More details are visible to the Paid members. i.e:- Party Name, Court Name, Date of Decision, Full Text of Headnote and Decision etc.
- I.Tax
- GST
- Customs
- Co.Law
- IBC
- PMLA
- SEBI
- FEMA
- S.Tax
- C.Ex.
- VAT/CST
- Others
Case Laws - Income Tax
- 2024 (4) TMI 753
Correct head of income - True character of the income - Income from leasing or letting out the properties in such Mall - “income from business” or “income from house property” - ITAT held that where the letting out the property is the main object of a company, its income is to be computed under the head “income from business” and it cannot be treated as “income from house property”, affirmed the order passed by the CIT (A)
HELD THAT:- AO did not find any material against the assessee to come to the conclusion that sub-leasing of the premises was only a part of its predominant object of the assessee. The respondent’s right from the construction of mall till the matter was taken into scrutiny had been offering income from the business of constructing, owning, acquiring, developing, managing, running, hiring, letting out, selling out or leasing multiplex, cineplex, cinema hall, theater, shop, shopping mall etc., sub-licence by it under the head “profit and gain of business or profession” of the Income Tax Act. Therefore, the CIT (A) as well as ITAT have rightly set aside the order of A.O.
The Apex Court in case of Raj Dadarkar and Associates [2017 (5) TMI 586 - SUPREME COURT] has held that ITAT being a last forum insofar as factual determination is concerned, these findings have attained finality. No material has been produced even before us to show how the aforesaid findings are perverse.
The order passed by A.O. nowhere shows that the entire income or substantial income of the assessee was from letting out of the properties, which is admittedly not the principal business activity of the assessee. Therefore, we do not find any perversity in the findings recorded by the ITAT as well as the CIT (A) and also do not find any substantial question of law involve in these appeals.
- 2024 (4) TMI 752
Validity of reopening of assessment - appeals for Assessment Years 2011-2012, 2013-2014 and 2014-2015 were pending before the ITAT and as the assessment was getting time barred and to safeguard the interest of the Revenue, the assessment was reopened on 3 issues i.e., 8% profit treating contractor, Proportionate income and Capital gain - HELD THAT:- Admittedly, the ITAT has now held against the Revenue. Therefore, the entire basis for reopening has collapsed. The Revenue’s case that an appeal has been filed in this Court challenging the orders passed by the ITAT for Assessment Years 2011-2012, 2013-2014 and 2014-2015 will not be of any help because admittedly there is no stay.
As held in Union of India v/s. Kamlakshi Finance Corporation Ltd. [1991 (9) TMI 72 - SUPREME COURT] the principles of judicial discipline require that the orders of the higher appellate authorities should be followed unreservedly by the subordinate authorities and the order is the subject matter of an appeal can furnish no ground for not following it unless its operation has been suspended by a competent Court. Admittedly, the order of the ITAT, which is challenged in appeal in this Court, has not been suspended. Therefore, the order of the ITAT is certainly binding on the Revenue.
Respondents also submitted that assessment can be opened on the basis of order passed in another assessment year which is a settled position in law. Though we will not enter into a debate with him/Respondents on this aspect, still to issue notice itself the Revenue has to, in the facts of the case, cross the first hurdle of the proviso u/s 147 of the Act and if they do not, as we have observed above, the reopening will be bad in law.
We hereby quash and set aside the impugned notice. Consequently the order on objections also is hereby quashed and set aside.
- 2024 (4) TMI 751
Addition u/s 68 on account of share capital and premium - addition made on absence of identity of the creditors, genuineness and creditworthiness of the entire transaction - ITAT deleted addition - HELD THAT:- Findings recorded by the Tribunal, is not supported by facts. AO has held that the assessee was a Private Limited company which cannot issue shares in the same manner in which Public Limited company does and in so far as creditworthiness of the share subscribers is concerned, there must be positive evidence to show the nature and source of resources of the share subscribers and if the assessee was serious enough to establish his case, it ought to have complied with the notices/letters issued by the Assessing Officer and ought to have produced the directors of the subscribing companies before the AO so that they could explain the sources from which the share subscription was made.
