and implemented to the detriment of third parties having no connection with and involvement in the scheduled offences which fall within the domain of the Act.

The provisions of the Act can only entail penal consequences on those who are guilty of committing of scheduled offences. The rights of a third party having no involvement in the scheduled offences cannot be jeopardized and decimated by the operation of Act as the same would be violative of their legal right under bond fide contracts. Appeal allowed.

2019 (1) TMI 1181

Offence under PMLA - Provisional Attachment Order - property purchased as proceeds of crime - assessee is an educational institution - Held that:- It is admitted position that the appellants are neither arraigned in any schedule offence nor in any charge-sheet.

The appellants are running educational institutions and the Respondent has issued the impugned attachment order and complaint on the erroneous premise of “any property” of “any person” without focusing its attention as to first pre-requisites in law of existence of any “proceeds of crime” and availability of “material” to lead to “reasons to believe” as required under Section 5 of PMLA.

In the present case, one fact is very clear that Adjudicating Authority has not at all considered the written submission submitted by the Appellants before him. The respondents and the Adjudicating Authority have miscarried itself in law by ordering attachment and confirmation of the attachment in the absence of any “proceeds of crime”. In the absence of proceeds of crime the very exercise of powers by the respondents under PMLA is beyond jurisdiction. The contentions of Appellants have not been met including denial of cross-examination.

The properties of the appellants were attached towards value thereof.

The said properties were not purchased from the proceed of crime. It is inter-se disputes between the appellants and Nilesh J. Thakur about the money parked at the hand of Kalyani Group. However, it is not disputed by any party that the said amount was originally owned by the SPCL which is not tainted even as admitted by the counsel for the ED. Thus, the question of proceed of crime or money laundering by any appellant in all appeals does not arise.

The appellants‟ properties, therefore, wrongly attached by the ED. Appeals allowed.

2019 (1) TMI 832

Offence under PMLA - provisional attachment order - criminal proceedings already pending against accused parties - Held that:- Appellants are bona-fide purchasers and they have not done anything against law. Furthermore, the Appellants are not involved in any crime or money laundering and the Appellants are law abiding citizens running an organization in the field of textile business, with the family business being there for more than 85 years. No case of money laundering against the appellants is made out. The prosecution complaint under PML Act, 2002 was filed by the respondent against Ramesh Pothy with mala-fide intention and after thought on the date of passing the provisional attachment order.

It is of the opinion that complaint filed against Ramesh Pothy is not sustainable and is filed after-thought as the IO has failed to trace the amount paid by the appellant to the family members of Late Sridhar. In order to save its skin, the complaint against the Ramesh Pothy has been filed. This is because of the reasons that the appellants are not directly or indirectly involved in the money laundering. They have no direct link or nexus with deceased who has now passed away.

The appellants have no objection if criminal proceedings already pending against accused parties may continue as per law.

The appellants despite of above are agreeable to deposit a sum of ₹ 6,47,25,000/- as value assessed by the ED in the Investigation Report with the respondent (without prejudice) in order to secure the entire value of the property filed by the ED in the reason to believe. The figure mentioned by the hearing officer in the impugned order is fanciful and accepted as per the case of ED in subsequent pleadings. The real figures are mentioned in the reason-to-believe on the basis of which the provisional attachment order was passed. The said figures could not have been changed.

The appellant is directed to deposit a sum of ₹ 6,47,25,000/- with the respondent without prejudice within the period of six weeks from today as security amount. In case the final orders are passed against the accused, the said amount shall be kept by the ED. In case, the prosecution complaint filed by the ED under PMLAS is dismissed, the entire amount shall be returned to the appellant with interest accrued thereon.

Once the said amount is deposited, the property shall be released forthwith. In the light of above, all the appeals filed by the Appellants are allowed and the impugned order dated 29.12.2016 is set aside qua against the Appellants so as the provisional attachment order.

2019 (1) TMI 831

Offence under PMLA - Provisional Attachment Order - current status of the property attached - Held that:- The documents would show that the appellant and her family members were residing in the said house. No useful purpose would be served if the said property is lying vacant for number of years when the trial against her husband is concluded, but on the other hand, the appellant is prepared to deposit the reasonable use and accommodation charges for residing in the said property.

The respondent on the date of taking the possession was fully aware that the appeal is coming up for hearing for consideration on 14.8.2018, however, the possession was taken prior to the hearing of the admission of the appeal. The appellant has only come to know about the same on 13.8.2018.

As far as movable properties are concerned, the IO and the counsel was unable to provide the details of the valuation of said properties. We are of the view that the value of the same are reasonably offered by the respective appellants no. 2 and 3 as well as Dhanik Lal Mandal, except the value of the movable property as per the suggestion of the appellant.

The proposal given by the learned counsel with regard to one of the movable properties and other properties is allowed. The said properties are released accordingly subject to the deposit of amount suggested by the appellant with the respondent within a period of eight weeks with the respondent.

With regard to immovable property is concerned where the appellant Smt. Rajanti Devi and her family members are residing, the value of the said property as per respondent is ₹ 15,31,729/-. We direct that Smt. Rajanti Devi shall deposit a sum of ₹ 3,000/- (Rupees three thousand only) as use and accommodation charges every month on 7th day of calendar month with the respondent. As far as arrears from the date of impugned order i.e. from July to December, 2018 is concerned, the same shall be deposited by the appellant within eight weeks from today.

2019 (1) TMI 830

Offence under PMLA - provisional attachment order - Held that:- It is nothing less than a case of daylight robbery by the Sandesara Group of companies, including Sterling Biotech Limited and their respective owners. As mentioned, large number of properties have been mortgaged with the above mentioned banks and financial institutions, who are admittedly the secured creditors of the said amount. Some of them are public sector banks. The money due must go to the banks so that the banks should run the system in smooth manner. At present, no-one is known when they would return back and when the extradition proceedings are initiated against them and who will pass the orders thereon. Trial may take number of years. Therefore, blocking the process to receive the loan cannot be stopped as suggested by the ED.

The present case is a classic example as to how the public money has been swindled by these groups and individuals.

No one knows when enquired why they have left the country and how they have managed to flee recently in pending investigation by various agencies, no one is aware whether they will ever return to home country and pay their debts, every one appearing is clueless on this question. Thus, the submission of ED can be accepted that unless the trial of accused parties is over, mortgage properties against the loan amount should not be dealt with. The borrowers will celebrate the said order if their properties to be kept in safe heaven for couple of decades

In the light of above, till the next date of hearing, operation of the impugned order with regard to the mortgaged properties shall remain stayed. However, the Provisional Attachment Order dated 29th May, 2018 shall continue. With regard to the other properties status quo shall be maintained by all the parties. It is directed that CIRF process under the Insolvency Code shall continue.

2019 (1) TMI 572

Maintainability of application filed under Section 17(4) - seizure of bank accounts - time limit for filing application - Held that:- It is well settled that if the statute require a thing to be done in a particular manner, it must be in that manner otherwise action is vitiated. After realized its mistake about freezing, the respondent has passed the order of fresh freezing on the fresh application filed under Section 17(4) for confirmation of retention.

In the present case, it is admitted position is that the bank accounts were seized on 15.02.2017. The application under Section 17, sub-section (4) was filed on 3rd March, 2017 ( i.e. within 30 days) from the date of freezing of the bank account. Sub-section (1) of Section 20 stipulates the maximum period of one hundred and eighty days for the purpose of adjudication under Section 8 of the Act, however, proceedings under section-5 were not initiated within the period of 180 days.

Admittedly, in the present case, the application filed by the respondent under section 17(4) was not allowed. The said order is become final between the parties as the respondent has not challenged the same in any court as admitted by the counsel.

As far as the proceedings under section 5 of PMLA, which have been initiated against the appellant is concerned, the same would be considered by the Tribunal as per its own merit.

Appeal allowed.

2019 (1) TMI 515

Validity of communications issued by officers of the Enforcement Directorate to the BSE - attachment of equity shares of KRBL Ltd. held by the petitioners in their Demat Accounts with SMC - Withholding of the proceeds of equity shares sold by the petitioners on the platform of respondent no.2 - prohibition of any debit transaction in the Demat Accounts.

Held that:- In terms of Section 8(1) of the PMLA, the Adjudicating Authority is required to examine the complaint filed under Section 5(5) of the PMLA or an application made under Section 17(4) of the PMLA. If on receipt of such complaint or application, the adjudicating authority has reason to believe that a person has committed an offence of money laundering or is in possession of the proceeds of crime, he is required to serve a notice of not less than thirty days on such person calling upon him to indicate the sources of his income, earning or assets or the means with which he has acquired the property which is provisionally attached under Section 5(1) of the Act or seized or frozen under Section 17 of the PMLA - In either case, the Adjudicating Authority is required to pass an order within a period of one hundred and eighty days from the date of the order of provisional attachment under Section 5(1) or from the date of order of seizure/freezing passed under Section 17 of the PMLA. This is explicitly clear by the plain language of Section 5(1) of the PMLA. In terms of Section 20 of the PMLA, any property seized under Section 17 or frozen under Section 17(1A) of PMLA can be retained or if frozen, continue to remain frozen for a period not exceeding one hundred and eighty days.

Any property can be provisionally attached under Section 5 or be seized under Section 17 or be frozen under Section 17(1A) of the PMLA. However, any such order can be passed only if the necessary checks and balances are complied with; namely, that the seizure or attachment is preceded by the concerned authority having reason to believe that such properties are proceeds of crime or are otherwise related to crime - It is axiomatic that no order of freezing can be passed except in accordance with the provisions of Section 17(1A) of the PMLA.

The reliance placed on provisions of Section 65 of the PMLA is misplaced. By virtue of Section 65, the provisions of Cr.P.C. apply only insofar as they are not inconsistent with the provisions of the PMLA. There can be little doubt that scheme of seizure under Section 102, Cr.P.C. is inconsistent with the provisions relating to attachment and seizure of property under the PMLA.

The contention that officers of the Enforcement Directorate could issue orders of freezing under Section 102 of Cr.P.C. is rejected and the communications issued by the Enforcement Directorate to BSE are, plainly, without authority of law - it is not necessary to examine whether the series of communications sent by the officers of Enforcement Directorate for interdicting the transaction relating to sale of 64,94,891 equity shares of KRBL Ltd. are otherwise sustainable in law. However, for the sake of completeness, this Court considers it apposite to also examine the question whether such communications could be issued under the provisions of Section 102 Cr.P.C.

Plainly, provisions of Section 102 Cr.P.C. do not empower any police officer to nullify a transaction. The sale of shares of KRBL Ltd. were complete and SMC had tendered the shares and M/s Pabrai Investment Fund had tendered the consideration and was entitled to the said securities. The petitioners were entitled to the consideration paid by M/s Pabrai Investment Fund. By directing BSE to release funds to M/s Pabrai Investment Fund, the Deputy Director of the Enforcement Directorate had proceeded further; he had interdicted the BSE from effecting the clearing and, by the letter dated 23.03.2018, the Assistant Director of the Enforcement Directorate had nullified the sale transaction that was complete. No authority for such actions can be found in section 102 Cr. PC. A police officer cannot set aside a transaction of sale and purchase of shares under the provisions of Section 102 Cr.PC. This Court pointedly asked Mr Singh, the learned counsel for the respondents as to under which authority did the Assistant Director, PMLA issue the communication dated 23.03.2018. Apart from contending that such action was bonafide, there was no explanation forthcoming as to under which provision of law, this direction had been issued.

Accordingly, 5109 shares of KRBL Ltd., which were sold by the petitioners, were released to the counter parties (purchasers) - However, on instructions of the Enforcement Directorate, BSE continued to withhold 64,94,891 shares of KRBL Ltd. and ₹30,35,006.90 which were received as consideration for the sale of 5109 shares.

It is seen that orders under Section 17 of the PMLA freezing the said shares and the amount released in the bank account of the petitioners has since been passed and, the petitioners have preferred an appeal before the Appellate Tribunal. Keeping this in view, no further orders are being passed and it would be open for the petitioners to seek appropriate remedy including compensation for any loss suffered by them on account of the illegal actions on the part of the respondents.

Whether the provisions of the PMLA are applicable in respect of freezing orders passed under Section 17(1A) of the PMLA in respect of the shares of KRBL Ltd.? - Held that:- As is apparent from the above that whilst it is clear that RAKGT is alleged to have received the alleged proceeds of crime, it is unclear on what basis it is alleged that the petitioners are recipients of proceeds of crime. Clearly, a ledger entry is not a property and cannot be the proceeds of crime. It appears from the reading of the counter affidavit that it is the Enforcement Directorate’s allegation that certain funds were received by RAKGT which were essentially kickbacks paid by AgustaWestland. The receipt of the said amounts are reflected as credit entries against M/s Omar Ali Balsharaf-GK. In other words, books of RAKGT reflect that the said sums have been received from petitioner No.2 - this court in order to seek clarity, by order dated 27.09.2018 directed Enforcement Directorate to file the statement indicating money trail which the Enforcement Director alleges to be proceeds of crime.

If it is established that the petitioners hold any property overseas, which is derived or obtained by a scheduled offence, then the Enforcement Directorate would be well within its right to initiate proceedings against any property held by the petitioners in India to the extent of the value of the proceeds of crime held overseas. In such a case, it would be irrelevant whether the assets acquired in India were acquired prior to or after the PMLA came into force - the contention that assets acquired prior to enactment of the PMLA could never fall under the scope of the definition of the expression ‘proceeds of crime’ and consequently are immune from the provisions of the PMLA, is erroneous and is accordingly rejected.

Petition disposed off.

2019 (3) TMI 824

Offence under FEMA - appellant had without any general or special permission of RBI, received amounts ₹ 2,47,99,350/- in India, otherwise than through an authorised person, by order or on behalf of his friend Madan, a person resident outside India - penalty imposed - HELD THAT:- From the documents/statements the Investigating Officer became aware of the identity of various persons from whom Shri Harish Kumar had been receiving payments in India, under instructions of his friend Madan, residing in USA, who was earlier residing in Mohali. In view of other certain searches were conducted and a number of persons examined and their statements recorded under FEMA, which brought out corroboratory evidence viz-a-viz the facts as stated by Shri Harish Kumar in his afore-mentioned statements.

Shri Harish Kumar later on sought to retract from his abovementioned statements, by way of a letter sent during the course of investigations, besides by way of submissions made during the course of personal haring including in the form of Affidavits, both his as also of one other person, in which Affidavit, it is claimed that amount totaling to ₹ 26,25,000/- was received by Shri Harish Kumar from the said person (Harchand Singh) on interest for using the same in his business of Goldsmith.

It is correctly found in the impugned order that from the seized material and the above-mentioned statements, and find that the said statements, when read with in conjunction with the seized documents/material, brings out the facts that the contention of the Noticee that he was forced to make inculpatory statements is not correct.

Not only that these statements are in the form of explanation to the seized documents, it is also a matter of records that the said statements were recorded by Shri B.C. Mahey, Assistant Director and not by Shri Balwinder Singh (the then Chief Enforcement Officer), as alleged by the Noticee.

Therefore, as agreeing with the finding arrived in the impugned order that it is established beyond a reasonable doubt that during the years 2002 and 2003, the said Shri Harish Kumar @ Rinku without any general or special permission of Reserve Bank, received amounts totaling to ₹ 2,47,99,350/-, in India, otherwise then through an authorized person, by order or on behalf of his friend Madan, a person resident outside India, and thereby he has contravened the provisions of Section 3 (c ) of the Foreign Exchange Management Act, 1999 - the seized amount of ₹ 21,75,000/- was the amount involved in afore-mentioned contraventions of the provisions of FEMA. It is also a matter record that the appellant had retracted his admission after the expiry of almost more than four years. The said period is long period of time. It is after thought thus has no value in the eyes of law.

With regard to the penalty of ₹ 25,00,000/- is concerned, it has come on record that appellant is not in a position to deposit the said amount. The appellant is suffering from undue hardship. The financial condition of the appellant is very weak. He has been residing in House in Punjab, on rent from the last many years. On the perusal of the affidavit and a copy of the deed of conveyance filed therewith makes it abundantly clear that the father of the appellant Late Shri Kanwar Bhan had been residing in the aforesaid rented house and after the death of his father the appellant has been residing in that house. He is an unemployed person living with the generosity of the Management of the nearby Gurudwara where he and his family are having their daily meals in return of his help to the distribution of free meal to the devotees. He does not have any income who is not an income tax payee and does not have any other financial resources to make the pre-deposit of the penalty.

There is no material on record on behalf of the respondent to show that the appellant is not suffering from the undue hardship. It appears from the record, there is no contrary evidence available. The appellant is exempted to deposit the penalty amount. The same is waived in view of the peculiar facts of the present case. The impupgned order is modified only to this extent of penalty component.

2019 (3) TMI 823

Offence under FEMA - transaction in foreign exchange undertaken by the Varanasi branch with another company holding no license from the RBI to conduct the said business of money exchange - penalty imposed - separate license to companies and all its branches - HELD THAT:- Considering that the RBI grants license to the company as well as its branches separately, a fact which was reiterated by the learned counsel for the appellant, RMEL, Varanasi cannot take shelter under the main RMEL company located at Mumbai.

From the emails it is clear that the consignment was sent from Varanasi. It belies common sense that if the transaction had been undertaken by the Lucknow branch as the appellants have tried to argue at one stage then why should the money/consignment/package be not transferred from Lucknow to Cochin their hub and why carry it to Varanasi and then send it to Cochin. Even the statement of Shri Sandeep Kumar Srivastava, State Head, Uttar Pradesh who reported to the zonal manager confirms that the consignment was transferred from Varanasi directly through Jet Airways via AWB 58979725306 to Cochin.

In the present case, the Varanasi branch was not authorised for such dealings but nevertheless they undertook the same. Section 10(4) are the duties prescribed for the authorized person which in this case is not relevant as Varanasi branch is not an authorized person. To that extent, the RMEL, Varanasi branch has contravened the provisions of Section 3(a) of FEMA, 1999.

With regard to the zonal manager, Mr. Dasgupta, the emails which have not been denied by him shows his involvement and culpability. He was very much in the knowledge about the whole transaction and the way it has been undertaken. Under the provisions of Section 42(2) of FEMA, he will be therefore deemed to be guilty of the contravention.

The appellants in the present two appeals are liable to penalty under Section 13 of FEMA, 1999. But onsidering the case in its totality and the contraventions, hold that the penalty levied has been on a higher side. Reduce the same to ₹ 10,00,000/-(Ten lakhs only) for RMEL Varanasi, and ₹ 1,00,000/-(One Lakh only) for Shri Souvik Dasgupta.

2019 (3) TMI 550

Refund of amount deposited - FERA - Grievance of the applicant is that the department has not returned the seized cash of ₹ 6,000/, nor refunded ₹ 20,000/deposited by her as per interim directions of FERA Board not release her original title deeds - Held that:- Learned counsel for the department stated under instructions that the department has already initiated steps for refunding such amounts.

This application is disposed of with certain directions.

2019 (2) TMI 1039

Offence under FEMA - Penalty imposed in exercise of the powers conferred u/s 13(1) of the Foreign Exchange Management Act, 1999 - HELD THAT:- The term “bona fide” would be used in contradistinction with “mala fide”; i.e., where an activity is not “mala fide”, it would be “bona fide”. A business activity would be “mala fide” if the business activity itself is “fraudulent” and conducted with a fraudulent intent as in the present case, RLL was engaged in bona fide business activity for exploring opportunities in steel and other specified sectors globally including India.

The appellants have made out a strong prima-facie case. There are many issues which have not been decided strictly as per law and facts of the matter in the impugned order. The appellants have raised many important legal issues which have to be gone into.

The balance of convenience is also in favour of the appellants. The issue of penalty (being totally disproportionate) as raised by the appellant i.e. grossly arbitrary has also resulted in causing irreparable harm loss and injury to the appellants are to be considered at the time of hearing the appeal on merit. The appeals are pending for the last more than 4 years so as the stay applications. The same have been adjourned one on reason or the other. The appeals could not be decided on merit as the respondent was insisting that before deciding the appeals, the pending application under the provisions of section be decided at the first in stance.

Even otherwise the earlier tribunal is merged with the present tribunal in July, 2017 and many files were not transferred on time.

In order to strike out the balance between the parties at this stage, direct that without prejudice, the appellants shall deposit ₹ 2 Crores lump-sum with the respondent within eight weeks from today. The hearing of the appeal is expediated. The appeals are listed on 1st July, 2019. All pending applications are disposed of accordingly.

2019 (2) TMI 963

Grant of stay - pre-deposit - interim order granted by the Appellate Tribunal for SAFEMA, FEMA, PMLA, NDPS, PEPT, New Delhi-3 - Tribunal failed to consider the income tax returns of the appellant for the year 2018-19, but only noted the income tax returns filed for the years from 1999-2000 to 2002-2003 - Held that:- Without going into the controversy as to whether the appellant had produced the current income tax returns or not, we deem it appropriate that the appellant shall be given one more opportunity to place all the records before the Tribunal, so that the Tribunal can take a decision as to whether the interests of the Revenue stand sufficiently safeguarded on account of the attachment over the immovable property of the appellant, which is stated to be worth of ₹ 3 Crores and as to whether the appellant's financial condition precludes from making a predeposit.

For such a reason alone, we allow this appeal, set aside the order of the Tribunal and remand the matter to the Tribunal for a fresh consideration.

2019 (2) TMI 884

Contravention of provisions of Section 9(3) of the FERA Act - violation of FERA - petitioner having not been made aware of the show cause notice, the impugned order passed thereon is exparte and caused grave and serious prejudice to him - Held that:- Various foreign exchange resources of the country and the proper utilization thereof in the interests of the economic development of the country. This Act is now repealed by virtue of a new law namely, the Foreign Exchange Management Act, 1999, but even though repealed, the proceedings under FERA Act can continue. The provisions of the Act enable to carry out searches and confers powers to arrest as well. The violation of FERA is, thus a grave and serious issue.

Its strict and stringent provisions enable the authorities to adjudicate into the breaches of the law, and thereafter, if proved, impose penalties. That is how the impugned order proceeds. The impugned order does not show that the petitioner was duly served, but deliberately did not appear or avoided to appear. Having received the show cause notice and related papers, he did not file any reply. He avoided even the service of the proceedings. The above is not the position emerging from the order itself. Rather the order is passed after observing that certain attempts to serve the petitioner were made but having not found him at the premises of one Hasmukh Shah, the order was passed in his absence. Once the factual position as stated in the Writ Petition is undisputed, then, this Writ Petition must succeed.

We allow the Petition by quashing and setting aside the impugned order.

2019 (2) TMI 214

Violation of provisions of section 4 of the Foreign Exchange Management Act, 1999 and Regulation 3 of the Foreign Exchange Management (Realisation, Repatriation and Surrender of Foreign Exchange) Regulations, 2000 - inheritance of foreign exchange - Held that:- There is no dispute that the appellant being a person resident in India has inherited this amount as per the voluntary settlement deed executed by the settlers being person resident outside India - As per settled law, the word inheritance has to be given a wider meaning here. The word inheritance here cannot be limited to mean the asset acquired by a Human being/ natural person upon the death of a natural person because as per section 2(v) of the Act a ‘person resident in India’ includes a legal person. Thus, the property passing upon death of a person being resident outside India to a person resident in India whether the person resident in India is a natural or a legal person.

As per Section 9(e) of the Act also if the foreign exchange has been acquired by way of gift or inheritance then even in that situation the provision of section 4 shall not apply. The reserve bank has not prescribed any limit for holding the foreign exchange in case the foreign exchange has been acquired by gift or inheritance - even if for a moment assuming that the provision of section 6(4) and section 9(d), (e) of the Act are not applicable in the instant case even than the appellant should not be held guilty for contravening the provisions of section 4 of the Act

The appellant should not be considered to have violated the provisions of section 4 of the Act and Regulation 3 of the Foreign Exchange Management (Realisation, Repatriation and Surrender of Foreign Exchange) Regulations, 2000 in view of peculiar facts and circumstances of the present matter - appeal allowed - decided in favor of appellant.

2019 (1) TMI 1502

Maintainability of appeal before Special Director (Appeals) - proper appellate authority for deciding the appeals filed after repeal of FERA on 01.06.2000 against the order passed under Section 51 of FERA - contravention of Sections 9 (1) (a), 9(1)(c) and Section 16(1) of the Foreign Exchange Regulation Act, 1973 - imports and exports of certain commodities made with two foreign parties, viz., M/s Fingrain, S.A., Geneva and M/s Continental Grain Export Corporation, New York - whether appeal against the order passed by the Deputy Director of Enforcement (Adjudicating Officer) under Section 51 of FERA read with FEMA would lie only to the Appellate Tribunal under Section 19 of FEMA but not before the Special Director (Appeals) under Section 17 of FERA?

Held that:- Any appeal filed after 01.06.2000 against the order of the Adjudicating Officer passed under Section 51 of FERA in the proceedings initiated under FERA would lie before the Appellate Tribunal under Section 19 of FEMA.

The legislature did not intend to make a distinction between the two appeals for their disposal by two different appellate authorities under FEMA only because one appeal was filed prior to 01.06.2000, therefore, it will lie before the Appellate Tribunal whereas the other appeal which was filed after 01.06.2000 though against the similar order, it will lie before the Special Director (Appeals). In our view, there does not appear to be any justifiable reason to make such distinction for filing of appeals filed against the similar order passed under FERA before two different appellate authorities under FEMA - this intention of the legislature is strengthened when we read Section 49 (5)(b) of FEMA and Section 81(c) of FERA.

So far as Section 49(5)(b) of FEMA is concerned, it specifically provides that the appeals filed under Section 52 (2) of FERA against the order passed under Section 51 of FERA will be decided by the Appellate Tribunal under FEMA - So far as Section 81(c) of FERA, 1973 is concerned, it deals with Repeal and Saving of FERA, 1947. Clause (c) of Section 81 specifically provides that all the appeals filed under Section 23 of FERA, 1947, whether pending on the date of Repeal or/and those filed after the repeal of FERA, 1947, shall be disposed of by the Appellate Board constituted under FERA, 1973.

Since Section 49(5)(b) of FEMA is not identically worded on the pattern of Section 81(c) of FERA, that itself would justify that the legislature intended to provide two appellate authorities in FEMA for filing two types of appeals arising out of a similar order - it is not possible to accept the submission of learned counsel for the respondents(assessees) that by interpretative process this Court can uphold creation of another appellate authority for the disposal of the appeals filed against the order passed under Section 51 of FERA after 01.06.2000 which do not fall under Section 49 (5)(2) of FEMA.

There is no reason as to why the same legislative intent while interpreting the provisions of FERA, 1973 and FEMA, 1999 is applied for deciding the identical question now arising in the case.

The appellate forum for deciding the appeals arising out of the order passed under Section 51 of FERA whether filed prior to 01.06.2000 or filed after 01.06.2000 must be the same, i.e., Appellate Tribunal under FEMA - the appeal filed by respondent Nos. 2 to 4 against the order dated 05.12.2003 passed by Deputy Director of enforcement under Section 51 of FERA will lie and was, therefore, maintainable only before the Appellate Tribunal under Section 19 of FEMA - appeal allowed.

2019 (1) TMI 980

Stay of penalty imposed - Contravention and allegations against the appellant u/s 6(3)(d) of FEMA - penalty imposed - delay in settlement of import dues - Held that:- The Appellants have prima facie demonstrated that there have been no violations of the provisions of FEMA, the Rules, Regulations and the Master Circular on Imports. Without prejudice to any of the aforesaid, and assuming without admitting that there was a violation, even then the RBI regularized the same by granting the permissions to settle the dues specifically from “FEMA Angle”. The Appellant has also able demonstrated the factual conditions which led to the delay in settlement of import dues. The RBI letter expressly states that the permission was issued from foreign exchange angle under FEMA. The limitation of the permission was only in respect of any other applicable laws other than FEMA. The Respondent is admittedly not seeking to impose penalty for alleged violation of any other law. In view of the aforesaid, the contentions of the Respondent especially at Para 16 are unsustainable.

In this regard, the submissions of the Appellants in their Appeals, Stay Applications and the common Synopsis are reiterated.

Prima facie it is of the view that the respondent has no jurisdiction to reinterpret the terms of the agreement between Google Ireland and Google India.

Undue hardship that will be caused to the Appellants if they are made to make a deposit of any part of their respective penalty which is without basis in law and in any event highly disproportionate to the bona fide actions of the Appellants.

In the present case, the RBI has specifically allowed the settlement of dues from FEMA angle

In the light of the prima facie has been made by the appellant and the appellant will suffer hardship if the appellant is asked to deposit the penalty amount. After having through the facts and material placed on record, I am of the opinion that the chances of success of appeal are more than the failure of appeal. Thus, the prayer is allowed. M.P is disposed of. There shall be a stay of operation of the impugned order till the final decision of appeals.

2019 (1) TMI 190

Approval of RBI for transfer of technology in excess of USD 1,00,000 - rectification of the advance payment - invocation of provisions of FERA - Held that:- The whole case hinges on the RBI’s approval for the excess amount not being available. From the RBI’s letter dated 18.11.2002, it is apparent that the RBI was seized of the matter and had not rejected their case. It would be in the fitness of things to have consulted the RBI before the impugned order was passed more so because the genesis of the case was an information received from the RBI.

The matter is remanded back to the original authority to get the necessary response/reply from the RBI and pass a fresh speaking order after giving the appellants an opportunity of being heard.

2019 (1) TMI 26

Penalty under FEMA - Tribunal jurisdiction allowing waiver of deposit of penalty - Tribunal directed the appellant to deposit a sum of ₹ 12,00,000/-, which would amount to 25% out of the total amount ordered by the adjudicating authority by way of penalty - Held that:- We are of the opinion that the direction already given in this appeal, dated 05.09.2018, would safeguard the interest of the Department, since the appeal itself has been directed to be listed by the Appellate Tribunal on 27.02.2019.

Thus the appeal stands allowed and the order passed by the Tribunal is modified to the effect that the appellant shall pay a sum of ₹ 5,00,000/-, which the appellant has already paid. Consequently, the remaining amount of penalty, levied on the appellant, shall remain stayed till the disposal of the appeal by the Appellate Tribunal.

2018 (12) TMI 445

Gross violation of the principles of natural justice - Dispensation of the pre-deposit - Penalty imposed - whether principles of natural justice was followed or not? - Held that:- Innumerable opportunities have been given to the appellant for appearing/arguing his case and examining the witness but he failed to avail the same. He either did not appear or on the few occasions where he did appear before the adjudicating authority he took adjournment on some plea or the other. We agree with the learned counsel for the respondents that justice is qua both the parties and we do not find any violation by the adjudicating authority in this regard.

Therefore, do not see any reason to grant them the dispensation of the pre-deposit. They have not pleaded anything either on merits of the case or on hardship even when specifically asked by me. With regard to the judgments quoted by the counsel for the appellant on the principles of natural justice it goes without saying that these principles are the pillars of justice and there is no denying these judgements. However, the facts of the case has to be seen to come at a conclusion whether there is a denial of these principles or not. The discussions and findings in the previous paras show that the principles have been fully followed by the adjudicating authority.

Interests of justice would be served if the appellant is directed to deposit 50 per cent of the total penalty (covering all the four appeals as above) within a period of two months from today.

2018 (12) TMI 444

Contravention of FERA underhand foreign exchange - Loose sheets found in the house of the main accused Shri Darshan Singh and the statement of the appellant - Held that:- There is no evidence to that effect on record. In fact, the appellant in his statement before the DRI and which finds a mention in the impugned order has not stated that the alleged Darshan Singh was in any way involved in foreign exchange transactions. The so-called loose sheets recovered from the residence of Shri Darshan Singh does not establish that the appellant had received or given any money in contravention of FERA. There are no statements or any other evidence which has been produced by the adjudicating authority to prove the involvement of the appellant in receipt or making payments of foreign exchange. Holding of Indian currency or dealing with it is not a crime and if there is a violation of any other law like the income tax etc. that would be dealt with by the respective authorities. The appeal is accordingly allowed.

2018 (11) TMI 367

FERA violation - cases against a number of exporters for presenting forged copies of shipping bills, GR-I Forms, invoices etc. where no shipment had actually taken place - denial of principle of natural justice - violation confirmed on statement taken during investigation - relying upon statements made under the Customs Act for the purpose of the adjudication proceedings under FEMA - Held that:- Principles of natural justice has been duly followed and the appellant have failed to avail of the opportunities given to him. Moreover, his silence over receipt of the relied upon documents afresh in 2008 after the Tribunal‟s remand order of 16.11.2007 also casts shadow on his intentions except that he appears to be trying to delay the decision. On merits as discussed above, his 3 statements which are voluntarily and the investigations done by the Customs brings out the offence as well as his involvement.

A decided in Vinod M. Chitalia vs. UOI [2012 (5) TMI 157 - BOMBAY HIGH COURT] the investigations done under Customs Act, can be used for the purpose of FERA/FEMA also, as the transaction in this case also is the same. The court further held that “in assessing these findings, the Court cannot be oblivious of the fact that clandestine transaction of the nature involved in the present case, are within the peculiar knowledge of persons such as the appellant who are parties to those transactions. The burden which is cast upon the adjudicating authority to establish a violation must be assessed from a robust and common sense perspective. Clandestine violations take place under the cloak of secrecy. To impose a burden of establishing in an adjudication proceeding, every conceivable link of an unlawful transaction would result in a manifest failure of justice and would defeat the underlying purpose of the Act. Appeal dismissed.

2018 (11) TMI 310

Application for condonation of delay in filing the appeals - Conversion of petition to an appeal - Held that:- When the petitions came up for consideration, our attention was invited to the decision of the Apex Court in Raj Kumar Shivhare Vs. Asstt. Director, Directorate of Enforcement, (2010 (4) TMI 432 - SUPREME COURT). Therefore, the appropriate remedy to challenge the impugned orders would be an appeal under Section 35 of the FEMA. It is an undisputed position that both these petitions have been filed within a period of 120 days from the date of the impugned order of the Appellate Tribunal as provided under Section 35 of the FEMA.

Mr. Jain, prays that he be allowed to convert this petition into an appeal. Mr. Vyas for the respondent has no objection at this being allowed.

Thu the petitioners are allowed to convert both the petitions into appeals under Section 35 of the FEMA. The petitioners would take the necessary steps including payment of appropriate Court Fees etc. with the Registry to convert both the petitions into appeals on or before 30th November, 2018

2018 (11) TMI 188

Contravention of Section 8 of the Foreign Exchange Management Act, 1999 read with Section 42(1) thereof along with Regulation 9 and 13 of the Foreign Exchange Management (Export of Goods and Services) Regulations, 2000 - Appeal to Appellate Tribunal - Held that:- The Tribunal prescribed a condition of deposit of 20% of the penalty amount as a precondition for hearing the Appeals on merits. Such a pre-condition is imminently fair, just and reasonable. It does not deny the appellant a right of appeal as is now projected before us. It ensures that justice would be done as well. Thus, the right of appeal has not been defeated and frustrated and as is now complained. In fact from 14th July, 2009, we have travelled upto 31st October, 2018. Despite this enormous passage of time, the appellants have not complied with this order and the conditions imposed therein. We were prepared to give further time to the appellant to comply with this order, but their counsel argued that they do not have any money. Given their precarious financial position and undue hardship, we must set aside this condition altogether or reduce the amount to a paltry sum of approximately two lakhs.

Tribunal was ready and willing to hear the restoration application provided a fair stand was taken by the appellants. On such occasions, when the restoration applications of the appellants were placed before the Tribunal, they chose to remain absent. They did not cooperate with the Tribunal. The Tribunal was not obliged to wait for them. Its the appellants who desire another opportunity to have an adjudication on merits. However, their conduct is not consistent and justice cannot be rendered to those who have failed to show their bona fides in the instant case. We find that the bona fides are totally lacking. The Tribunal has indulged the appellants enough and we do not see the discretion exercised by the Tribunal to be arbitrary or capacious enabling us to entertain these Appeals.

2018 (10) TMI 1420

Contravention of section 8 read with section 42 of FEMA, 1999 - Penalty imposed - Directorate has no jurisdiction to issue of the offences allegedly committed during the FERA regime after the repealing of FERA after the expiry of sunset clause on 31.5.2002 - Held that:- Admittedly the Company through which exports were made during 95-96 and as the company has become defunct no exports were made thereafter besides the buyers had gone under ground , auction at the Turkey port following change in the quota system etc.( i.e. letters dt.27.4.2010 and 6.12.2010 as replies to the show cause notice. These replies were not at all considered as could be seen from the findings and order of the Adjudication order.