As stated that there is no complaints either from the end of the assessee company or from the end of the alleged subscriber company. This finding recorded by the AO as affirmed by the CIT(A), if required to be set aside by the Tribunal, reasons have to be assigned. Therefore, we find that the conclusion arrived at by Tribunal is insufficient to support its ultimate conclusion in allowing the assessee’s appeal. Therefore, we are of the view that the matter has to be remanded back to the Tribunal for fresh consideration.
Revenue appeal is allowed. The order passed by the learned Tribunal is set aside and the matter is remanded to the Tribunal to take a fresh decision.
- 2024 (4) TMI 750
Revision u/s 263 - CSR expenses admissibility as the deduction u/s 37(1) - assessee is public sector undertaking - Tribunal on fact concluded that it is not a case of no enquiry and nor it is a case of non-application of mind - HELD THAT:- ITAT's factual finding cannot be dislodged in an appeal filed u/s 260A where we are required to answer substantial questions of law for consideration.
With regard to the admissibility of the expenses u/s 37(1) Tribunal has taken note of the decision in the case of Hindustan Copper Limited. [2020 (1) TMI 1324 - ITAT KOLKATA] the facts of the said case is also on the similar line as in the said case the assessee was a public sector undertaking and certain directives issued by the Government of India was followed by the assessee. There are two notifications issued by the Government of India, the first of which is by Office Memorandum dated 21.06.2011, wherein the expenses incurred by public sector undertakings in the form of fee charged for participation in CSR Training Programme/Workshops or for sponsorship of Workshops/programmes organized by Tata Institute of Social Sciences etc. will be allowed to be included under the CSR Budgets of Central Public Sector Enterprises. The other notification is dated 1st November, 2011 which stipulates the guidelines on Corporate Social Responsibility for Central Public Sector Enterprises. Admittedly, the respondent assessee has complied with the said directives issued by the Government of India.
Identical issue was considered by this Court in the case of Ramesh Prasad Sao [2023 (10) TMI 405 - CALCUTTA HIGH COURT] wherein the assessee company was engaged in iron ore mining and it incurred periphery development expenses for territorial welfare as well as welfare of local people in the area in which mines were operating as per the direction of the local administration and such CSR expenses incurred by the assessee prior to the assessment year 2015-16 were held to be liable as business expenditure as same was wholly and exclusively incurred for the purpose of business.
Thus on facts we are convinced that the expenses were allowable more so, when the respondent assessee is a public sector undertaking and they had carried out a notification and they had implemented the notifications issued by the Government of India. The specific case of the assessee was that they incurred the expenditure for facilitating the business of construction and repair of ships mainly for Indian Navy and they were required to take up certain activity for the benefit of people residing in the said locality. Matter is entirely factual and no substantial question of law arises.
- 2024 (4) TMI 749
Acquittal of charge u/s 276CC - respondent has failed to comply with the provisions contained u/s 139(1) and he has submitted the income tax returns after a delay of 28 months - “intention”, “motive” and “knowledge” - “culpable mental state” on the part of the accused - HELD THAT:- Apex Court in the case of Prem Das [1999 (2) TMI 6 - SUPREME COURT] held that for holding an accused guilty u/s 276CC ‘mens rea’ is a necessary ingredient. Hence, in absence of proof of ‘mens rea’ and on the basis of mere presumption u/s 132(4-A), the conviction cannot be sustained.
In the above case, the Hon’ble Apex Court has clearly held that the complainant in order to bring home the guilt of the accused for the offence punishable u/s 276C has to prove the mens rea of the accused for non-payment of tax or attempt to evade the tax. But in the present case, the accused respondent has explained the reasons, in detail, about the delay in filing the income tax returns and depositing the entire tax amount with penalty subsequently. Therefore, the complainant/ appellant has failed to prove that the respondent had mens rea to evade the payment of tax. Accordingly, the Income Tax Department has failed to prove the guilt of the accused respondent beyond all the reasonable doubts.
The trial Judge came to the conclusion that even no notice was given to the respondent prior to filing of the complaint against him. Hence, it was found that the offence u/s 276CC was not found to be proved against the respondent.
It is the settled principle of law that while appreciating the evidence, in an appeal against acquittal, if the appellate Court finds that two views are plausible, then the view favouring the innocence of an accused must be taken into consideration.
This Court does not find any perversity in the findings arrived at by the trial Court in acquitting the accused under the aforesaid offences. Accordingly, the instant Criminal Appeal is dismissed. The judgment of acquittal of the accused respondent, passed by the Court below, is upheld.
- 2024 (4) TMI 748
Denial of specific request for personal hearing - petitioner expressing his difficulty in availing the opportunity of personal hearing through video conference, personal hearing was not granted, on the premise that the petitioner had not clicked on the Assessee Request Button/Icon and also not filled up the “Box of agenda of VC” - HELD THAT:- We find there is merit in the submissions of the learned counsel for the petitioner, since under identical circumstances, this Court has already held that personal hearing ought to have been extended, though the petitioner assessee might have failed in clicking on the appropriate button.
In view of the same, the impugned order is set aside. The assessment order shall be passed after affording the petitioner reasonable opportunity and personal hearing through video conference. The above exercise shall be carried out within a period of twelve weeks from the date of receipt of copy of this order.
- 2024 (4) TMI 747
Unexplained credit u/s 68 - unexplained bogus share applications - HELD HAT:- As observed once the respondent-Company furnished all the relevant and requisite documents, and in the assessment order, there is nothing which could show that the respondent-Company introduced its own income from undisclosed sources in the form of shares; the assessment order was passed only on the basis of suspicion and doubt, which is not permissible under the law, as has rightly been held by the learned CIT in its order, which in turn has rightly been upheld by the Appellate Tribunal vide the impugned order.
CIT as well as Appellate Tribunal have rightly ordered deletion of the above-said amounts, because the respondent-Company had furnished all the required the details, and further held that it cannot be said to be an unexplained credit under Section 68 of the Act of 1961. Therefore, the impugned order passed by the Appellate Tribunal is justified in law.
Disallowance of various expenses - The said disallowing is on a higher side and the same was considered by the learned CIT, and that the disallowance was restricted to Rs. 75,000/- and the respondent-Company got the relief of Rs. 75,000/-, which is completely justified in law.
Disallowance of employees contribution to ESI - CIT directed the AO to verify the contention of the respondent-Company that the employees’ contribution towards PF and ESI was deposited on or before the due date of filing the return u/s 139 (1) the same was upheld by the learned Appellate Tribunal. Therefore, now the same does not require any reconsideration by this Court.
This Court further observes that there are concurrent findings arrived at by the learned CIT as well as learned Appellate Tribunal, which are well reasoned and have been arrived at after taking into due consideration the overall facts and circumstances of the case and upon duly analyzing the material available on record before them.
This Court does not find it a fit case so as to grant any relief to the appellant in the present appeal. This Court does not find it a fit case so as to grant any relief to the appellant in the present appeal.
- 2024 (4) TMI 746
Deduction u/s 80P - interest income(s) derived from such nationalized/other bank(s) - HELD THAT:- The issue is no more res integra in light of this tribunal’s recent coordinate bench’s order in The Rena Sahakari Sakhar Karkhana Ltd [2022 (1) TMI 419 - ITAT PUNE] allowed the assessee’s claim for deduction under Sec. 80P(2)(d) on the interest income earned on its investments/deposits with co-operative bank.
Even the latter limb of interest income derived from investments made in nationalized/other bank(s), the Revenue could hardly dispute that case law The Vaveru Cooperative Rural Bank Ltd. [2017 (4) TMI 663 - ANDHRA PRADESH HIGH COURT ] that interest income(s) derived from such nationalized/other bank(s) also qualifies for Sec. 80P deduction and thereby declined it’s very stand. Thus accept the assessee’s Sec. 80P(2)(a)(i)/80P(2)(d) deduction claim(s) in very terms - Decided in favour of assessee.
- 2024 (4) TMI 745
Validity of exercise of jurisdiction u/s 153A and 153C - Addition based on manual cash book found at the premises of the Company - scope of incriminating material for the purpose of Section 153A of the Act to make addition in hands of assessee as a searched person - HELD THAT:- Manual cash book contained entries related to cash withdrawals and expenses of Company which were duly recorded and reconciled with its books of account, as also cash introduced, withdrawn and expenses on behalf of the appellant. Thus we are of the considered view that once CIT(A) has endorsed the findings of AO that based on this manual cash book, of the Company, no substantive addition is required to be made in the hands of Company and as the cash inwards and outwards are found to be from known sources and existing books, which have been considered final in the assessment of Company, then same set of books of the Company, including the manual cash book found at the premises of the Company, cannot be considered to be incriminating material for the purpose of Section 153A of the Act to make addition in hands of assessee as a searched person, as the two AYs before us are of concluded assessments.