In the present appeal both the parties had made their submissions on 16th May, 2018 and the order was reserved. On the said date, two weeks time was granted to the parties to file their written submissions.

The written argument of the appellant was received however no written submissions has been filed by the respondent. Even after waiting for the considerable period for the written submissions on behalf of the respondent, when the same was not filed, we proceeded to pass the present order on the basis of the written arguments filed by the appellant and the materials available on record.

Once the issue of SCN of the offence completed in FERA regime no SCN can be issued after 1.6.2002 under FEMA,1999 because of the statutory bar under FEMA, 1999.Accordingly, in the light of the above, the appeal is allowed.

The entire proceedings based on the illegally issued SCN (assuming jurisdiction under FEMA, 1999) is null and void ab-initio and therefore the penalty imposed is untenable by the force of law.

2018 (10) TMI 1081

Condination of delay as per Section 19 of FEMA - delay in filing appeal - sufficient cause for not filing it within specified period - Held that:- On receipt of the adjudication order, that notwithstanding that efforts were again made by the respondent to serve the copies in person on the appellant, but because of the appellant leaving her residence/premise without any notice could not enable the said service and the postal endorsement is a proof of the same, and that way back in 2009 and 2010, they were pasted on the last known addresses of the appellant.

In spite of that the appellant failed to file any appeal, and suddenly in 2017 she filed the appeals and took the plea that she was in jail and hence the delay, while by their own admission, she was sent to jail only in February, 2017, while the impugned order are of 2008 and 2009. I do not find any cause having being given to explain the delay. Following decision in Esha Bhattacharjee case (2015 (1) TMI 1053 - SUPREME COURT), and in the facts of the case as discussed in previous paras see no reason for condoning the delay. Justice is for both the sides- the appellant and the respondent and such huge delay and thereafter attempts to cover it up would lead to denial of justice to the other side.

No ground to condone the delay running into number of years in all the four appeals. The appellant has not been able to give/prove any sufficient cause to do the same.

2018 (10) TMI 1015

Penalty on the co-appellant on the charge of violation of Section 3(b), 3(d) and 3(c) of FEMA - Held that:- It is stated on behalf of the appellants that ED without conducting any independent inquiry has simply on the basis of few documents sent by DRI issued a show cause notice to the appellants for alleged under-valuation of furniture imported from China during the year 2006-07 and thereby alleging violation of the provisions of section 3(b), 3(d) and 3(c) of the Foreign Exchange Management Act, 1999 (“the Act”) read with Section 42(1) of the Act.

The show cause notice relied solely on the DRI case which had been settled and closed by the Settlement Commission in 2009 itself. Initiation of proceedings is incorrect when the issue has already been settled by the Settlement Commission. This is against the statutory mandate laid down under provisions of Section 127J of the Customs Act, 1962 which stipulates that no matter covered by such orders shall be reopened in any proceedings under this Act or under any other law for the time being in force. Appeal allowed.

2018 (10) TMI 411

Refund to the Petitioners of principal amount along with interest - non adherence to Foreign Exchange Regulation Appellate Board orders - Held that:- We find that our Court had in Abu Moosa [2015 (1) TMI 977 - BOMBAY HIGH COURT] and Prabodh Mehta [2012 (7) TMI 145 - BOMBAY HIGH COURT] had occasion in similar facts, directed refund of the amount received by the Respondents along with interest from the date on which the amounts were deposited with the Respondents till repayment.

The Respondents before us refuse to pay interest on the ground that it has not earned any income. Interest is paid as to compensate persons who have been deprived of its amount. Thus in the present facts the Respondents are directed to grant refund aggregating to ₹ 9,50,000/- along with interest thereon @ 6% p.a. from the date of payment / deposit of the Petitioner. The refund should be granted as expeditiously as possible along with interest @ 6% p.a. preferably within a period of 12 weeks from today.

2019 (3) TMI 1055

Monetary amount involved in the appeal - appeal of Revenue before the High Court - Circular of the Revenue bearing F.No.390/Misc./116-2017-JC - Held that:- A Circular issued by the Revenue binds the Revenue but, it may not bind the Court or the assessee. We have here a situation where the Revenue's advocate seeks to disown the Circular and seeks to brush it aside in this case. If such a tend is allowed, in future every matter filed by the Revenue will chart the same course. In every case, the Revenue proposes certain questions and terms them as substantial questions of law.

The Revenue's Circular covers this matter - The appeal is dismissed on account of the same.

2019 (3) TMI 1054

Penalty u/s 78 of FA - non-payment of service tax on sub-contract charges - contentious issue - bonafide belief - Board Circular dated 6.6.1997 - Held that:- There was indeed considerable confusion on the issue and which had also resulted in litigation. In this circumstance, that there was reasonable cause on the part of the appellant for non-discharge of the tax liability - penalty set aside by invoking section 80 - appeal allowed - decided in favor of appellant.

2019 (3) TMI 1053

CENVAT Credit - common services used for taxable services as well as traded goods - reversal of proportionate credit - Rule 6(3A) of CENVAT Credit Rules - Held that:- Admittedly the appellant has obtained centralized registration from 27.5.2010 and they have showroom and service station at 5 locations. Further, it is found from the showroom that the appellant is not only trading the goods and spare parts and accessories but also providing taxable output service i.e., Business Auxiliary Service, Insurance Service and received commission which is subjected to tax.

During the pendency of these appeals, the appellants have reversed the proportionate CENVAT credit in both the appeals by paying through challans as per the requirement of Rule 6(3A) of CENVAT Credit Rules. These payments made by the appellant needs to be verified as per Rule 6(3A) and for this purpose, both the cases are remanded back to the original authority to find out whether the appellant has reversed the proportionate credit as per Rule 6(3A) or not.

Penalty u/r 15(1) - Held that:- The appellants are not liable to pay penalty under Rule 15(1) of the CENVAT Credit Rules because there is no proposal to impose penalty under Rule 15(1) and the proposal was only under Section 78 read with Rule 15(3) which the Commissioner (A) has held was not tenable in law.

Appeal allowed by way of remand.

2019 (3) TMI 1052

Liability of service tax - freight paid by appellant to a ‘Goods Transport Agency’ - the said tax stands paid by the said transporter - Held that:- At this stage the invoices and the challans paid by the GTA agencies are perused. Perusal thereof shows that the invoices include the amount of Service Tax and the respective liability thereof stands paid by the transporter. These documents show that appellant has availed services from three transport companies M/s. Balaji Goods Carrier, D.S. Road Lines and Kailash Translines Pvt. Ltd. Respective invoices and challans corroborating the value of those invoices being inclusive of service tax paid by the appellant alongwith the freight are on record. In addition, there have been the certificates of three of these transporters acknowledging the liability qua the GTA services to have been discharged by them - the findings of adjudicating authority that the documents are insufficient to prove that the invoices were inclusive of service tax and liability thereof stands discharged though by the service provider are apparently false.

Whether the payment made against the statutory provision of rule 2 (1) (d) of service tax Rules is still acceptable? - Held that:- The issue is no more res integra as has earlier been dealt with in the case of M/s. K.V. Enterprises vs. Commissioner of Central Excise, Allahabad [2018 (2) TMI 719 - CESTAT, ALLAHABAD] wherein it has been held that once there has been no dispute regarding the payment of service tax though by the provider of GTA service the amount of service tax stands accepted by Revenue. The same cannot be demanded from the recipient of the said GTA service - demand set aside.

Extended period of limitation - penalty - Held that:- The allegation as that of suppression and misrepresentation of the facts cannot be levelled against the appellant. Resultantly, the extended period of limitation could not be invoked by the Department, nor there arises any reason for imposition of penalty. Consequently, the order confirming demand of penalty amount is liable to be set aside.

Appeal allowed - decided in favor of appellant.

2019 (3) TMI 1051

Levy of late fee - ST-3 returns have not been filed in time - Section 68 (1) of Finance Act, 1994 - Held that:- Section 68 (1) of Finance Act, 1994 requires every person providing service to any person to pay service tax at the rate specified in Section 66 ibid in such manner and within such period as may be prescribed. Further, Rule 6 (2) of Service Tax Rules, 1994 says that “the assessee shall deposit the service tax liable to be paid by him with the bank designated by Central Board of Excise and Customs for this purpose in form TR-6 or in any other manner prescribed by the Central Board of Excise and Customs” - Most importantly Rule 6 of Service Tax Rules, 1994 says that the service tax shall be paid to the credit of Central Government by the 6th day of the month and if it is to be deposited electronically through internet banking, by the 5th day of the month, immediately following the calendar month in which the service deemed to be provided as per the rules framed in this regard.

From the record, it is also apparent that the ST-3 returns for 6 April 2010 till March 2015, cause thereof, have not been filed in compliance of the afore-said Rule 6 of Service Tax Rules. Rather there has been the delay in filing as big as that of 1016 days and as minimum as that of 25 days - It is also apparent that ST-3 return for October 2012 to March 2013 has not been filed till date. This is a definite violation of the afore-said provisions and specifically violation of Section 70 of the Finance Act. Also Rule 7 (c) of Service Tax Rules, 1994 is a provision making assessee to pay late fee in case the above said time limit has not been met with by the assessee. There is no rebuttal on the part of the appellant to the afore-notice delay in submission of ST-3 returns.

The confirmation of penalty/late fee in view of Rule 7 (c) of Service Tax Rules, 1944 readwith the Section 70 of Finance Act, 1994 - appeal dismissed.

2019 (3) TMI 1050

Business Auxiliary Services - individual and not Commercial Concern - processing of the pay role of sales executives of ICICI and to work out and timely payment of emoluments of the canvassers and to monitor monthly attendance of canvassers - period from May 2004 to December 2004 - Held that:- The appellant in the instant case is an individual - Reliance placed in the case of Krishan Murari Gupta vs. Commr. of C. Ex. & S.T., Jaipur-I [2016 (6) TMI 723 - CESTAT NEW DELHI], where it was held that the appellant was a proprietary concern and not an individual. It is trite to say that a proprietary concern rendering the said service is a commercial concern.

Also, N/N. 14/04 grants exemption to individuals providing the ‘Business Auxiliary Services’.

Appeal allowed - decided in favor of appellant.

2019 (3) TMI 1049

Penalty u/s 78 of FA - Service tax on distribution of pre-paid sim cards paid before issuance of SCN - bonafide belief - Held that:- The appellant have paid the major amount of service tax amount along with interest before issuance of SCN - It is a fact that various other distributors were also not paying service tax on the commission received towards sale of prepaid sim cards in Saurashtra area, this shows the bonafide of the appellant that non payment of service tax is not with intention to evade the service tax - penalties imposed under Section 78 set aside by invoking section 80 of the Finance Act 1994 - Demand of service tax and interest and penalty under 77 is maintained - appeal allowed in part.

2019 (3) TMI 1048

Classification of services - cargo handling services or not - various activities involving Coal unloading, Coal feeding and cleaning job of coal handling plant etc - Held that:- The appellant with the help of man power carrying out various activity - From the said activities, it can be seen that the majority of activities are not classifiable as a cargo handling service. A very small part of the service unloading of coal from truck forever since pre-dominantly all the activities are out of the purview of cargo handling service, i.e. the unloading is incidental to those service. Therefore, the service is not classifiable as cargo handling service.

On the identical activity in the case of Pati Ram Sharma [2017 (3) TMI 656 - CESTAT NEW DELHI], the Tribunal held that the unloading portion is incidental to the other activities such as staking of coal, watering, etc. hence the same is not classifiable as cargo handling service.

Appeal allowed - decided in favor of appellant.

2019 (3) TMI 979

Commercial or industrial construction service - construction of Shiv Chatrapati Sports Complex - scope of Section 65(25b) of the Finance Act - whether, user of the stadium area to the extent of 1/3 rd of the total area for commercial purpose would tantamount to 'commercial or industrial construction service' as defined by Section 65 (25)(b) of the Finance Act, 1994?

Held that:- It is not even the case of the appellant that the stadium is exclusively used for commercial purpose. Relying on materials which indicate that 1/3rd of the area of the stadium can be utilized for commercial purpose, other than sports, the appellant wants us to arrive at a conclusion that construction is commercial construction service as defined under Section 65(25b) of the Finance Act, 1994. No doubt, various rates are specified for different facilities in the sports complex - it is not even the case of the appellant that sports complex is exclusively or even primarily used for commercial purpose.

The plain meaning of definition of Commercial or industrial construction service, as can be understood from the definition clause, more particularly, the clarification contained in clauses (i), (ii), (iii) is that the construction ipso facto is not leviable to service tax, but it is only when it is used, or to be used, primarily for “commerce” or “industry” or work intended for “commerce” or “industry” that service tax can be levied. Thus, it is only that construction which is to be used or primarily to be used for commerce that is subject to levy of service tax.

In the present facts, the dominant user of the sports complex is non­commercial. The definition uses the words “used or to be used primarily for commerce or industry” clearly indicating that the user is to be exclusively for commercial purpose or at least it must be primarily for commercial purpose. The definition leaves us in no manner of doubt that if the predominant user of the “sports stadium” is not commercial, then the same cannot be subjected to levy of service tax - Thus, in the facts of the present case, though an area to the extent of 1/3rd is used for commercial purpose prescribing separate rates for such user, this by itself is not sufficient to attract service tax.

Appeal dismissed.

2019 (3) TMI 978

Nature of services - Benefit of abatement under N/N. 1/2006-ST dt. 1.3.2006 - Erection, Installation or Commissioning services - Department was of the view that to avail the benefit of notification, the plant, machinery, equipment and other material should be supplied by the service provider and not for simple supply of any other material for providing service - input tax credit - Held that:- Perusal of the purchase order and invoices indicates that the appellant’s activities are not restricted only as a service provider simplicitor, for example a purchase order / invoice clearly indicate “supply and installation of power cables multi strand, Armoured copper UG, Tower implementation, shelter erection on site, supply and installation of earthing pits, supply and installation of aviation lamp for towers and so on. The SCN has also alluded to the appellant’s letter dt. 21.09.2007 wherein the appellants have reported to have informed that “major equipment” would be supplied by the customer Nortel. While this may very well be so, there is no allegation by the department that entire equipment and material has been supplied in totality by Nortel.

Whether for being considered as a composite works contract, the service provider is required to provide not only of the services required for execution of the contract but also all materials and equipments required for such execution? - Held that:- When there is supply of material involved by the service provider in execution of the product project / work contracted to him, the activity done on such service provider cannot be mere “service simplicitor” but will be a composite contract comprising of both materials and services. It really does not matter what percentage of the materials is being provided by such service provider at his cost.

However, necessary facts as to whether the appellants had actually supplied material also for the works executed by them is not forthcoming. More so because, the purchase order says “for services only”. It is seen that appellants have rendered ECIS in nature of laying foundation for tower, installation of machinery equipments etc. Though tower, machinery, equipments are provided by Nortel, the contractor would have to use other materials for rendering ECIS. The facts in such line have to be verified - matter remanded to adjudicating authority for de novo adjudication - appeal allowed by way of remand.

2019 (3) TMI 977

Refund claim - Selling of Space or Time Slot for Advertisements - Renting of Immovable Property - rejection of the said refund claims on the ground that the “Adwords” services cannot be held to be Cenvatable input services used in providing output export services - Held that:- The Appellate Authority has passed a detailed order based upon the law declared by the Larger Bench of the Tribunal - Admittedly, assessee was providing services to M/s Google Asia Pacific Pte. Ltd., Singapore, which was located outside India and the input services were being received from an altogether different legal entities i.e. M/s Google India Pvt. Ltd. Gurgaon.

Similarly, he has examined clause (d) Rule 6A of the Service Tax Rule and has correctly held that the place of provisions of the service was outside India - Commissioner (Appeals) has also referred to the Tribunal’s decision in the case of Vodafone Essar Cellular Ltd. vs. CCE [2013 (7) TMI 178 - CESTAT MUMBAI] wherein the telecom service provided to the customers of the foreign telecom service provider while using the assessee’s telecom network in India for which the consideration was paid in foreign currency, was held to be export of services inasmuch as the foreign telecom service provider, was the recipient of the services and was located outside.

There are no reasons to interfere in the above findings of Commissioner (Appeals) - appeal disposed off.

2019 (3) TMI 976

Reversal of proportionate credit - Exempt service or not? - lending of loans - Whether the Appellants are required to reverse proportionate Cenvat credit and as to whether interest etc. earned by them from cash credit, overdraft, etc. would be treated as exempted service? - Held that:- As per sub- section 4 of section 67 of Finance Act 1994, the value of taxable services has to be determined in terms of Service Tax (Determination of Value) Rules, 2006. As per Rule 6 (2) (iv) the interest on loans has to be excluded from the taxable value - In case of HDFC [2018 (9) TMI 312 - CESTAT MUMBAI] the Tribunal Mumbai has gone further ahead and have put to rest the argument that only interest part is exempted and not the other administrative charges and fees etc. are not exempted and thereby the service would not come under the purview of exempted services - the Banks are free to decide the interest after taking into consideration administrative expenses if any - there is no merit in the Appellants argument that interest is to be deducted only for the purpose of calculating the taxable value - the lending of loans on interest as an exempted service.

Thus, the services rendered by the Appellants in advancing loans etc. are exempt. Therefore, the amount of interest earned in advancing of loans needs to be taken into consideration while determining the amount to be reversed in term of Rule 6(3A)(c) of the CENVAT Credit Rules, 2004.

Levy of service tax - alleged supply of manpower to their subsidiary - Held that:- As long as it is not proved that the Appellants have received anything other than the reimbursement of wages, no Service Tax can be levied - demand do not sustain.

Cenvat Credit - credit availed on input services availed by them in respect of their branches in J & K - Held that:- The Learned Commissioner has not accepted the claim of reversal made by the Appellants only on the ground that the reversal is not made on annual basis and that the Chartered Accountant has not certified the amounts reversed. We find that this argument is not acceptable. In case the reversal was not within time it was free for the Learned Commissioner to charge interest applicable thereof - it is a fit case to remand this matter to the Commissioner for examining the issue once again.

Levy of service tax - Directors’ sitting fees - Held that:- The reimbursed expenses are not to be included in the value of the taxable services - this issue also needs to go back to the adjudicating authority for a proper appreciation of the facts of the case and to give allowance in respect of reimbursed expenses to the Appellants.

Time limitation - suppression of facts or not? - Held that:- We are not inclined to give a carpet ruling that since the Appellants are public sector undertaking suppression of facts cannot be alleged. The issue depends on case to case basis. Therefore we find that this issue also needs to be looked into again by the adjudicating authority.