The corollary to aforesaid being that to consider the said seized document of transactions of appellant reflected in manual cash book in the hands of appellant, provisions of Section 153C should have been invoked at the first instance. Thus the change of head of the addition by Ld. CIT(A), has resulted in vitiating the exercise of jurisdiction u/s 153A of the Act and 153C of the Act.
Disclosure as made by appellant in IDS - Even otherwise, if Ld. CIT(A) has given benefit to the appellant of having cash in hand subsequent to the disclosure in IDS, then the source of impugned expenditures incurred by Mr Vasudevan, on behalf of the appellant should also be accepted. Restricting the benefit to opening balance in AY 2015- 16 has no basis except being based on presumption. Thus, there was no justification with CIT(A) to hold that the said expenditure by Mr. Vasudevan, were the benefit or perquisites given by the company to its director which is chargeable to tax u/s 2(24)(iv) of the Act. Admittedly, these expenditures were not even claimed as deduction in the hands of the company.
The most excruciating fact is that Mr. Vasudevan could not have accounted the amount given by appellant to him as a receipt in the manual cash book as the dates reflected in the said cash book are prior to the date of declaration in IDS made by appellant. Hence, it could be safely concluded, to offset the negative cash balance reflected in manual Cash Book qua the transactions of appellant, the disclosure of Rs. 50 lacs was made by appellant in IDS. Hence, there is no scope for making any addition at all in the hands of the appellant as appellant would be entitled for telescoping benefit. Assessee appeal allowed.
- 2024 (4) TMI 744
Validity of order passed u/s 154 - investment in the property was not properly explained by the assessee during the year under consideration, there is a mistake apparent from record rectifiable u/s 154 - whether question is not a mistake apparent from record? - as argued addition u/s. 68 made despite the assessee having explained the source of investment with proper documentary evidences - HELD THAT:- As per well established law it is not in dispute that the source of the investment which was accepted by AO in his original assessment order cannot be revised in an order u/s 154 as it cannot be said to be a mistake apparent from record. We find that AO wants to change his view in the garb of rectification of mistake u/s 154 which is not permissible under the law. We find that the impugned order of the AO was passed u/s 154 and Section 154 of the IT Act mandates rectification of mistake apparent from record.
The Hon’ble Apex Court in the case of ITO vs. Volkart Brothers and others [1971 (8) TMI 3 - SUPREME COURT] has held that “a mistake apparent on record must be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning, on points on which there may be conceivably two opinions. A decision on a debatable point of law is not a mistake apparent from the record.
Thus, respectfully following the aforesaid binding principle rendered in ITO vs. Volkart Brothers [1971 (8) TMI 3 - SUPREME COURT], we hold that the impugned order passed u/s. 154 of the Act of the Assessing Officer is invalid and liable to be quashed. Appeal of the assessee is allowed.
- 2024 (4) TMI 743
Disallowance u/s. 36(1)(iii) - interest paid alleging diversion of interest bearing borrowals to the appellant's Group Companies - AO was of the opinion that the loan was diverted for non-business purposes and accordingly, he proceeded to make interest disallowance u/s 36(1)(iii) - HELD THAT:- Assessee uses mixed funds for the purpose of its business. The Share capital and free reserves are Rs. 217.20 Crores whereas loan funds are to the extent of Rs. 135.61 Crores. It is also seen that the secured loans are for specific purposes i.e., project loans, vehicle loans etc. only and the same could not be diverted for other purposes. In such a situation, unless the nexus of borrowed funds vis-à-vis the loans advanced by the assessee is established by Ld. AO, a presumption could be drawn in assessee’s favour that the advances were funded out of own funds and not out of borrowed funds.