Penalty - Held that:- Looking into the fact that the Appellants are public sector undertaking and that most of the issues involved were interpretative in nature we find that imposition of 100% penalty is certainly not warranted. The amounts being paid before the issue of Show Cause Notice itself, penalties can be restricted to 25%.

Appeal allowed in part and part matter on remand.

2019 (3) TMI 975

Demand of service tax - Section 11AA of the Central Excise Act - non-payment of Service Tax on Government transactions - Held that:- As per the Larger Bench decision of the Tribunal in the case of CCE vs. State Bank of Patiala [2016 (10) TMI 800 - CESTAT NEW DELHI], the appellant being agent of the RBI is not liable to Service Tax on Government business.

In the present case, the appellant in compliance of the direction of the RBI dated 04.11.2016 paid the Service Tax even before collecting the same from RBI. Further, the appellant has paid the Service Tax in compliance of Section 73A(2). Further, in the facts and circumstances of the case demanding interest under Section 75 is not tenable in law because the appellant is not liable to pay Service Tax under Section 68.

The impugned order demanding interest in terms of Section 11AA of the Central Excise Act is not sustainable in law - appeal allowed - decided in favor of appellant.

2019 (3) TMI 971

Refund of duty paid - services wholly consumed within SEZ - case of Revenue is that the Ld. Commissioner. while allowing the appeal has not seen that the condition 1(c) of notification no. 09/2009-ST dated 03/03/2009 was not complied with - Held that:- Since the service was wholly consumed within SEZ, the appellant is otherwise entitled for the refund. It is also observed that as regard the condition and documents, the Ld. Commissioner has given a categorical finding. Therefore, there is no infirmity in the order.

On the identical facts, this tribunal has taken view in the case of Zydus BSV Pharma Pvt. Ltd. Vs. CST Ahmedabad [2018 (8) TMI 961 - CESTAT AHMEDABAD] has held that the exemption by way of refund is not available to the services consumed wholly within the Special Economic Zone however as per the first para of the notification all the services provided in relation to authorized operations in a SEZ and received by SEZ unit are exempted therefore the services received by the appellant even though consumed wholly within the SEZ are exempted per se.

The appellant was rightly entitled for the refund - appeal dismissed - decided against Revenue.

2019 (3) TMI 956

Pre-deposit - appeal was dismissed by the CESTAT on account of non payment of pre-deposit sum - Held that:- Since the writ petitioner has already made the pre-deposit,which was the ground for dismissal of the appeal, and an application is pending before the CESTAT for revival of the appeal,we are of the opinion that the garnishee notice may not be given effect to till CESTAT makes adjudication of the writ petitioner’s application filed on 28th January, 2019. We are not making any observation in this order as regards maintainability of that application as that would be a matter for the Tribunal to decide.

The matter shall be listed again on 7th March, 2019.

2019 (3) TMI 955

Valuation - Commercial or Industrial Construction Service - inclusion of free supplies in assessable value - composite contracts - demand is for the period from 2005-06 to 2009-10 - Held that:- Though the appellants have received free supplies of cement and steel from the customers, the use of other materials by the appellants for execution of the Works Contract would make it a composite contract, which involves both supplies of materials and rendering of services.

The decision of M/s. Larsen & Touboro Ltd., [2015 (8) TMI 749 - SUPREME COURT] will be applicable for the period prior to 01.06.2007 and, therefore, the demand prior to 01.06.2007 cannot sustain - the decision in the case of M/s. Real Value Promoters Pvt. Ltd., [2018 (9) TMI 1149 - CESTAT CHENNAI] would be applicable for the period after 01.06.2007 for the reason the Tribunal has held that the demand under CICS cannot sustain in contracts of composite nature.

Appeal allowed - decided in favor of appellant.

2019 (3) TMI 954

Refund of service tax - rejection on the ground of time limitation - Held that:- Notification No. 40/2012 – ST dated 29.06.2012 exempts the services on which service tax is eligible under Section 66b of the said Act received by a unit allocated in Special Economic Zone (SEZ) or developer of SEZ and used for authorised operation from the whole of the service tax education cess and secondary and higher education cess leviable thereupon. The said exemption is amended to have been provided by way of refund of service tax paid specified services received by the SEZ unit or the developer of SEZ and use for the authorised operations however subject to the conditions as mentioned therein including that the claim especially be filed within one year from the end of the month in which actual payment of service tax was made by such SEZ unit or developer of SEZ to the registered service provider or such extended period as the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, shall permit.

Admittedly the refund claim was filed beyond the time limit as prescribed above. Admittedly there was no former Application seeking condonation of the said delay except the oral submission of appellant before adjudicating authority below about shortage of staff - the said plea of the appellant has duly been dealt with in the Order under challenge holding the said explanation is not satisfactory as the appellant was otherwise running business and all other operations pertaining to their business - Once the said eligible criteria has not been made with or any condition pre-requisite for the said benefit has not been made that the benefit of exemption Notification cannot be made available to the assessee.

Appeal dismissed.

2019 (3) TMI 953

Rectification of mistake - review of order - scope of rectification - Held that:- The scope of the rectification of the mistakes application is very limited. Only mistakes which are apparent on the face of the record and which do not require long drawn process of arguments by both sides, may be rectified. It is well settled law that applicant cannot seek review of the order in the guise of rectification of mistake - ROM application dismissed.

2019 (3) TMI 952

Port Services - these services were demanded the same was recovered by LDT i.e. Light displacement tonnage which is on account of tonnage not brought in comparison to the agreed tonnage - Held that:- From the nature of amount collected by the appellant it is clear that the said amount relates to the compensation paid by the ship breaker on account of failing to fulfill the contracted LDT. In these circumstances, it cannot be said that the said charges related to provision of any service - Prior to 1.7.2003 the levy under the head of Port Service was limited to the services provided in Major Ports. None of the ports administered by the Gujarat Maritime Board are major ports. In these circumstances, there cannot be any levy under the head of Port Service in respect of the services allegedly provided on minor ports prior to 01.07.2003 - demand do not sustain - appeal allowed - decided in favor of appellant.

2019 (3) TMI 951

Refund of CENVAT Credit - input services - insurance auxiliary service - credit in respect of SEZ unit - October, 2010 to December, 2010 - Rule 5 of Cenvat Credit Rules, 2004 - Held that:- The issue is covered by the decision of this Tribunal in the respondent’s own case CC, CE & ST, NOIDA VERSUS M/S HCL TECHNOLOGIES LTD. [2014 (1) TMI 261 - CESTAT NEW DELHI], where it was held that even if appellant was not eligible for refund under Notification No. 9/2009, dated 3-3-2009, the appellants were certainly eligible for refund under Section 11B of the Act - credit allowed.

Medical insurance services - Held that:- There are different views on the issue - the respondent has failed to produce mandate of the Employees State Insurance Act, 1948, in that circumstance, we are not in agreement of the decision of this Tribunal in the case of KPMG [2013 (4) TMI 493 - CESTAT NEW DELHI] - The Registry is directed to place the matter before the Hon’ble President to constitute lager bench of this Tribunal to resolve the issue.

2019 (3) TMI 1047

Classification of goods - Conveyor - Whether the CESTAT was justified in holding that though the Chapter Heading 8431 is excluded in Sr.No.2 of the Table to Rule 57 Q (1) of the Central Excise Rules, 1944, parts of Conveyer is covered under Sr.No.5 of the Table? - Circular No.276/110/96-TRU dated 02.12.1996.

Held that:- The Tribunal should have referred to the Rule as prevailing and after the Circular was issued. Whether that Circular covers the goods under the amended Rule should have been clearly noted by the Tribunal. The Tribunal, for the purposes of upholding the availment, referred to goods such as conveyor classifiable under 8424 and if that is covered under Sr.No.2 and particularly, the non-excluded category, then, to that extent, the Tribunal may be right. However, when it was aware that the Table at Sr.No.2 clearly read as excluding goods falling under Heading 84.29 to 84.37, then, it should have also excluded the parts, accessories of these goods from the availment of Modvat Credit. We find that the reading of the Sr.No.5 by the Tribunal was improper and correct. The Circular would not enable the assessee in this case to avail of the credit.

Though the Circular may say that the scope of this entry is not restricted to the components, spares and used under Chapters 82, 84, 85 or 90 but covers all components, spares and accessories of the specified goods irrespective of their classification, then, to that extent and without noticing the language of Table No.5, and only with the aid of this Circular, the Tribunal could not have allowed the assessee to avail the Modvat Credit.

The ultimate conclusion of the Tribunal should not be entirely set aside. It is set aside only to the extent pertaining to the goods covered by chapter heading 8431 and its part (parts of conveyor) - Rest of the order of the Tribunal is upheld - appeal allowed in part.

2019 (3) TMI 1046

CENVAT Credit - input service distribution - credit denied on the basis of invoices issued by input service distributor (ISD) who have been passing the credit of service tax paid on services which have no relation with the manufacture of soap - Held that:- The relevant statutory provisions are Rule 7 of CCR which prescribes the manner of dispute of credit by input service distributor and Rule 7A of CCR which talks about the recovery of cenvat credit wrongly taken or erroneously refunded. From Rule 7 and Rule 7A of CCR, it is clear that the input service distributor shall distribute the cenvat credit in respect of service tax paid on the input services to its manufacturing units provided the credit distributed does not exceed the amount of service tax paid and that the credit of service tax attributable to a particular unit shall be distributed only to that unit. The credit shall be allowed on the basis of invoice/ Bill/ challan issued by an office of premise of said provider of output service.

The provisions makes it clear that the credit if distributed by ISD if is found ineligible credit, the same can be reversed by the ISD itself. If the reversal is prior utilisation of credit, no question of interest and penalty at all arises - In the present case, it is an acknowledged fact that out of the total proposed credit of ₹ 56,70,178/- the amount of ₹ 47,11,370/- has already been reversed and that all other demands have been dropped except for the demand of 1st SCN for reversal of credit of ₹ 44,33,290/-. It becomes clear that the amount reversed satisfy the demand even of SCN dated 15.01.2015 alleging the construction services to be ineligible input - thus Department was not justified for confirming the said demand.

Demand of interest and penalty - Held that:- It is apparent from the record that entire credit was reversed even before the issuance of SCN. In view of Rule 14 of CCR as discussed above and even in view of Section 11AC of Central Excise Act, 1944, the question of demanding interest at the appropriate and the imposition of proportionate penalty does not also arises.

Appeal allowed - decided in favor of appellant.

2019 (3) TMI 1045

Clandestine removal - unaccounted stock of finished goods - truck loaded with detergent cakes of M/s. Maharaja Soaps Industry Pvt. Ltd. present in the premises of M/s. Maharaja Industries without any duty paying documents - allegation on the basis of Mahazar dated 29.3.2011 - admissible evidence or not - Held that:- The entire case has been made by the department on the basis of Mahazar dated 29.3.2011 which is purely inadmissible evidence. Further, the Department has not recorded any statement of Mr. R. Prakash, Manager of M/s. Maharaja Industries. Further, the goods which were loaded in the truck parked inside the premises of the appellant had not been removed from the factory and in the absence of removal of goods from the factory the question of payment of duty or issue of invoice does not arise. Further, the reasons given by the appellant for not updating the daily stock account on account of the accident of Mr. Shashikumar who was maintaining the record was not verified by the Department.

It is a settled law that power of confiscation does not extend to goods still inside the factory premises and not cleared without payment of duty - it has been held in various cases that confiscation of the goods and imposition of penalty is bad if the goods are not cleared without payment of duty and are still inside the factory - in the absence of any evidence of manufacture and removal of the goods from the factory of M/s. Maharaja Soaps Industries Pvt Ltd without payment of duty, the order of confiscation of goods and penalty is not sustainable.

Redemption fine - penalty - Held that:- There is no evidence has been brought on record by the Revenue that the Proprietor has deliberately used the vehicle for clandestine removal of the goods. Further, there is no evidence either of the owner or driver of the vehicle having knowledge of the alleged removal of goods without payment of duty and the liability of the said goods for confiscation - In the absence of such cogent evidence, the imposition of redemption fine and penalty is not sustainable.

Appeal allowed - decided in favor of appellant.

2019 (3) TMI 1044

Penalty u/s 11AC - SSI Exemption - threshold limit crossed - on the value exceeding the SSI exemption limit, duty was not discharged - Held that:- there is no dispute for the reason that SSI exemption value has been exceeded by the appellant. Accordingly, on the value exceeding the SSI exemption limit, the appellant is liable for excise duty.

Quantum of penalty - Held that:- The fact about exceeding the value of exemption limit has not been disclosed by the appellant. Moreover, the duty demand was confirmed invoking proviso to Section 11A(1) - It is settled law, as the Hon'ble Supreme Court decision in the case of Dharmendra Textiles Processors [2008 (9) TMI 52 - SUPREME COURT] that penalty imposed under Section 11AC cannot be reduced being the mandatory penalty - thus only on the ground that duty was paid before issue of show cause notice, penalty imposed under Section 11AC cannot be reduced or waived.

Appeal dismissed - decided against appellant.

2019 (3) TMI 1043

SSI exemption - use of brand name - use of brand name ‘Shukla’ in respect of medication equipment exported - N/N. 08/2003 - CENVAT Credit - Held that:- The appellant have denied that they have used brand name ‘Shukla’ and there is no evidence to support the Revenue’s claim that the appellants are using the brand name ‘Shukla’.

It is seen the appellants are clearing waste and scrap in the domestic market and the value of waste and scrap cleared by them in the domestic area was within the limit prescribed under notification 08/2003-CE. Consequently, it is apparent that the appellants were entitled for the notification 08/2003-CE in respect of waste and scrap cleared by them - Thus, it is apparent that the Revenue has failed to make case that appellants are not entitled to any value based exemption notification and consequently, not entitled to avail 100% CENVAT Credit of duty paid on capital goods in the first year of receipt of goods.

Appeal allowed - decided in favor of appellant.

2019 (3) TMI 1042

CENVAT Credit - input - HR Plates, HR Coils, SS Plates, SS Sheets, SS Coils, MS Channels, HB/MS/SS pipes, etc. - manufacturing activity carried out or not - N/N. 67/95-CE - sub section 1(A) of section 5A of CEA - principles of natural justice - Held that:- It is seen that neither OIO nor OIA examines the decisions relied upon - It is seen that the respondents had produced Chartered Engineer’s certificate dated 22/11/2016 which certify that the impugned goods were used to manufacture tank, steeping vat and machinery.

It is seen that the Rule 2(k) of Cenvat Credit Rules, 2004 only excludes from its ambit cement, angles, channels, Centrally Twisted Deform bar (CTD) or Thermo Mechanically Treated bar (TMT) and other items used for construction of factory shed, building or laying of foundation or making of structures for support of capital goods - It is apparent that Rule 2(k) does not exclude HR Coils, SS Coils, SS Sheets, etc. used in manufacture of tanks, steeping vats, etc which are in the nature of machinery and not in the nature of factory shed, building or foundations or structures for capital goods.

Credit allowed - Appeal dismissed - decided against Revenue.

2019 (3) TMI 1041

Interest on delayed refund - section 11B and section 11BB of CEA - interest not granted on the ground that the refund has been sanctioned under directions of Hon’ble High Court within the time limit prescribed by High Court and thus, no interest need to be sanctioned - Held that:- The appellant had filed a refund claim on 12/10/2001 - Hon’ble Apex Court in the case of Ranbaxy Laboratories Ltd. [2011 (10) TMI 16 - SUPREME COURT OF INDIA] has examined the provisions of section 11B and section 11BB along with the instruction issued by CBEC at the material time and held that the liability of the revenue to pay interest under Section 11BB of the Act commences from the date of expiry of three months from the date of receipt of application for refund under Section 11B(1) of the Act and not on the expiry of the said period from the date on which order of refund is made.

The relevant date for the purpose of calculation of refund would be the date of filing of refund claim - the appellants are entitled to interest on the said amount of refund after the expiry of 3 months from the date of receipt of the application for refund - appeal allowed - decided in favor of appellant.

2019 (3) TMI 1040

SSI Exemption - removal of brass scrap by the appellants - penalty u/r 25 of CER, 2002 - Held that:- There is no illegality as they have cleared brass scrap under the cover of challans declaring it under N/N. 83/94-CE and 84/94-CE dated 11.04.1994 - The case that whether M/s. Senor Metal Pvt. Limited is eligible for SSI exemption under N/N. 8/2003-CE, the eligibility of said notification is concerned with M/s. Senor Metal Pvt. Limited alone.

The removal of brass scrap under N/N. 83/94-CE and 84/94-CE was correctly availed by the appellant for the reason that their final product i.e. brass wire was covered under SSI N/N. 8/2003-CE. Therefore, there is absolutely no mistake or violation of any provision on the part of the appellant.

There is no reason that why appellants are liable to penalty under Rule 25 - appeal allowed - decided in favor of appellant.

2019 (3) TMI 974

CENVAT Credit of differential duty - Refund - price increase on goods stock transferred during the quarter April 2008 to June 2008 - closure of factory - Held that:- The accumulation of CENVAT Credit in the CENVAT account is done over a period of time by a manufacturer by taking Credit of the duty suffered on inputs, capital goods and eligible input services. Thus, this Credit balance is built up and assiduously gathered over time. In the normal course, this Credit would have been utilized towards discharge of duty liability on goods that may be manufactured and cleared or taxable services provided/received. The closure of the factory should not be allowed to snatch away that amount from the manufacturer.

The availment of CENVAT Credit and its utilization is akin to a fundamental right in the area of indirect taxation. It has been time and again reiterated that CENVAT Credit is as good as a cash balance, to be utilized for the discharge of duty liability in lieu of actual cash. If a factory of a manufacturer has closed down for no fault of theirs, the unutilized Credit, which rightfully belongs to the manufacturer, cannot be denied to them when claimed by way of refund.

The issue in dispute is no longer res integra and it has now been conclusively settled by both the Hon’ble High Court and the Hon’ble Apex Court that pursuant to closure of a factory, the manufacturer can avail refund claim for the unutilized CENVAT Credit lying in the balance.

Appeal allowed - decided in favor of appellant.