We find that no such exercise has been carried out by Ld. AO and therefore, it was to be presumed that funds were advanced first out of interest free funds available with the assessee. This is as per the decision of Hon’ble Supreme Court in the case of CIT Vs. Reliance Industries Ltd. [2019 (1) TMI 757 - SUPREME COURT] The decision of Savera [1997 (11) TMI 37 - MADRAS HIGH COURT] also supports this view. Therefore, we delete the impugned disallowance and allow corresponding grounds raised by the assessee. This issue arises in assessee’s appeal for AY 2011-12 also. Facts being pari-materia the same, the corresponding grounds raised in AY 2011-12 also stand allowed accordingly.
Nature of expenses - Relaunch expenses - deferred revenue expenditure claimed to the extent of 1/3rd in each of the year - HELD THAT:- Assessee has undertaken publicity campaign and incurred relaunch expenses, such an activity has not enlarged the profit making apparatus of the assessee. The assessee has not ventured into any new line of business rather it is seeking growth in the existing line of business. Further, the nature of the expenditure would show that it is substantially in the nature of revenue expenditure though the benefit of the same may have accrued to the assessee over several years. Nevertheless the said expenditure could not be branded as capital expenditure merely on account of the fact that the benefit would flow in more than one year.
The assessee has not enlarged its profit making apparatus and it seeks improvement in the existing line of business only. It could not be said that the assessee has acquired enduring advantage in capital field. Therefore, we direct Ld. AO to accept the claim of the assessee. In other words, the expenditure claimed by the assessee to the extent of 1/3rd would be allowable to the assessee. The depreciation as allowed to the assessee shall stand reversed. The corresponding ground stand allowed accordingly.
Short Credit of TDS - HELD THAT:- We direct Ld. AO to allow correct TDS credit in accordance with law. This ground stand allowed for statistical purposes.
Disallowance u/s 14A - no exempt income has been earned by the assessee - HELD THAT:- We find that this issue is covered in assessee’s favor by the decision of Chettinad Logistics P. Ltd [2017 (4) TMI 298 - MADRAS HIGH COURT] holding that Section 14A cannot be invoked where no exempt income was earned by assessee in relevant assessment year. Respectfully following the same, we direct Ld. AO to verify the same. If no exempt income has been earned by the assessee, the impugned disallowance shall stand deleted. The Explanation to Sec.14A, as referred to by Ld. CIT(A), in our considered opinion, is prospective in nature and the same is not applicable in this year. The corresponding grounds raised by the assessee stand allowed for statistical purposes.
Disallowance of prior period items - HELD THAT:- From assessee’s submissions, it emerges that various expenditure, though pertaining to earlier years, have been ascertained during this year only. The same would be claimed and allowable only upon crystallization. It is also not the case that the assessee has claimed deduction of the same in earlier years. Therefore, the impugned expenditure, in our considered opinion, is allowable to the assessee in this year only. We order so. The corresponding grounds raised by the assessee stand allowed.
Disallowance of late payment of Employee’s contribution to PF / ESI - HELD THAT:- Admittedly, this issue stand covered against the assessee by the decision of Checkmate Services P. Ltd [2022 (10) TMI 617 - SUPREME COURT] Respectfully following the same, we dismiss the corresponding grounds raised by the assessee.
TDS u/s 195 - Disallowance u/s 40(a)(i) on account of payment made to foreign agencies - PE in India or not? - impugned disallowance was deleted by CIT(A) as held that Fees for Technical Services means managerial, technical and consultancy services but do not include payments considered as salary by the recipient of such income. Journalism is the process of collection, analyzing and disseminating information in public interest - HELD THAT:- Admittedly, none of the payee has permanent establishment in India. As noted by Ld. CIT(A), Fees for Technical Services means managerial, technical and consultancy services. The process of gathering information is nothing but a profession and these kind of services are covered under specific Article-5, Article-7 and Article-15 of India-USA DTAA and India-UK DTAA which are applicable to the facts of the present case. These articles exempt such payment from taxation in the absence of any permanent establishment. The provisions of DTAA, being more beneficial to the assessee, would apply in preference to the provisions of the Act. Decided in favour of assessee.