2019 (3) TMI 973

Restriction of CENVAT Credit - N/N. 14/97-CE(NT) dated 03.05.1997 - Restriction on credit in respect of LSHS - case of respondent is that the notification restricts the credit in respect of LSHS to the extent of 10% however the impugned order allows the cenvat credit of entire 15% to the respondent - Held that:- Notification 14/97-CE (NT) amends Notification 5/94-CE(NT) by introducing a proviso which restricts the availability of credit on certain fuel oils like LSHS to 10% ad valorum - In the present case it is not disputed that the item under dispute i.e. Gas Oil is also LSHS - In the present case, the respondent had voluntarily paid duty on the Gas oil consumed captively for generation of electricity. In terms of the decision of Hon’ble Apex Court in case of Indian Oil Corporation Ltd. (supra), the appellants were not liable to pay duty on the said material consumed captively. The respondent had paid duty on such captive clearances. The said payment of duty by the respondent was not disputed by them and consequently the said assessment has attained finality.

Whether the appellant are entitled to take credit of the entire duty of 15% paid by them as credit when Notification No. 14/1997-CE (NT) restricts the same to 10%? - Held that:- In the plain and simple language of the notification and law, it is clear that the credit is restricted to 10%. Ld. Counsel has sought to invoke the reasons behind restricting the credit to 10% as enumerated in the trade notice number 56/1997-(S). It is seen that the notification 14/97-CE(NT) does not specify the intention behind the same. It merely restricts the credit to 10% - it cannot be held that the appellants are entitled to credit @ 15%, the plain and simple language of the Notification does not allow any scope of any interpretation.

Appeal dismissed - decided against appellant.

2019 (3) TMI 972

Clandestine removal - leather footwear - bogus transactions - admissibility on the statements - extended period of limitation - cum-duty benefit - penalties - Held that:- The real actors behind the both the bogus co-operative societies were Shri Ashok Mane and Shri Ramchandra Mane the Directors of SRSPL. Further the fact of supply of goods by Appellant to various shop owners in the name and against the bills of Cooperative Societies has been admitted by various shop owners in their statements - The issue in respect of admissibility of the statements recorded under Section 14 of Central Excise Act, 1944 is well settled and the depositions made in the statements cannot be discarded - The shop owners have admitted receiving the goods from Appellant and invoice from the society, and such admission is itself enough to hold that the goods were manufactured and cleared by the appellants clandestinely.

Once revenue is able to make allegation of clandestine clearance on the basis of records and circumstantial evidence such as statements of the person concerned, it has discharged its burden and it is for the Appellant to show that charge of clandestine clearance is not true in their case.

From the records of cross examination it is quite evident that the shoes were supplied to these shop owners through one Mr Raju and were the goods supplied were from the M/s Start Rite Shoes. Most of the dealers have even during the cross examination before the adjudicating authority, with the pre43 ponderence of probability admitted that shoes received by them were manufactured and cleared by M/s Start Rite Shoes against the invoices issued by the cooperative society.

Extended period of limitation - Held that:- Since the issue is in respect of duty evasion by committing fraud etc., the extended period of limitation under proviso to Section 11A(1) will be applicable in the present case.

Cum duty value benefit - Held that:- There are no merits in that submission as the issue is one involving fraud and clandestine clearance.

Penalties - Held that:- The penalty imposed by the adjudicating authority under rule 173Q of the erstwhile Central Excise Rules, 1944 is upheld - Shri Ashok Mane was responsible for causing the duty evasion by resorting to the fraud through fictitious cooperative societies and the penalty on him is upheld.

Appeal dismissed - decided against appellant.

2019 (3) TMI 970

CENVAT Credit - marketing and festival expenses - marketing and sales promotion expenses towards hire of mobile vans - Held that:- The issue of marketing and festival services is covered in favour of the appellant by the ruling of Toyota [2011 (3) TMI 1373 - KARNATAKA HIGH COURT] and accordingly the same is held to be allowable.

Marketing and sales promotion expenses towards hire of mobile vans - Held that:- Admittedly appellant have used the motor vans for business purpose/ sales promotion/ marketing, and accordingly they have taken entire cenvat credit of ₹ 1,38,966/- - credit allowed.

So far the charging of interest is concerned under Rule 14 of CCR, the appellant shall be liable for interest only on such portion of cenvat credit which they have utilized - this issue is remanded to the Adjudicating Authority who shall calculate the interest payable under Rule 14.

Appeal allowed by way of remand.

2019 (3) TMI 950

CENVAT Credit - input services - GTA service - place of removal - Held that:- The Hon’ble Supreme Court in the case of Ultra Tech Cement Ltd. [2019 (2) TMI 1487 - CESTAT AHMEDABAD] has held that credit is eligible from the place of removal upto the buyer’s premises. However, in the case of Roofit Industries Ltd. [2015 (4) TMI 857 - SUPREME COURT], the Hon’ble Apex Court has held that when the sale is on FOR basis, all the charges / cost have to be included in the assessable value for the payment of central excise duty. Thus, in such cases, when the sale takes at buyer’s premises, the place of removal is the buyer’s premises - Therefore, it is necessary to determine the place of removal to consider the eligibility of credit of service tax paid on freight charges upto the buyer’s premises. For this purpose, I deem it fit to remand the matter to the adjudicating authority who shall look into the issue of eligibility of credit on GTA service after determining the place of removal - matter on remand.

CENVAT Credit - works contract service - Held that:- The mere allegation in the Show Cause Notice is that the input service is not eligible for credit. The period involved is prior to 1.4.2011. The invoice produced by the ld. Counsel also shows that the period is prior to 1.4.2011. The input services for setting up of factory / premises is eligible during the period prior to 14..2011 - credit allowed.

Appeal allowed in part and part matter on remand.

2019 (3) TMI 949

CENVAT Credit - removal of capital goods “as such” to their other units from June 2006 to December 2007 - time limitation - Held that:- The present proceedings are surely hit by limitation. Having issued an earlier SCN on 19.02.2007 covering the period February 2006 to June 2006 the subsequent SCN should have been issued within the normal period and without invocation of extended period of demand - the present SCN issued only on 25.08.2009 for the period June 2006 to December 2007 only is surely hit by limitation - appeal allowed - decided in favor of appellant.

2019 (3) TMI 948

Refund of excess payment of duty - unjust enrichment - amount credited to Consumer Welfare Fund - Section 11B of Central Excise Act, 1944 - Held that:- The background of the refund claim is that the appellant though paid excess duty but the rate of duty was revised downward by notification. Only due to the reason that system was not updated, the duty was paid on the higher rate, the appellant though shown the higher duty in the invoices, subsequently, the excess paid duty was adjusted and the same was given reduction in the subsequent updated payment recovered from buyers of the goods. To this effect, the appellant have made a joint certificate between the appellant and the buyers of the goods wherein it is certified that the excess duty paid shows recoverable in the invoice as adjusted in the subsequent payment from the customers. Therefore with this evidence, it is clear that incidence was not passed on to the ultimate buyer of the goods.

It is clear that incidence was not passed on to the ultimate buyer of the goods. It is also observed that the appellant have obtained a Chartered Accountant certificates wherein it was certified that the amount of refund amount has been shown as amount “Receivable/Recoverable from the Revenue that means the said amount was not otherwise passed on in any manner either to the buyer or to any other persons.

The appellant have produced ample evidence to establish that the incidence of duty has not been passed on, whereas both the lower authorities have only discarded the same without any contrary evidence. To discard such evidence either the Revenue should establish that the evidence are not appropriate or incorrect or false or the counter evidence to discard the appellant’s evidence should have been produced which both the lower authority have failed to do so, therefore, there is no reason to not accept the evidence such as Joint Certificates of the appellant and buyer and CA Certificate.

The sanctioned amount is not liable to be credited into Consumer Welfare Fund. Since, on the fact, itself, it is clear that the incidence of duty has not been passed on to any other person, we need not be going into various judgments relied upon by the appellant - appeal allowed - decided in favor of appellant.

2019 (3) TMI 947

Rectification of mistake - seal of the packing machine was broken - Held that:- The applicant has been contending since beginning that initially on 03-03-2010 the packing machine was sealed at 4-5 different points and only one seal got loose and still the machine could not have been used without breaking seals of all the points. The Applicant has requested for verifying the fact by getting the machine checked/examined, as the said machine is still lying in a room sealed by the officers. This issue goes to the root of the matter, and requires verification for the ends of justice - There have been miscarriage of justice, as the Adjudicating Authority have used material collected behind the back, without confronting the appellant.

The Final Order dated 07.11.2017 is recalled - ROM is allowed - Appeal is allowed by way of remand.

2019 (3) TMI 946

SSI Exemption - use of brand name of other person - ‘Sudarshan’ - N/N. 08/03-CE dated 01.03.2003 - Held that:- The lower authorities have not properly considered the verification report, invoice and relevant documents. As regard 5 machines which appellant had claimed that the same is not bearing the brand name of ‘Sudarshan’ i.e. of another person, whereas 5 machines are bearing name of ‘Mohansons’ of their own, therefore, on these 5 machines no demand should have been confirmed. However, both the authorities have not properly verified these documents and given proper findings, therefore this needs to be re-considered by the adjudicating authority and demand should be re-quantified - matter on remand.

Cum duty benefit - Held that:- It is settled law as held in Hon’ble Supreme Court judgment in case of M/s Maruti Udyog Ltd [2002 (2) TMI 101 - SUPREME COURT], whenever demand is confirmed, the cum duty should be extended to the assessee, accordingly, we hold that appellant is entitled for the cum duty benefit.

Penalty u/s 11AC - Held that:- Since both the lower authorities have not considered the option of 25% penalty as provided under proviso to Section 11AC and the same can be re-considered.

Penalty on partner - Held that:- Since the partnership firm has been penalised, no separate penalty can be imposed on the partner as held by Hon’ble Gujarat High Court in case of M/s Pravin N. Shah Vs. CESTAT [2012 (7) TMI 850 - GUJARAT HIGH COURT], therefore, penalty on partner is set aside.

Appeal allowed in part and part matter on remand.

2019 (3) TMI 945

CENVAT Credit - duty paying documents - credit availed on supplementary invoices issued by IOCL, Trombay, Mumbai with reference to the original invoices on which the credit was already availed - case of the department is that, there is no provision in Cenvat Credit Rules to issue supplementary invoices in respect of inputs cleared as such - Time Limitation - Held that:- The appellant initially availed the credit on the original invoices and the supplementary invoices, corresponding to the said original invoices on which the credit was taken, were issued by their own another unit. There is no dispute about the payment of duty on which the Cenvat credit was taken.

It is also a fact that appellant is a public sector undertaking therefore, there is no question of malafide intention to evade payment of duty and wrong availment of credit. Accordingly, extended period of limitation cannot be invoked as provided under Section 11A of Central Excise Act, 1944. Accordingly, the demand is clearly time-barred, and is set aside.

Appeal allowed - decided in favor of appellant.

2019 (3) TMI 944

Supply of Expansion Bellow which is used as joints for the pipes from the source of water to water treatment plant - N/N. 3/2004-CE dated 08.01.2004 - case of the department is that since the Expansion Bellow is not part of water treatment plant nor it is pipe and the same is used for jointing the pipes while laying the pipeline, therefore it is not covered under the said notification - Held that:- There is no dispute between the assessee and the Revenue inasmuch as the goods namely Expansion Bellow was used as joints while laying pipeline from source of water to water treatment plant.

From the notification, it is clear that either the goods should be water treatment plant and its instrument, parts apparatus and appliances, auxiliary equipment and components/parts of water treatment plant and as per the description at serial No. 2, pipelines for delivery of water from its source to the plant. However, in the present case, Expansion Bellow is not part of water treatment plant and therefore, it is not covered in description serial No. 1 and it is also not a pipe which can be covered under serial No. 2 - thus, the Expansion Bellow which is neither part of the water treatment plant nor it a pipe, it is therefore, not eligible for exemption.

Penalty - Held that:- Since the issue relates to interpretation of the notification, there is no malafide on the part of the appellant - penalty set aside.

Benefit of cum-duty price - Held that:- Since exemption has been denied, the duty should be recomputed considering the cum-duty benefit as held by the Hon'ble Supreme Court in the case of CCE, Delhi vs. Maruti Udyog Limited [2002 (2) TMI 101 - SUPREME COURT]. Therefore, the Adjudicating Authority should re-calculate the duty by considering the benefit of cum-duty.

Appeal allowed in part and part matter on remand.

2019 (3) TMI 943

Refund of accumulated CENVAT Credit - rectified spirit - case of Revenue is that rectified spirit was non-dutiable product and since appellant was not manufacturing any dutiable final product, the said Cenvat credit was not admissible to them - Held that:- The matter is now settled in favour of the appellant in the case of M/S. SHARDA CERAMICS PVT. LTD. VERSUS C.C.E., JODHPUR [2018 (8) TMI 407 - CESTAT ALLAHABAD], where it was held that appellants were manufacturing excisable commodity and therefore they were entitled to avail Cenvat credit which was reversed by the Central Excise officers.

The appellant is entitled to refund of the balance amount of ₹ 21,51,812/- - the Adjudicating Authority is directed to refund the same alongwith interest, w.e.f. the date of adjustment i.e. 11 July, 2016 till the date of disbursement - appeal allowed.

2019 (3) TMI 1022

Revision of assessment - Section 27 of the TNVAT Act, 2006 - principles of natural justice - Held that:- It is an undisputed fact that the main reason for revision of assessment under Section 27 of the 'Act' by the respondents is that the other end seller has not reported to the respondent the sales made to the second respondent. As seen from the assessment order and as seen from the reply, dated 26.07.2016 sent by the petitioner to the pre revision notice sent by the second respondent, it was made clear that the purchases made by the petitioner from the other end seller have been duly reported to the second respondent by the petitioner without any suppression.

In the case of Assistant Commissioner (CT), Presently Thiruverkadu Assessment Circle, Kolathur, Chennai Vs. Infiniti Wholesale Limited [2016 (9) TMI 1431 - MADRAS HIGH COURT], is squarely applicable for the facts of the instant case.

This Court is of the considered view that the respondents have violated the principles of natural justice by not considering the objections raised by the petitioner in the reply dated 26.07.2016 - the matter is remanded back to the second respondent for fresh consideration - petition allowed by way of remand.

2019 (3) TMI 1021

Validity of assessment order - compounded rate of tax - Section 8(1)(a) of the Tamil Nadu Value Added Tax Act, 2006 - principles of natural justice - Held that:- In the instant case, no personal hearing was granted to the petitioner, eventhough a specific request was made by the petitioner, in his reply dated 04.01.2016. It is well settled that personal hearing will have to be granted to the assessee under the Tamil Nadu Value Added Tax Act, 2006 as held by the internal circular bearing circular No.7 of 2013 of the Principal Commissioner of Commercial Tax.

The Hon'ble Division Bench of this Court has held in the case of G.V.Cotton Mills (P) Limited Vs. The Assistant Commissioner (CT) [2018 (3) TMI 1617 - MADRAS HIGH COURT] has held that even though personal hearing is not sought for by the assessee, it is mandatory on the part of the respondent to grant a personal hearing.

The matter is remanded back to the respondent for fresh consideration and the respondent shall pass final orders, after giving sufficient opportunity of hearing to the petitioner - petition allowed by way of remand.

2019 (3) TMI 1020

Input tax credit - denied for the reason of an inadvertent error of the supplier in issuing invoices in Form-8B - Held that:- Form-8B indicates that there can be no input tax credit available, insofar as the purchases made under the said invoice, which is deemed to be one of last sale to the consumer. In such circumstances, there is no infirmity, insofar as the Tribunal having reversed the order of the first Appellate Authority and found the input tax credit claimed to be not sustainable - decided against assessee.

Levy of tax - x-ray films - Held that:- Taking of X-rays is a part of the services offered in a hospital and is an activity to diagnose the specific ailment of the patient. There is no sale discernible nor can the transfer of such X-ray films in the course of para-medical services offered be separated from the composite service offered in an hospital - tax cannot be levied - decided in favor of assessee.

Decided partly in favor of assessee and partly in favor of Revenue.

2019 (3) TMI 1019

Levy of sales tax - drugs, implants and consumables used in the treatment of an inpatient in a hospital - KVAT Act - Whether hospitals, which carry out inpatient and outpatient treatments and in the course of such treatments administer drugs, carries out invasive surgeries to make implants and uses consumables in the various medical procedures, are to be registered under the KVAT Act? - Whether the sales carried out in the pharmacies to outpatients can be categorised as sale of goods liable to tax under the KVAT Act?

Held that:- The minute consultation with the Doctor ends as far as an out-patient is concerned, he is free to decide whether he purchases the medicine or not. The service of medical care ceases with the consultation and the further sale made to an outpatient of any goods from the pharmacy has the connotation of sale of goods. The supply of medicines from the pharmacy to an out-patient is mere sale of goods and not a supply in the course of medical service. It is at best a sale in pursuance of a service, ie: the consultation - the hospitals with Pharmacies have to be necessarily registered under the KVAT Act and they also have to satisfy the liability to tax under the respective enactments in the various periods, on the medicines, consumables or implants supplied to an out-patient, as distinguished from an administration of drug or use of consumables or implants carried out within the hospital premises itself, subject however to the purchase having been made from a compounded dealer, who has already paid tax on the MRP.

The hospitals are to be registered under the sales tax enactment, whether they have a Pharmacy catering to out-patients or not. The hospitals who transfer or supply goods in the course of treatment are exempted from the levy of sales tax for such goods; the transfer being not in the course of sale of goods exigible to tax. The sale of any drug, implant or consumable from the Pharmacy to an out-patient which is not administered, used or implanted within the premises of the hospital would be taxable as sale of goods.

Insofar as oxygen and nitrous oxide are concerned, the same are administered for providing respiratory therapy and as an anaesthetic agent respectively, which is provided within the hospital itself and to inpatients as also at times outpatients. The administration of the oxygen and nitrous oxide is definitely in the course of treatment and it cannot be said to be a sale of goods under the KVAT Act, since it is part of the service rendered in a hospital. X-Rays too when taken of the inpatients and outpatients are taken within the hospital and they cannot be treated as sale of goods, since it cannot be divided into a sale and service; the dominant intention being of provision of treatment, or diagnosis of ailment of the patients.

Application disposed off.