- 2024 (4) TMI 742
Addition of bogus sales - difference in opinion between learned Members constituting the bench - matter referred to third member - Accountant Member has given a clear cut finding that no addition u/s 68, whereas, Judicial Member has returned a finding that the addition has to be made u/s. 69 - whether, the ingredients of section 68 of the Act are satisfied to sustain the disputed additions? and whether additions in dispute can alternatively made u/s. 69? - assessee is a resident partnership firm stated to be engaged in the business of trading in bullion, jewellery etc.
HELD THAT:- As far as the salesalleged to have been made to bogus entities controlled by entry operator Shri Sonu Punjabi, it is observed that in course of assessment proceeding as well as before the First Appellate Authority the assessee has furnished various documentary evidences, such as, party wise details of purchase and sale for the entire year, VAT returns and VAT assessment orders, item wise stock register and purchase invoices, confirmation from the suppliers, audited books of accounts, quantitative tally of purchase and sale etc.
It is also a fact that the suppliers from whom the assessee purchases gold/bullion confirmed the transactions in response to notices issued u/s. 133(6) of the Act. Pertinently, no deficiency or discrepancy was found either in the books of accounts maintained by the assessee or the documentary evidences furnished. This is so because, neither the AO nor the FAA have returned any adverse inference, either in relation to the books of accounts maintained by the assessee or the documentary evidences furnished. Merely, because the notices issued u/s. 133(6) and summons issued u/s. 131 returned unserved or remained unanswered, cannot lead to the conclusion that sales are bogus, when there are overwhelming documentary evidences brought on record in the form of audited books of accounts, stock register, item wise purchase and sales, VAT return, VAT assessment order accepting the sale transactions to demonstrate that the assessee indeed has effected the sales.
In respect of sales made to M/s. RBPL the addition in our view was made purely on conjectures and surmises - Admittedly, the AO has not found any discrepancy or deficiency in the books of accounts and stock register maintained by the assessee. Thus, when the assessee has maintained item wise purchase and sale details as well as stock register and, moreover neither in course of survey any stock discrepancy was found nor any unaccounted cash was found, certain sales cannot be treated as bogus.
Similar is the factual position qua the sales effected to M/s. Olivia Tradelinks India P. Ltd., and M/s. S.S Overseas, as, the assessee has furnished all documentary evidences to prove the identity, creditworthiness and genuineness of transaction. Thus, the assessee has sufficiently discharged the initial burden cast upon it to prove the credit entries appearing in the books of account. Once it is established that the initial burden cast upon the assessee has been discharged, the burden shifts to the Assessing Officer to conclusively prove that the credit entries appearing in the books of accounts are unexplained in terms with section 68 of the Act. In the facts of the present appeal, the Assessing Officer has failed to do so.
As rightly observed by Accountant Member, since the Assessing Officer has started the computation of income with the returned income of the assessee, it goes to prove that the entire trading account shown in the financial statement filed with the return of income has been accepted by the Assessing Officer.
Also agree with learned Accountant Member that once the sales made by the assessee are supported by stock register, sale bills, payments through banking channel and sales have not only been disclosed in VAT returns but stand duly verified and accepted by VAT Department, such sales cannot be treated as bogus, so as to enable the Assessing Officer to invoke the provisions of section 68 of the Act. Thus, addition made u/s. 68 of the Act was rightly deleted.
Addition u/s 68 v/s 69 - In the facts of the present appeal, it is an admitted factual position that the disputed transactions are duly recorded in the books of accounts of the assessee. Therefore, at the very threshold the provisions of section 69 will not get attracted. In fact, Revenue fairly accepted aforesaid factual and legal position. In any case of the matter, both the Assessing Officer and learned First Appellate Authority have proceeded on the premise that the credit entries appearing in the books of account are unexplained cash credit u/s. 68 - It is quite patent and obvious that provisions contained u/s. 68 and 69 of the Act operate in different situations and conditions therein are also different. Therefore, when it was never the case of the Department that the disputed addition has to be treated as unexplained investment u/s. 69 of the Act, at the second appellate stage, a new dimension cannot be given to the disputed issue by converting the addition from section 68 to section 69, that too, without providing an opportunity of being heard to the assessee. More so, when applicability of section 69 was never within the purview of the Tribunal and not even the case of the Department.
Revenue, though, had fairly agreed that provisions of section 69 cannot get attracted, however, he urged and pleaded that the addition made u/s. 68 of the Act should be sustained - aforesaid contention of learned Standing Counsel is unacceptable considering the fact that the mandate given to me as Third Member is very limited in its scope and I have to agree with the view expressed by one of the Members. In the facts of the present appeal, learned Accountant Member has given a clear cut finding that no addition u/s 68 of the Act can be made. Whereas, learned Judicial Member has returned a finding that the addition has to be made u/s. 69 of the Act. In other words, learned Judicial Member impliedly agrees that the addition could not have been made u/s. 68 of the Act. Thus, in third member view, there is no disagreement between the learned Members with regard to applicability of section 68 of the Act to the disputed addition.
Ratio laid down in the decisions referred to by learned Accountant Members clinches the issue in favour of the assessee. Thus, additions made u/s. 68 of the Act are unsustainable as agreeing with the view expressed by learned Accountant Member.
- 2024 (4) TMI 741
Bogus unsecured loans and bogus share capital money - not providing cross-examination of maker of the statement on which AO relies upon to take adverse view against an assessee - CIT(A) deleted addition - HELD THAT:- Merely because the lenders did not appear before the AO, cannot be the sole reason for drawing adverse view against the assessee/transaction in question. Since the assessee filed the aforesaid relevant documents by the assessee, we find it had discharged the burden to prove the identity and creditworthiness of the lenders parties and genuineness of the loan given to assessee
We rely on the decision of Andaman Timber Industries Vs. CCE [2015 (10) TMI 442 - SUPREME COURT] wherein it was held that not providing cross-examination of maker of the statement on which AO relies upon to take adverse view against an assessee is a serious flaw which render the action of AO a nullity. Same view was reiterated in the decision of CIT v Odeon Builders Pvt. Ltd. (2019 (8) TMI 1072 - SUPREME COURT).
Further, we note that the assessee has shown the nature of the receipt as unsecured loan, and has discharged the burden casted upon it u/s 68 of the Act by providing proof of creditors i.e. identity of the lender by furnishing their PAN details, their ITR acknowledgment for AY. 2009-10; and from a perusal of the relevant financials of share subscribers, we note that they had sufficient creditworthiness to make investment in assessee company; and from perusal of the bank statement it reveals that loan was given and repaid through banking channel. We further note that AO has not been able to find any infirmity in the aforesaid evidence furnished by the assessee. In such a scenario, we agree with the impugned action of the Ld. CIT(A) deleting the addition - Therefore, we uphold the action of Ld. CIT(A) the deleting the addition.
Investment in the form of share capital in earlier years - Merely on the basis of information given by Investigation Wing and the statement recorded by Shri Pravin Kumar Jain (accommodation entries provider) the AO without applying the mind made an addition of Rs. 80 Lakhs, despite the fact that the assessee has infused share capital of only Rs. 50,000/- in the year AY. 2009-10, and thus erred in making an addition of Rs. 80 Lakhs which action of the AO cannot be countenanced and the Ld. CIT(A) rightly noted that the impugned share capital of Rs. 80 Lakhs has not been infused in the relevant year under consideration from the companies named by AO as noted (supra). In such a scenario, we do not find any infirmity in the action of the Ld. CIT(A) deleting the addition which we confirm.
Appeal of the revenue stands dismissed.
- 2024 (4) TMI 740
LTCG u/s. 50C - leasehold right on land acquired - CIT(A) deleted addition by holding that leasehold right on land are not within the purview of section 50C - Ld. Counsel submitted that section 50C applies only in case of a transfer of capital asset being land or building or both and this section does not make a specific reference to “rights in lands or building” which otherwise is included in other provisions in the Act
Whether the transfer of leasehold rights in land falls within the purview of section 50C or not? - HELD THAT:- Coming to the facts of present case, where the transaction relates to transfer of a leasehold property whereby an industrial plot of land was allotted by MIDC under a lease agreement to the assessee and subsequently assessee transferred the said leasehold land to SMI for the remaining period of lease, the important point we need to consider is whether the leasehold rights which are restricted in nature are covered within the meaning of “capital assets being, land or building or both”, contained in section 50C(1).