2019 (3) TMI 1017

Levy of tax - KVAT Act - whether the medicines supplied, implants carried out, the consumables used and surgical tools exclusively used in a particular procedure, as part of treatment of patients in a hospital, the price of which is recovered by way of bills from the patients are ' sale of goods' as contemplated by the legislation levying such tax? - Held that:- The three contracts - works contract, hire purchase contract and catering contract - along with other transactions (with which we are not concerned in the present case) were deemed to be sales under Article 366(29A) by an amendment to the Constitution. However, the position even after the said amendment, with respect to transactions of a composite nature based on an indivisible contract, were not covered under the specific clauses (a) to (f). The position as to other composite contracts remained the same and there could be no separation of a composite, indivisible transaction so as to tax the transfer of goods, if at all there is such a transfer in the course of such composite contract or the service rendered - The sale element in composite, inseparable contracts which are covered by the six sub-clauses of Article 366(29A) can be separated and subject to sales tax. With respect to all other composite transactions, the State would not have such power to distinctly tax the transfer of goods forming part of a composite contract or a rendering of service.

With respect to hospital services, we cannot but observe that the sale of drugs, implants and other consumables are a part of the medical treatment rendered. There is no identity of the medicines or consumables or implants, as it does not lie in the mind or mouth of the patient to identify the drugs to be administered in the course of the treatment. Though a patient on his volition could refuse to take a particular drug, he cannot demand, as a matter of right, that a drug be administered to him in the course of the medical treatment. A demand of that nature will not be complied with by either a medical practitioner or a hospital, the latter of whom dispenses medicines only in accordance with the directions of the attending Physician or Surgeon - The cost of the implants, consumables or the drugs is irrelevant insofar as deciding what is the dominant nature of the transaction or service rendered to the patient in a hospital, which, without any doubt, is the therapeutic treatment rendered. The patient has no control or say, has limited control, on the procedures taken in the course of the treatment, the drugs administered and the consumables used.

The decisions in Malankara Orthodox Syrian Church [2002 (12) TMI 587 - KERALA HIGH COURT] and Comtrust Eye Hospital, [2006 (10) TMI 413 - KERALA HIGH COURT] do not propound and declare the correct position in law.

We direct the Registry to place the matters before the Division Bench for consideration of the individual cases.

2019 (3) TMI 969

Validity of Maharashtra Tax on the Entry of Goods into Local Areas Act, 2002 - case of petitioner is that the eventual fiscal burden may differ, despite the intention to equalise the same, since no set-off is granted in respect of tax paid outside the State - scope of Local Area.

Held that:- The issue or point raised by petitioners in these petitions is squarely covered by the recent judgment of the Supreme Court delivered by nine judges, in the case of JINDAL STAINLESS LTD. AND ANOTHER VERSUS STATE OF HARYANA AND OTHERS [2006 (4) TMI 120 - SUPREME COURT], where it was clarified that taxation does not amount to restriction on trade, commerce and intercourse. The levy of tax which is non discriminatory would not constitute an infraction of Article 301 - it was finally concluded that imposition of entry tax under Entry 52 of the State list would not violate Article 301 or 304(b) of the Constitution.

The object and purpose of the Maharashtra Entry Tax Act is not to discriminate against goods from outside the State but instead is to bring about economic unity and parity by doing away with the discrimination visited by virtue of differing rates of tax in different States - There is no Constitutional burden on the State to equalize all inequalities of burden on goods even if such inequalities do not result from the State's taxation. No inequality results from any action /legislation attributable to the State of Maharashtra. Merely since the State of Maharashtra has allowed reduction for Central Sales Tax in the Maharashtra Tax on Entry of Motor Vehicle into Local Areas Act, 1987, does not mean that it is obligated to give a similar reduction for entry tax under the Maharashtra Entry Tax Act. Notably, other States also do not give any reduction for Central Sales Tax while levying entry tax. Therefore, local goods exported from Maharashtra to other States, which also bear Central Sales Tax, would incur a higher tax burden than just the VAT of the State to which they are exported.

Under Entry 52 of List II of Seventh Schedule appended to the constitution, the State is empowered to levy and collect entry tax on the entry of the goods into local areas. Further, the imposition of tax on sale or purchase of goods is permissible under entry 54 of List II. Entry 52 and Entry 54 are two separate fields of legislations. Incidence of tax under these two entries is also independent. Merely because the rate of tax under both the taxing statutes is the same, it cannot be said that the state is levying VAT in the garb of Entry Tax. The State having taken a conscious decision to avoid discrimination has decided not to levy Entry tax in excess of VAT applicable on similar goods.

The Act in no way makes any discrimination against the local purchases and importers much less any hostile discrimination. The importers are given input tax credit of Entry Tax Paid to the Government against the VAT liability and balance is payable or refundable as the case may be. Hence tax burden of Entry Tax not borne by the dealers who purchase locally within the State who get set off of the input tax credit u/s 48 r/w 52, is balanced in case of persons who suffer entry tax by making provisions in the MVAT Act that the entry tax can be adjusted against the MVAT liability thus in effect the dealers who import from other State or Country are at par with local manufacturers who purchase from local dealers so far as burden of tax is concerned since in effect there is no entry tax at all when rebate or set off or ITC is granted for the same - Thus the rebate is provided in second proviso of the Act that the tax payable by the importer under this Act shall be reduced by amount of tax paid, if any, under the law relating to General Sales Tax in force in the UT or the State in which the goods are purchased by the importer in effect takes care of the ground that the dealers who import goods are discriminated vis a vis the dealer who procure the goods from local sources.

It is not a correct proposition of law that the scope of Entry in the Lists to the Constitution would be governed by the consistent legislative practice that has been followed prior to the enactment of the Constitution of India. The Legislative practice to enactment of Constitution and Government of India Act, 1935 framed by the then British Parliament has no binding limitation and practice under the Constitution of India in independent India. The Legislation is not ultra vires in any manner - the Constitutional validity of the Maharashtra Entry Tax Act is upheld.

Petition dismissed.

2019 (3) TMI 968

Interest on delayed refund - Relevant date for calculation of interest - Held that:- The controversy involved in the present case is no longer res integra, inasmuch as the same stands decided by the above referred decision of this court in the case of M/s Syngenta Crop Protection Pvt. Ltd. v. State of Gujarat [2018 (4) TMI 1669 - GUJARAT HIGH COURT]. In the said case this court, relied upon an earlier decision of this court in the case of State of Gujarat v. Doshi Printing Press [2015 (3) TMI 211 - GUJARAT HIGH COURT] wherein the court turned down the contention that while giving effect to section 54(1)(aa) of the Act, the effect would be available to the assessment made by the assessing authority only and not the further modification made by the first appellate authority or thereafter, the second appellate authority or even third appellate authority, as the case may be. The court held that the interpretation canvassed by the revenue of section 54(1) (aa) of the Act, if accepted, would run counter to the basic principles of the doctrine of merger which is a well accepted doctrine incorporated in the system of administration of justice.

The Gujarat Value Added Tax Act, 2003 came into force with effect from 1st April, 2006. In the light of what is held in the above decision, considering the fact that in the present case the payment has been made in August, 2006, that is, after the coming into force of the Gujarat Value Added Tax Act, 2003, for the period prior to the coming into force of the GVAT Act, the petitioner would be entitled to payment of interest at the rate of 9% per annum as provided under section 54 of the Gujarat Sales Tax Act and for the subsequent period it would be entitled to interest at the rate of 6% per annum as provided under section 38 of the Gujarat Value Added Tax Act.

Petition allowed.

2019 (3) TMI 967

Interest on delayed refund - relevant date for calculation of interest - Doctrine of merger - Held that:- The controversy involved in the present case is no longer res integra, inasmuch as the same stands decided by the above referred decision of this court in the case of M/s Syngenta Crop Protection Pvt. Ltd. v. State of Gujarat [2018 (4) TMI 1669 - GUJARAT HIGH COURT]. In the said case this court, relied upon an earlier decision of this court in the case of State of Gujarat v. Doshi Printing Press [2015 (3) TMI 211 - GUJARAT HIGH COURT] wherein the court turned down the contention that while giving effect to section 54(1)(aa) of the Act, the effect would be available to the assessment made by the assessing authority only and not the further modification made by the first appellate authority or thereafter, the second appellate authority or even third appellate authority, as the case may be. The court held that the interpretation canvassed by the revenue of section 54(1) (aa) of the Act, if accepted, would run counter to the basic principles of the doctrine of merger which is a well accepted doctrine incorporated in the system of administration of justice.

The Gujarat Value Added Tax Act, 2003 came into force with effect from 1st April, 2006. In the light of what is held in the above decision, considering the fact that in the present case the payment has been made in August, 2006, that is, after the coming into force of the Gujarat Value Added Tax Act, 2003, for the period prior to the coming into force of the GVAT Act, the petitioner would be entitled to payment of interest at the rate of 9% per annum as provided under section 54 of the Gujarat Sales Tax Act and for the subsequent period it would be entitled to interest at the rate of 6% per annum as provided under section 38 of the Gujarat Value Added Tax Act.

Petition allowed.

2019 (3) TMI 935

Revision of assessment - Deemed assessment - Section 22(2) of the TNVAT Act, 2006 - non-speaking order - principles of natural justice - change of opinion - Held that:- The observation made in the impugned orders for passing the reassessment order is nothing but change of opinion without any new material being brought on record, which has come to the knowledge of the respondents and the said action cannot be permitted under the law. The reassessment proceeding must be based on some material and not on mere suspicion. The Assessing Authority must have some material, on which it forms its opinion and the same should not be arbitrary, irrational, vague or irrelevant. In the absence of such material, the action taken by the respondents cannot be sustained - The case in hand, the reassessment proceedings and the consequential assessment order have been passed only on presumption and conjectures, which is not permissible under the law.

A Division Bench of this Court in the case of G.V.Cotton Mills (P) Ltd., vs., the Assistant Commissioner (CT) [2018 (3) TMI 1617 - MADRAS HIGH COURT] has held that the right of personal hearing to the assessee is mandatory even if the assessee fails to submit objections to the pre-assessment notice.

The impugned order dated 07.09.2017 passed by the respondent no. 2, granting permission to reopen the completed assessment, as well as the consequential ex parte reassessment order dated 31.03.2018 for the Assessment Year 2009-10 passed by the respondent no. 3 are liable to be quashed being tantamount to change of opinion, which is not permissible under the law - petition allowed.

2019 (3) TMI 934

Reopening of assessment proceedings - compounding of tax - U.P. Tax on Entry of Goods into Local Area Act, 2007 Act - ex-parte order - change of opinion - Held that:- The observation made in the impugned orders for passing the reassessment order is nothing but change of opinion without any new material being brought on record, which has come to the knowledge of the respondents and the said action cannot be permitted under the law. The reassessment proceeding must be based on some material and not on mere suspicion. The Assessing Authority must have some material, on which it forms its opinion and the same should not be arbitrary, irrational, vague or irrelevant. In the absence of such material, the action taken by the respondents cannot be sustained - The case in hand, the reassessment proceedings and the consequential assessment order have been passed only on presumption and conjectures, which is not permissible under the law.

The Hon'ble Supreme Court in the case of State of Uttar Pradesh and others vs. Aryaverth Chawal Udyog and others [2008 (5) TMI 621 - ALLAHABAD HIGH COURT] has held that mere change of opinion while perusing the same material cannot be a “reason to believe” that a case of escaped assessment exists requiring assessment proceedings to be reopened.

This Court is of the opinion that the impugned order dated 07.09.2017 passed by the respondent no. 2, granting permission to reopen the completed assessment, as well as the consequential ex parte reassessment order dated 31.03.2018 for the Assessment Year 2009-10 passed by the respondent no. 3 are liable to be quashed being tantamount to change of opinion, which is not permissible under the law - Petition allowed.

2019 (3) TMI 933

Revision of assessment - Deemed assessment - Section 22(2) of the TNVAT Act, 2006 - non-speaking order - principles of natural justice - Held that:- Even though, the respondent in the impugned order has acknowledged receipt of the objections raised by the petitioner, has passed a non-speaking order, without considering all the objections raised by the petitioner, in the reply dated 30.11.2015. As seen from the impugned orders, personal hearing was also not afforded by the respondent to the petitioner, even though a specific request was made.

A Division Bench of this Court in the case of G.V.Cotton Mills (P) Ltd., vs., the Assistant Commissioner (CT) [2018 (3) TMI 1617 - MADRAS HIGH COURT] has held that the right of personal hearing to the assessee is mandatory even if the assessee fails to submit objections to the pre-assessment notice.

The revision of assessment made by the respondent under Section 27 of the TNVAT Act, 2006 without affording an opportunity of personal hearing to the petitioner is bad in law and violates the principles of natural justice - the matters are remanded back to the respondent for fresh consideration and the respondent is directed to afford sufficient opportunity to the petitioner including the right of personal hearing and pass final orders under Section 27 of the TNVAT Act, 2006 on merits - Petition allowed by way of remand.

2019 (3) TMI 932

Revision of earlier assessment - Section 27 of the Tamil Nadu Value Added Tax Act, 2006 - revision of assessment mainly based on the inspection report - opportunity of personal hearing not provided - principles of natural justice - Held that:- As seen from the impugned order, personal hearing was not afforded by the respondent to the petitioner, even though a specific request was made.

A Division Bench of this Court in G.V.Cotton Mills (P) Ltd. Vs. The Assistant Commissioner (CT), Coimbatore [2018 (3) TMI 1617 - MADRAS HIGH COURT] has held that the right of personal hearing to the assessee is mandatory even if the assessee fails to submit objections to the pre-assessment notice.

Thus, the revision of assessment made by the respondent under Section 27 of the TNVAT Act, 2006 without affording an opportunity of personal hearing to the petitioner is bad in law and violates the principles of natural justice - the matter is remanded back to the respondent for fresh consideration and the respondent is directed to afford sufficient opportunity to the petitioner including the right of personal hearing - petition allowed by way of remand.

2019 (3) TMI 846

Revision of assessment - Section 27 of TNVAT Act - all facts not properly considered - principles of natural justice - Held that:- In the instant case, the petitioner being a purchasing dealer, has reported all the sales and purchases effected during the assessment year 2012-13 to the respondent and there is no suppression of sales and purchases done by him - All these factors were not considered in the impugned assessment order, even though, the same was raised as objection by the petitioner in his detailed reply dated 28.06.2016 sent to the respondent. Therefore, in the considered view of this Court, the respondent has violated the principles of natural justice by not considering the objection raised by the petitioner on merits and in accordance with law.

The matter is remanded back to the respondent for fresh consideration in accordance with law - petition allowed by way of remand.

2019 (3) TMI 845

Assessment of notice - assessment under Section 16 of the HVAT Act - Whether VAT N-2 notice which is mandatory is required to be served on the assessee for assessment under Section 16 of the HVAT Act? - Whether the proceedings against the assessee would be rendered illegal in the absence of serving VAT N-2 notice on the assessee for the assessment under Section 16 of the HVAT Act?

Held that:- The case had been decided as inspection case under Section 29 of the Act after giving proper opportunity of hearing to the assessee and by issuing notice. Moreover, the limitation period for serving VAT N-2 notice under Section 16 of the Act had not yet expired and, therefore, even if the matter was remanded to the Assessing Authority for serving VAT N-2 notice on the assessee and then to pass fresh order, it would be a formality and futile exercise - The assessee cannot be absolved of its liability to pay penalty merely because it had retained the purchase invoices and bill books.

Appeal dismissed.

2019 (3) TMI 844

Validity of assessment order - no proper opportunity of hearing provided - principles of natural justice - Held that:- Even though the petitioner has written the letter dated October 10,2007 to the respondent seeking one month time for furnishing the reconcile statement of accounts,the petitioner neither made any further representation nor produced the records to the respondent,instead the petitioner waited to hear from the respondent,till the respondent passed the impugned orders. Therefore,it is evident that the petitioner has also to be blamed as they did not furnish the reconcile statement to the respondent on their own.

While setting aside the orders impugned in these writ petitions on the ground of violation of principles of nature of justice,this court is inclined to award cost of ₹ 5,000 payable by the petitioner in each writ petition,totally a sum of ₹ 15,000 payable to the Tamil Nadu State Legal Aid Service Authority,High Court Buildings,Chennai,within the period of three weeks from the date of receipt of a copy of this order,failing which the authorities are directed to proceed further - petition disposed off.

2019 (3) TMI 774

Validity of reassessment proceedings - reopening of assessments - change of opinion - input tax credit - Held that:- Admittedly, the reassessment proceedings have been initiated only on the basis of the information received from the Deputy Commissioner (SIB), Commercial Tax, Muzaffarnagar pertaining to the search/survey dated 04.07.2013 at M/s TISCL and search/survey dated 11.07.2013 carried out at the business premises of the petitioner by the DGCEI, New Delhi. On the basis of the said search, notices were issued by the excise authorities and the replies have been submitted by the petitioner. Thereafter, no proceeding, whatsoever, has been undertaken by the excise authorities, nor has levied any duty, tax or imposed penalty upon the petitioner.

The basis of reassessment proceedings initiated by the respondents – authorities is only the survey/search conducted by the DGCEI, New Delhi and no further action or order has been passed or brought on record by the respondents - The jurisdiction to initiate reassessment proceedings arises only after the Assessing Authority records his reason to believe that any turnover has escaped assessment. Thus, not only is the belief of escapement essential, but, more importantly, it is necessary for the Assessing Authority to record his reason(s) as to existence of the belief of such escapement - In the present case, the respondents, while making proposal for reassessment, record their reason to the effect that survey has been conducted by the Central Excise authorities at the business premises of M/s TISCL, in which certain incriminating materials were found, which represent clandestine removal of goods and non-payment of due taxes and therefore, verification is required for the said figures and reassessment proceedings may be permitted.

In the present case, the reassessment proceedings have only been initiated on the basis of the survey/search conducted by the Central Excise authorities, i.e., DGCEI, New Delhi, and this fact is admitted between the parties that no further action has been taken by the said authorities, nor any tax, duty or penalty has been imposed upon the petitioner - the present proceedings of reassessment are absolutely bad in law and are not permissible under the law.

Petition allowed.

2019 (3) TMI 773

Principles of natural justice - Section 22(4) of the Tamil Nadu Value Added Tax Act - Held that:- It is admitted fact that the pre-assessment notice as well as the impugned assessment order were sent by the respondent only to the address at No.116/1-20B, Belimer Complex, Veppamoodu Junction, Nagercoil, whereas the registered office of the petitioner as per the respondent records is at No.94, Ramakrishna Nilayam, S.P.Office Road, East of Tower, Nagercoil, Kanyakumari District - It is the case of the petitioner that he has not received the preassessment notice as well as the impugned assessment order and it is his case that only an employee of the petitioner's son had received the notice. When the impugned assessment order was served at the address of the petitioner's son, the petitioner's son was hospitalized as he met with an accident. It is also evident from the assessment order that the respondent did not give personal hearing to the petitioner before passing the impugned assessment order.

In the instant case, admittedly, the pre-assessment notice as well as the impugned assessment order were sent to the wrong address instead of the registered address of the petitioner and no personal hearing was given to the petitioner. Therefore, this Court is the considered view that the respondent has violated the principles of natural justice.

The matter is remanded back to the respondent for fresh consideration by affording sufficient opportunity - Petition allowed by way of remand.

2019 (3) TMI 772

Principles of natural justice - validity of Assessment order - TNVAT Act - It is the case of the petitioner that the details of the alleged sale to M/s. Jay Jay Agency, namely, the invoices, payment details and other documents sought for by the petitioner, were not provided by the respondent despite the request made by them - Held that:- The respondent ought to have considered all the above mentioned factors and should have given sufficient opportunity to the petitioner to place all his objections and also should have given an opportunity to the petitioner to cross examine the alleged purchasers M/s.Jay Jay Agency, Pollachi - But, in the instant case, no such opportunity was given to the petitioner and therefore, the respondent has violated the principles of natural justice - the matter is remanded back to the respondent for fresh consideration - appeal allowed by way of remand.

2019 (3) TMI 771

Whether the assessee is liable for payment of sales tax in terms of Section 3(2) of the TNGST Act on the re-sale of sanitary fittings effected by the assessee within the State, which were purchased from WORTH, an organisation, which was granted exemption by the Government of Tamil Nadu under Section 17 of the TNGST Act in G.O.(Ms) No.436, dated 19.04.1983?

Held that:- Section 17 of the TNGST Act is the power of the Government to notify exemption and redemption of tax. Under sub-Section (1) of Section 17 of the TNGST Act, the Government may, by notification issued whether prospectively or retrospectively, make an exemption or reduction in rate, in respect of any tax payable under the TNGST Act - In the instant case, the petitioner's seller, “WORTH” was granted exemption in regard to the whole of turnover relating to the sale of its products manufactured and on all sales incidental or ancillary to such manufactures in their various centres by notification published under the Government Gazette. The exemption, which was granted to WORTH, falls under Section 17(1)(ii), as it is for a specified class of person, in regard to the whole of their turnover.

Section 7-A of the TNGST Act clearly provided for “levy of purchase tax” and the contingencies provided therein clearly fell within the said parameters and accordingly, the contention of the assessee was rejected. If the said decision is applied to the facts of the present case, we need to be conscious of the subtle yet marked distinction between the language employed in Section 7-A and an amended Section 3(2) of the TNGST Act - the charging section which stood prior to the amendment, did not contain any clause as contained in Section 7-A of the TNGST Act making the purchaser liable to pay purchase tax when they fall within any one of the contingencies in Section 7-A(1) of the TNGST Act.

The order passed by the Tribunal is not sustainable and the point of taxation cannot be shifted - this tax case revision is allowed and the substantial questions of law are answered in favor of the assessee.

2019 (3) TMI 770

Principles of Natural Justice - case of petitioner is that no opportunity has been afforded to the petitioner prior to the framing of the impugned assessments - Held that:- An order of assessment has to be a speaking one, containing reasons for the adjustments and additions effected revealing application of mind to the objections raised by the assessee and for rejection thereof, if the officer is not inclined to accept the same. The orders impugned do not satisfy the requirements and are non-speaking and bereft of reasons.

The assessments are set aside - The Assessing Authority is directed to redo the same after affording an opportunity to the assessee who shall appear before him at the first instance on 25.02.2019 at 10.30 a.m - Petition allowed - decided in favor of petitioner.

2019 (3) TMI 1018

Dishonor of Cheque - Section 138 of Negotiable Instrument Act - conviction order set aside on the ground that the complaint was not filed immediately after the first notice of default was given to the respondent - Held that:- A complainant is entitled to file a complaint under section 138 Negotiable Instruments Act, based on a second or successive default in payment of the cheque amount, even though he had not initiated prosecution based on the first default, provided that the requirements stipulated in the proviso to Section 138 are satisfied for the second or successive default based on which the prosecution is now launched.

The impugned order is set aside. Sequitur to the same is that the appeal filed by the respondent before the Appellate Court shall stand restored - matter is remitted to the Appellate Court for reconsideration of the appeal on merits.

2019 (3) TMI 843

Dishonor of Cheque - section 138 of NI Act - shortage of money - rebuttal of presumption - Held that:- The Appellate Court has held that respondent has been able to rebut the presumption that arises under Section 118 of the N.I. Act. Petitioner has thereafter failed to prove beyond reasonable doubt that he had given the loan to the respondent and the cheque was issued for repayment of the said loan - Finding of the Appellate Court that the petitioner has not shown the source of funds or that he had the capacity to make arrangement of a huge sum of ₹ 4,90,000/- and extend the same as a friendly loan for someone who was barely known to him, is neither perverse nor unreasonable. Perusal of the record shows that the respondent has been able to rebut the statutory presumption.

The petitioner has not been able to establish that he had the capacity to extend a friendly loan of ₹ 4,90,000/- without any condition and that such a loan was extended and was to be repaid and the subject cheque was issued for repayment of the loan - petition dismissed.

2019 (3) TMI 842

Maintainability of appeal - Held that:- The appellants is not present in the Court today. It is stated that he is out of station. This is no ground to seek adjournment. We therefore reject the request for adjournment - Appeal dismissed for non-prosecution.

2019 (3) TMI 769

Dishonor of Cheque - cheque were returned unpaid either for the reason that the "opening balance was insufficient" or for the reason that the "account was closed" - section 138 of NI Act - Held that:- The Trial Court concluded that the accused was successful in bringing rebuttal evidence to the requisite level of preponderance of probabilities; and observed that the complainant had failed to prove, beyond all reasonable doubt, that the cheques were issued in part payment of the loan amount of ₹ 22,50,000/-.

The High Court observed that if the transaction in question was not reflected in the accounts and income-tax returns, that would at best hold the assesse or lender liable for action under the income-tax laws but, if the complainant succeeds in showing the lending of amount, the existence of legally enforceable debt cannot be denied. The High Court also observed that the issue regarding washing away of the cheques in rain water was of no significance when the accused had accepted his liability in clear terms. The High Court found that the defence plea of the accused that the money was given as hand loan by his friend Shri Jagdishbhai got falsified by the version of the said Shri Jagdishbhai, who was examined as a witness on behalf of the complainant. The High Court, therefore, set aside the impugned orders and, while convicting the accused-appellant for the offence under Section 138 of the NI Act, sentenced him in the manner noticed hereinbefore.

Preponderance of probabilities - Held that:- The accused has to bring on record such facts and such circumstances which may lead the Court to conclude either that the consideration did not exist or that its nonexistence was so probable that a prudent man would, under the circumstances of the case, act upon the plea that the consideration did not exist. This Court has, time and again, emphasized that though there may not be sufficient negative evidence which could be brought on record by the accused to discharge his burden, yet mere denial would not fulfil the requirements of rebuttal as envisaged under Section 118 and 139 of the NI Act.

In the case at hand, even after purportedly drawing the presumption under Section 139 of the NI Act, the Trial Court proceeded to question the want of evidence on the part of the complainant as regards the source of funds for advancing loan to the accused and want of examination of relevant witnesses who allegedly extended him money for advancing it to the accused. This approach of the Trial Court had been at variance with the principles of presumption in law. After such presumption, the onus shifted to the accused and unless the accused had discharged the onus by bringing on record such facts and circumstances as to show the preponderance of probabilities tilting in his favour, any doubt on the complainant's case could not have been raised for want of evidence regarding the source of funds for advancing loan to the accused-appellant.

The High Court has conscientiously and carefully taken into consideration the views of the Trial Court and after examining the evidence on record as a whole, found that the findings of the Trial Court are vitiated by perversity. Hence, interference by the High Court was inevitable; rather had to be made for just and proper decision of the matter - the findings of the High Court convicting the accused-appellant for offence under Section 138 of the NI Act deserves to be, and are, confirmed.

Question of punishment for the offence aforesaid - Held that:- In the totality of the circumstances of this case and looking to the nature of offence which is regulatory in nature, while we find that the punishment as regards monetary terms calls for no interference but then, the sentence of imprisonment deserve to be modified - In the singular and peculiar circumstances of this case, where the matters relating to 7 cheques issued by the appellant in favour of respondent No. 2 for a sum of ₹ 3 lakhs each are being considered together; and the appellant is being penalised with double the amount of cheques in each case i.e., in all a sum of ₹ 42,00,000/-, in our view, the appellant deserves to be extended another chance to mend himself by making payment of fine, of course, with the stipulation that in case of default in payment of the amount of fine, he would undergo simple imprisonment for a period of one year.

Appeal allowed in part.

2019 (3) TMI 675

Appointment of an arbitrator - lease agreement - enhancement of rent - Held that:- It is well settled that in the cases of matters "in rem", the arbitration cannot be invoked - In the instant case, the petitioner is entitled to file a petition for enhancement of rent under Section 4 of the Tamil Nadu Buildings (Lease and Rent Control) Act, 1960. In case the respondents fail to vacate and commit willful default, the petitioner is entitled to evict the respondents under Section 10 of the Tamil Nadu Buildings (Lease and Rent Control) Act, 1960. It is also the apprehension of the petitioner that the respondents, being a Government Agency, they may rely on the Public Premises (Eviction of Unauthorised Occupants) Act, 1971 and also on the basis of arbitration clause will raise objections with regard to maintainability of the eviction petition filed under the above mentioned provisions of the Tamil Nadu Buildings (Lease and Rent Control) Act, 1960.

In fact, the Public Premises (Eviction of Unauthorised Occupants) Act, 1971, is applicable only against those under unauthorised occupation of the public premises and not against lawful persons - Therefore, the Public Premises (Eviction of Unauthorised Occupants) Act, 1971, will not apply to the case on hand. Therefore, the petitioner shall work out his remedy under Tamil Nadu Buildings (Lease and Rent Control) Act, 1960.

The Original Petition is dismissed as not maintainable.

2019 (3) TMI 601

Award of industrial Tribunal - whether the appellant (workman) was in continuous service of respondent No.1(Employer) for one year as provided under Section 6N of the U.P. Industrial Disputes Act? - Held that:- A finding on such question being a finding of fact, this Court cannot examine such question de novo by appreciating the whole evidence adduced by the parties again in these appeals. In our view, the High Court examined the matter in detail and the finding of the High Court on this question being a finding of fact is binding on this Court.

This question, we cannot now again examine de novo in our appellate jurisdiction under Article 136 of the Constitution. It is more so when we find that the finding on this question is neither against any evidence adduced by the parties nor against any provision of law and nor it is perverse - Indeed, this Court has held that the proceedings under Section 17B of ID Act are independent proceedings in nature and are not dependent upon the final order passed in the main proceedings.

Appeal dismissed.

2019 (3) TMI 600

Arbitration agreement - Whether the Sub-clause (7) of Clause 25-A of the agreement can be said to be arbitrary or discriminatory and violative of Article 14 of the Constitution of India?

Whether the 10% “deposit-atcall” of the amount claimed is in order to avoid frivolous claims by the party invoking arbitration? - Held that:- It is well settled that a frivolous claim can be dismissed with exemplary costs - It is therefore always open to the party who has succeeded before the arbitrator to invoke this principle and it is open to the arbitrator to dismiss a claim as frivolous on imposition of exemplary costs.

The important principle established by this case is that unless it is first found that the litigation that has been embarked upon is frivolous, exemplary costs or punitive damages do not follow. Clearly, therefore, a “deposit-at-call” of 10% of the amount claimed, which can amount to large sums of money, is obviously without any direct nexus to the filing of frivolous claims, as it applies to all claims (frivolous or otherwise) made at the very threshold. A 10% deposit has to be made before any determination that a claim made by the party invoking arbitration is frivolous. This is also one important aspect of the matter to be kept in mind in deciding that such a clause would be arbitrary in the sense of being something which would be unfair and unjust and which no reasonable man would agree to.

Further, it is also settled law that arbitration is an important alternative dispute resolution process which is to be encouraged because of high pendency of cases in courts and cost of litigation. Any requirement as to deposit would certainly amount to a clog on this process. Also, it is easy to visualize that often a deposit of 10% of a huge claim would be even greater than court fees that may be charged for filing a suit in a civil court.

Deterring a party to an arbitration from invoking this alternative dispute resolution process by a pre-deposit of 10% would discourage arbitration, contrary to the object of de-clogging the Court system, and would render the arbitral process ineffective and expensive.

Clause 25(viii) of the notice inviting tender is striked off - appeal allowed.

2019 (3) TMI 544

Dishonor of Cheque - Proceedings under the Negotiable Instruments Act, 1881 - Interpretation of statute - Postponement of issue of process - Section 202 of the Code of Criminal Procedure - Whether the provisions in the said section is mandatory? - Held that:- As per the said section by way of amendment of 2005 it came to be provided that if the accused persons are residing at the place beyond the area in which the Magistrate exercises the jurisdiction, the Magistrate needs to postpone the issue process against the accused and follow the procedure given in section 202 of the Cr.P.C. In a matter like the present one, the Magistrate is expected to make inquiry into the case himself as per this provision.

The object behind introducing the amendment shows that when in the past there was discretion with the Magistrate either to make inquiry as mentioned in section 202 to ascertain that there are sufficient grounds for proceeding against the accused, by amendment, the aforesaid portion came to be added in the provision and that procedure needs to be followed when the accused persons are not the residents of the area in which the Magistrate is expected to exercise the jurisdiction - Apparently the amended provision has added something in section 202 and that is the procedure which needs to be followed in such cases before 'issue process order' and that necessarily involves consumption of some time.

After consideration of the material which is made available under section 200 if the Magistrate thinks it fit to go for further inquiry as provided under section 202 of the Cr.P.C. it was open to the Magistrate in the past also, to postpone issue of process even after giving of the material by the complainant for the purpose of section 200 of Cr.P.C. and ask the complainant to give material for inquiry as provided in section 202 of the Cr.P.C. For this stage also the complainant can file affidavits as provided in section 145 but the Magistrate has a power to ask the complainant and the witnesses to remain present before him and make query by asking questions with regard to the material produced during this inquiry. This power is necessarily there with the Magistrate in view of the scheme of that Chapter. It cannot be said that the Magistrate must act on the basis of the evidence on affidavit and other material produced by the complainant which can be done under sections 145 and 146 of the Negotiable Instruments Act.

Petition allowed.

2019 (3) TMI 403

Legality of Clause 3(2)(iii) of The Nationalized Banks (Management and Miscellaneous provisions) Scheme, 1970 - whether Clause 3(2)(iii) of the Scheme is legal or ultra vires the Constitution? - disqualification for being nominated as a Director - the submission is that the disqualification provided in Clause 3(2)(iii)(b) of the Scheme for the worker/employee category is only confined to their category. No such similar disqualification is made applicable to the officer/employee category - Held that:- It would be clear from a perusal of clauses (e) and (f) of Section 9(3) of the Act that both the categories of employees are different one is worker/employee category as defined under Section 9(3)(e) and the other is officer/employee category as defined under Section 9(3)(f) of the Act. Second, it is for the legislature to decide as to what qualifications and disqualifications should be prescribed for various categories of the employees for their nomination on the post of Director. Third, there lies a distinction between the worker and the officer. The former, i.e., worker is defined under Section 2(s) of the Industrial Disputes Act, 1947 and is governed by that Act whereas the latter, i.e., officer is not governed by the Industrial Disputes Act but is governed by separate service rules. Both these categories of employees, therefore, cannot be equated with each other and nor can be placed at par for providing equal qualification or/and disqualification for their nomination as a Director in the Board of Directors. Fourth, Article 14 of the Constitution applies inter se two equals and not inter se unequals. Fifth, the nominee worker/employee has only a right under the Act to be appointed as Director from the category of worker/employee in terms of Section 9 (3)(e) of the Act provided the concerned nominee whose name is recommended by the Union fulfills the qualifications laid down in Clause 3(2)(iii) of the Scheme but not beyond it.

Appellants then submitted that once the employee is nominated to the Board of Directors may be from different categories specified under Section 9, then no distinction should be made between them while prescribing the qualification and disqualification - This submission has also no merit. A mere reading of Section 9(3) clause (a) to (i) would go to show that the Board of Directors consists of persons coming from different fields. There cannot, therefore, be a uniform qualification or/and disqualification for such persons. Indeed, the qualifications and disqualifications are bound to vary from category to category and would depend on the post, experience and the stream from where a person is being nominated as a Director. Moreover, the qualification and disqualification has to be seen prior to his/her becoming a Director and not after his/her appointment as a Director.

There is no good ground to interfere with the reasoning and the conclusion arrived at by the High Court, which rightly dismissed the appellants’ writ petition, and upheld Clause 3(2)(iii) of the Scheme as being legal - appeal dismissed.

2019 (3) TMI 337

Guilty of “other misconduct” - inappropriate behaviors of CA - Clause 2 of Part IV of the First Schedule to the Chartered Accountants Act, 1949 - It is the petitioner’s case that the allegations made against him have no bearing with him carrying on the profession as a Chartered Accountant and, therefore, the Board and/or ICAI would have no jurisdiction to entertain a complaint in this regard - inter-personal relationships between HA and the petitioner.

Held that:- Section 21A of the Act contains provisions for constitution of a Board of Discipline. Sub-section (3) of Section 21A provides that where the Board of Discipline is of the opinion that a member is guilty of professional or other misconduct as specified in the First Schedule, it shall afford to the member an opportunity of being heard and may, thereafter, take any one of the actions as specified therein. Section 21B of the Act contains provisions relating to the Disciplinary Committee - As is apparent from the plain language of Part IV of the First Schedule to the Act, the expression ‘other misconduct’ includes any conduct, which brings disrepute to the profession or the ICAI as a result of an action whether or not related to professional work. Thus, it is not necessary that the misconduct complained of should be a conduct in exercise of the profession of Chartered Accountancy. Any conduct, which tends to bring disrepute, would be a subject matter of proceedings under Chapter V of the Act.

In Council of the Institute of Chartered Accountants and Another v. B. Mukherjea [1957 (9) TMI 60 - SUPREME COURT], the Supreme Court had examined the provisions of the Act, as in force at the material time (prior to the amendments in the year 2006 and in the year 2011). The Court had explained that the acts of commission and omissions specified in the Schedule were not exhaustive and did not purport to limit the power of the Council under Section 21(1) of the Act.

In a recent decision in Council of the Institute of Chartered Accountants of India v. Shri Gurvinder Singh & Anr. [2018 (11) TMI 1163 - SUPREME COURT OF INDIA], the Supreme Court had allowed an appeal preferred against the decision of this Court. In that case, a complaint was made against a Chartered Accountant who had sold certain shares of a public limited company to the complainant therein, in the year 1999 - The Division Bench answered the reference in favour of the Chartered Accountant and held that since he was acting in an individual capacity while dealing with the complainant and not acting as a Chartered Accountant, he could not be held guilty of misconduct. The Supreme Court allowed the ICAI’s appeal against the said decision and held that the High Court had incorrectly appreciated the provisions of the Act.

Thus, this Court is unable to accept the contention that the Board of Discipline does not have the jurisdiction to examine the alleged misconduct on the part of the petitioner. Clause (2) of Part-IV of the First Schedule to the Act is wide, and would include within its scope, any conduct that would tend to bring disrepute to the profession or the Institute. If a Chartered Accountant is found to have been guilty in outraging the modesty of a woman and/or other offences involving moral turpitude, it would not be inapposite for the Board of Discipline to also conclude that the conduct did, in fact, lower the dignity of the profession. In this view, this Court is not able to accept that the proceedings before the Board of Discipline are without jurisdiction.

Whilst, it is correct that the Board of Discipline has no jurisdiction to sentence the petitioner, it would be erroneous to contend that the Board of Discipline does not have the jurisdiction, to examine the allegations made against the petitioner, in the context of determining whether the petitioner is guilty of other misconduct as defined under Part-IV of the Schedule-I to the Act - This Court is refraining from expressing any opinion on the merits of the complaint made by respondent no.2, as the question whether the petitioner is guilty of other misconduct is yet to be decided by the Board of Discipline.

Petition dismissed.

2019 (3) TMI 336

Determination of ownership of property - suit barred by virtue of Section 4 of the Benami Transactions (Prohibition) Act, 1988 - operation, control, administration and management as well as the business affairs of proprietary concern opened in the name of the 1st defendant - fiduciary relationship between the plaintiff and defendant - Held that:- The plaint when read as a whole, certainly averrs that there was a fiduciary relationship between the plaintiff and the 1st defendant. This is quite clear when one reads the plaint as a whole and more particularly Paragraphs 5, 7, 9,10, 11 and 12 of the plaint.

We are not examining whether there is any merit in the factual averments made in the plaint with reference to the fiduciary relationship that the plaintiff had with the 1st defendant. That will, of course, be subject to the plaintiff proving such a relationship by adducing the necessary evidence. If he is unable to prove those facts, his suit would then fail as it would clearly be hit by Section 4 of The Benami Transactions (Prohibition) Act, 1988.

Fiduciary relationship - Held that:- It is not as if under no circumstances there can be no fiduciary relationship between an employer and an employee. Whether on the facts pleaded, such a relationship is proved is a question that will be decided at the trial after both the parties are allowed to lead their evidence in support of their respective cases - the word “fiduciary” has not been specifically used in the plaint. However, that makes a little difference. When one reads the plaint as a whole, it is clear that such a relationship is pleaded though the specific word “fiduciary” has not been used - the learned Judge could not have rejected the plaint under Order VII Rule 11 (d) of the CPC.

The impugned order dated 8th February, 2017 is hereby set aside - the suit is restored back to the file of the Trial Court to be decided on merits and in accordance with law - appeal allowed.

2019 (3) TMI 295

Interpretation of statute - special allowances paid by an establishment to its employees - scope of basic wages - whether the special allowances paid by an establishment to its employees would fall within the expression “basic wages” under Section 2(b)(ii) read with Section 6 of the Act for computation of deduction towards Provident Fund? - Held that:- Basic wage, under the Act, has been defined as all emoluments paid in cash to an employee in accordance with the terms of his contract of employment. But it carves out certain exceptions which would not fall within the definition of basic wage and which includes dearness allowance apart from other allowances mentioned therein. But this exclusion of dearness allowance finds inclusion in Section 6. The test adopted to determine if any payment was to be excluded from basic wage is that the payment under the scheme must have a direct access and linkage to the payment of such special allowance as not being common to all. The crucial test is one of universality.

The employer, under the Act, has a statutory obligation to deduct the specified percentage of the contribution from the employee’s salary and make matching contribution. The entire amount is then required to be deposited in the fund within 15 days from the date of such collection.

In the present case, no material has been placed by the establishments to demonstrate that the allowances in question being paid to its employees were either variable or were linked to any incentive for production resulting in greater output by an employee and that the allowances in question were not paid across the board to all employees in a particular category or were being paid especially to those who avail the opportunity. In order that the amount goes beyond the basic wages, it has to be shown that the workman concerned had become eligible to get this extra amount beyond the normal work which he was otherwise required to put in. There is no data available on record to show what were the norms of work prescribed for those workmen during the relevant period. It is therefore not possible to ascertain whether extra amounts paid to the workmen were in fact paid for the extra work which had exceeded the normal output prescribed for the workmen.

The wage structure and the components of salary have been examined on facts, both by the authority and the appellate authority under the Act, who have arrived at a factual conclusion that the allowances in question were essentially a part of the basic wage camouflaged as part of an allowance so as to avoid deduction and contribution accordingly to the provident fund account of the employees.

There is no occasion to interfere with the concurrent conclusions of facts - The appeals by the establishments therefore merit no interference - appeal allowed - decided in favor of Revenue.

2019 (3) TMI 294

Dishonor of Cheque - insufficiency of funds - repayment of borrowed amount - Section 138 of the Negotiable Instruments Act, 1881 - In the present case, the record before the Court indicates that the cheque was drawn by the appellant for Lakshmi Cement and Ceramics Industries Ltd., as its Director - A notice of demand was served only on the appellant. The complaint was lodged only against the appellant without arraigning the company as an accused - Held that:- The provisions of Section 141 postulate that if the person committing an offence under Section 138 is a company, every person, who at the time when the offence was committed was in charge of or was responsible to the company for the conduct of the business of the company as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished.

In the absence of the company being arraigned as an accused, a complaint against the appellant was therefore not maintainable. The appellant had signed the cheque as a Director of the company and for and on its behalf. Moreover, in the absence of a notice of demand being served on the company and without compliance with the proviso to Section 138, the High Court was in error in holding that the company could now be arraigned as an accused.

The High Court was in error in rejecting the petition under Section 482 of the CrPC - appeal allowed.

2019 (3) TMI 232

Maintainability of review petition - doctrine of merger - Whether review petition is maintainable before the High Court seeking review of a judgment against which the special leave petition has already been dismissed by this Court? - Held that:- Explaining the doctrine of merger, the Court held that logic behind this doctrine is that there cannot be more than one decree or operative orders governing the same subject matter at a given point of time. When a decree or order passed by an inferior Court, Tribunal or Authority is subjected to a remedy available under law before a superior forum, then, though the decree or order under challenge continues to be effective and binding, nevertheless, this finality is to put in jeopardy. Once the superior court disposes of the dispute before it in any manner, i.e. either by affirming the decree or order or by settings aside or by modifying the same, it is the decree of the superior Court, Tribunal or Authority which is the final binding and operative decree and the decree or order of the lower Court, Tribunal or authority gets merged into the order passed by the superior forum.

Having noted the two judgments of ABBAI MALIGAI PARTNERSHIP FIRM & ANR. VERSUS K. SANTHAKUMARAN & ORS. [1998 (9) TMI 663 - SUPREME COURT OF INDIA] and KUNHAYAMMED AND OTHERS VERSUS STATE OF KERALA AND ANOTHER [2000 (7) TMI 67 - SUPREME COURT], and particularly the fact that the earlier judgment in the case of Abbai Maligai Partnership Firm is duly taken cognisance of and explained in the latter judgment, we are of the view that there is no conflict insofar as ratio of the two cases is concerned. Moreover, Abbai Maligai Partnership Firm was decided on its peculiar facts, with no discussion on any principle of law, whereas Kunhayammed is an elaborate discourse based on well accepted propositions of law which are applicable for such an issue - thus, the detailed judgment in Kunhayammed lays down the correct law and there is no need to refer the cases to larger Bench, as was contended by the counsel for the appellant.

Once we hold that law laid down in Kunhayammed is to be followed, it will not make any difference whether the review petition was filed before the filing of special leave petition or was filed after the dismissal of special leave petition.

The review petition was maintainable. Therefore, the High Court was empowered to entertain the same on merits. Insofar as appeal of the appellant challenging the order dated December 12, 2012 on merits is concerned, the matter shall be placed before the regular Board to decide the same.

2019 (3) TMI 231

Amendment of the plaint - trial court declined the amendment on the ground that the application is an attempt to convert the suit filed by a private individual into a suit filed by a Private Limited Company which is not permissible as it completely changes the nature of the suit - Held that:- The plaint is not properly drafted in as much as in the memo of parties, the Plaintiff is described as Varun Pahwa through Director of Siddharth Garments Pvt. Ltd. though it should have been Siddharth Garments Pvt. Ltd. through its Director Varun Pahwa. Thus, it is a case of mistake of the counsel, may be on account of lack of understanding as to how a Private Limited Company is to sue in a suit for recovery of the amount advanced.

The memo of parties is thus clearly inadvertent mistake on the part of the counsel who drafted the plaint. Such inadvertent mistake cannot be refused to be corrected when the mistake is apparent from the reading of the plaint - The Court always gives leave to amend the pleadings even if a party is negligent or careless as the power to grant amendment of the pleadings is intended to serve the ends of justice and is not governed by any such narrow or technical limitations.

Thus, it was an inadvertent mistake in the plaint which trial court should have allowed to be corrected so as to permit the Private Limited Company to sue as Plaintiff as the original Plaintiff has filed suit as Director of the said Private Limited Company - the order declining to correct the memo of parties cannot be said to be justified in law - appeal allowed.

2019 (3) TMI 93

Suit for permanent and mandatory injunction - Prayer for a decree of mandatory injunction in favour of the plaintiffs for removing the defendant, her agents, etc. from one room on the ground floor of the suit property - substance of the actual defence of the defendant from a perusal of the written statement is that the property in question has been purchased from the joint family fund obtained from the joint family business belonging to the father of the parties - Held that:- Clearly, vague, unsubstantiated and evasive pleas have been held to be sufficient ground to hold that there are admissions in the pleadings and a decree is liable to be passed under Order 12 Rule 6 CPC. The pleas taken by the defendant in the written statement are vague, inconsistent and do not in any manner whatsoever show that any worthwhile defence is raised or any right exists in favour of the defendant to enable her to continue to occupy the suit property.

The defence taken by the defendant is vague and unsubstantiated and a mere attempt to prolong the present litigation. Accordingly, no defence is available to the defendant. The present application under Order 6 Rule 12 CPC is liable to be allowed.

Whether the claim of the defendant would be barred under the Prohibition of Benami Property Transaction Act, 1988? - Held that:- A suit would not lie to enforce any right in respect of the property held benami against the person in whose name the property is held. No defence can also be based on any right in regard to any properties held benami. What the defendant had sought to plead is that the present suit property has been bought by the plaintiffs in the name of the plaintiffs out of the funds generated from the family business/funds generated after disposing of the joint family property - The plaintiff has failed to aver the basic requirements to show or plead about existence of any Hindu undivided family or joint family property. The pleas raised by the defendant are vague, unsubstantiated and frivolous. The defence raised by the defendant is clearly barred by Section 4 of the Prohibition of Benami Property Transaction Act. The exception to the Act as stated in section 2(9)(A)(i) or (iv) are not applicable.

There is a clear averment made in the plaint that the defendant was inducted into the suit property as a licensee. This plea in the plaint has not been specifically denied which is clear from the paras of the plaint that were noted above especially paras 3, 5 and 15 of the plaint read with the relevant paras of the written statement. Instead the defendant has chosen to raise vague and unsubstantiated plea about the suit property having been bought from funds siphoned off from the family business/from sale of joint family property - there is no proper denial of the averment in the plaint that the defendant was inducted as a licensee - once a licensee would always be a licensee. The license given in favour of the defendant stands terminated. The defendant would clearly be liable to be evicted.

Present adjudication is confined to the plaint herein and the defence raised in the written statement filed by the defendant and the documents thereof. Hence, the findings recorded herein would not prejudice the defendant in her adjudication of the said afore-noted suit - present application allowed.

2019 (3) TMI 20

Condonation of delay of 457 days in filing appeal - appeal rejected on the ground that it was filed beyond the period as prescribed under Sub-section (1) of Section 68-O of the Narcotic Drugs & Psychotropic Substances Act, 1985 - forfeited property.

Whether the Appellate Tribunal can entertain an appeal from an order of a Competent Authority, which is filed after expiry of sixty days from the receipt of the order?

Whether this Court can condone the delay beyond the said period in exercise of its powers under Article 226 of the Constitution of India?

Held that:- The plain reading of the proviso to Sub-section (1) of Section 68-O of the NDPS Act indicates that the Appellate Tribunal has no jurisdiction to entertain an appeal which is filed beyond a period of sixty days from the date on which the order passed by the Competent Authority is served on the appellant. An appeal under Sub-section (1) of Section 68-O of the NDPS Act can be filed only within a period of 45 days from the date on which the order is served. However, the Appellate Tribunal can entertain an appeal even beyond the said period of 45 days if it is satisfied that the appellant was prevented by sufficient cause from filing the said appeal. However, this power is not available to entertain an appeal beyond a period of 60 days.

The contention that the petitioner has any inherent right to file an appeal against the order of the Competent Authority, is flawed. It is well settled that an appeal is a creature of statute and there is no inherent right of appeal.

In Durga Shankar Mehta v. Thakur Raghuraj Singh and Ors [1954 (5) TMI 25 - SUPREME COURT] the Supreme Court had held that “It is well known that an appeal is a creature of statute and there can be no inherent right of appeal from any judgment or determination unless an appeal is expressly provided for by the law itself.”

Plainly, if the right of appeal is a creature of statute, it would be open for the legislature to curtail the said right as well. Therefore, there is no infirmity in the legislature providing a limited right of appeal. The Parliament has provided a right of appeal against an order of the Competent Authority, albeit, subject to the condition that the same be preferred within the specified period. It has expressly curtailed the power of the Appellate Tribunal to entertain an appeal which is filed beyond the specified period. Thus, a person aggrieved by an order of the Competent Authority has no right to an appeal if the same is not preferred within the prescribed period.

Clearly, if the petitioner has no statutory right to file an appeal, the question of issuing directions under Article 226 of the Constitution of India to provide the same, contrary to the statue, would not arise - Since, the right to appeal is a statutory right, this court is not persuaded to accept that relief can be granted to the petitioner who has lost such a right on account of delay.

Petition dismissed.

2019 (2) TMI 1544

Liability to pay 50% of the unearned increase for mutation/transfer of the property - whether a change in shareholding of a company amounts to transfer of the property? - Held that:- The issue whether a change in the shareholding warrants imposition of unearned increase was considered by the Coordinate Bench of this Court in M/s K.G. Electronics Pvt. Ltd. v. DSIIDC Ltd [2013 (12) TMI 1683 - DELHI HIGH COURT], wherein it was held that the guidelines in question do not provide for the payment of unearned increase in case of transfer of shares in a company and, therefore, the respondents are not entitled to claim unearned increase. It is relevant to note that in that case, the original promoters had divested 42.36% of the total outstanding share capital, out of which a substantial part was towards their respective spouses. The Court noted that 28.248% of the shares transferred by the promoters were held by non-family members. Indisputably, the petitioner’s case is on a better footing as only 10.23% of the shareholding is held by persons other than the original promoters.

The demand for unearned increase by the respondent is unsustainable, as there is no transfer of the property in question - impugned communication is, accordingly, set aside - petition allowed - decided in favor of appellant.

2019 (2) TMI 1473

SEZ Unit - Goods imported/procured by the respondent for authorized operations - Withdrawal of exemption of all duties under the Customs Act, Customs Tariff Act, Central Excise Act, etc. vide notification dated 06.04.2015 - PPAs dated 07.08.2008 and 02.02.2007 - inclusion of cost by way of payment of tax consequent to withdrawal of the exemption notifications - Held that:- A reading of Article 13 of PPA as a whole leads to the position that subject to restitutionary principles contained in Article 13.2, the adjustment in monthly tariff payment, in the facts of the present case, has to be from the date of the withdrawal of exemption which was done by administrative orders dated 06.04.2015 and 16.02.2016. The present case, therefore, falls within Article 13.4.1(i). This being the case, it is clear that the adjustment in monthly tariff payment has to be effected from the date on which the exemptions given were withdrawn. This being the case, monthly invoices to be raised by the seller after such change in tariff are to appropriately reflect the changed tariff.

On the facts of the present case, it is clear that the respondents were entitled to adjustment in their monthly tariff payment from the date on which the exemption notifications became effective. This being the case, the restitutionary principle contained in Article 13.2 would kick in for the simple reason that it is only after the order dated 04.05.2017 that the CERC held that the respondents were entitled to claim added costs on account of change in law w.e.f. 01.04.2015. This being the case, it would be fallacious to say that the respondents would be claiming this restitutionary amount on some general principle of equity outside the PPA. Since it is clear that this amount of carrying cost is only relatable to Article 13 of the PPA, we find no reason to interfere with the judgment of the Appellate Tribunal.

The restitutionary principle contained in Clause 13.2 must always be kept in mind even when compensation for increase/decrease in cost is determined by the CERC.

Appeal dismissed.

2019 (2) TMI 1394

Condonation of delay of 721 days in filing appeal - explanation offered in support of condonation of delay was that the then advocate had not informed the respondent about the disposal of suit - Possession of Villa - Held that:- What is more striking is that the delay to the tune of 721 days was condoned by the High Court when there was no satisfactory explanation. In our view, there was gross negligence on part of the respondent and the explanation offered in support of the prayer for condonation does not appear to be correct. This is evident from the fact that no effective steps were taken to pursue the complaint which was lodged against the then advocate.

In the petition for special leave, it was asserted that the complaint against the Advocate was not being proceeded with and the respondent had remained absent on the relevant date. Said assertion was not answered satisfactorily in the affidavit in reply filed in this Court.

The delay ought not to have been condoned by the High Court - the order condoning delay is set aside - possession of the villa which was handed over to the appellants in pursuance of the order dated 23.05.2018 shall continue to remain with the appellants and be taken to be in terms of the Agreement entered into between the parties - appeal disposed off.