We need to understand the nature of rights accruing on a property which is freehold and the one which is leasehold. In this respect, we do find force in the submission made by the Ld. Counsel exhaustively dealing with several parameters to distinguish between the features of leasehold property and a freehold property, already tabulated above. Accordingly, the capital asset being land or building or both referred to in sec. 50C(1) do not include leasehold rights in land or building or both.
Wherever legislature intended to include specific reference to “rights in land or building or part thereof” which is included in certain sections such as section 54D, section 54G, sec. 54GA, sec. 27(iiib), sec. 5(1) of Wealth Tax Act, 1957 and explanation to sec. 269UAD. Such a reference to “rights in land or building or part thereof” does not find place in sec. 50C(1) which sets it apart from the inference to be drawn that capital asset being, land or building or both would also include rights in land or building or part thereof, to cover leasehold rights which are limited in nature and cannot be equated with ownership of land or building or both. The Act has given separate treatment to land or building or both and the rights therein.
Thus we are in agreement with the submissions made by assessee to hold that leasehold rights in land are not within the purview of section 50C of the Act. Accordingly, we concur with the finding arrived at by CIT(A) in deleting the addition on account of long term capital gain for transfer of leasehold industrial plot u/s. 50C of the Act.
Alternate plea made by the Ld. Counsel as to application of first and second proviso to section 50C, we do find force in the same - assuming for a moment for the purpose dealing with this alternate plea that transfer of a leasehold right in land is covered by sec. 50C(1) then, on this alternative plea also, the assessee is adequately safeguarded by first and second proviso to sec. 50C whereby it had entered into agreement to sale with SMI to transfer the leasehold rights in land in the year 2011 itself for a consideration of Rs. 2 Cr. against which assessee had received Rs. 5 lacs in advance through banking channel, fact of which are undisputed and uncontroverted. Assessee had also placed on record the stamp duty value at that relevant time on record which is lesser than the actual consideration of Rs. 2 Cr. and thus, there cannot be any adverse bearing on the assessee by applying first and second proviso to sec. 50C in the instant case.
Appeal of the revenue is dismissed.
- 2024 (4) TMI 739
Enhancement of assessment by CIT(A) u/s 251(2) - addition u/s 56(2)(vii) - HELD THAT:- As from the perusal of the provisions of section 251 of the Act, it is pertinent to note that though the statute has conferred the power of enhancement on the learned CIT(A) while disposing of an appeal against an order of assessment, however, as per the provisions of sub-section (2) the learned CIT(A) is required to grant reasonable opportunity of showing cause against such enhancement to the assessee prior to making any such enhancement. Ostensibly, in the present case, no such opportunity was granted by the learned CIT(A) to the assessee while making the aforesaid enhancement and directing the AO to tax Rs. 25 lakh in the hands of the assessee under section 56(2)(vii)(a) of the Act. Therefore, we are of the considered view that the learned CIT(A), while directing the impugned addition under section 56(2)(vii)(a) of the Act, did not comply with the provisions of section 251(2) of the Act.
Addition u/s 56(2)(vii)(a) - Whether such a contravention is an illegality or irregularity? - As u/s 56(2)(vii)(a) of the Act, one of the preconditions for the taxability of the money received by the assessee is that the same should have been received without consideration, which, in our considered view, is not fulfilled in the present case, as the amount was received by the assessee as a security deposit towards the development agreement entered into by the assessee with the developer for development of non-agriculture land. Since one of the conditions for applicability of section 56(2)(vii)(a) of the Act is not satisfied in the present case, we are of the considered view that the impugned enhancement directed by the learned CIT(A) under section 56(2)(vii)(a) of the Act is not sustainable.
Therefore, the impugned addition u/s 56(2)(vii)(a) is directed to be deleted. Since the relief has been granted to the assessee on merits, the course of action as noted above in case of non-compliance with the procedure prescribed under section 251(2) of the Act is now rendered to be merely an academic exercise and thus not required in the facts of the present case. Appeal by the assessee is allowed.
- 2024 (4) TMI 738
Addition of commission expenses and franking charges - Allowable business expenditure or not? - HELD THAT:- From a perusal of it is noted that the assessee had furnished the details of the parties to whom the franking charge has been incurred by assessee (on behalf of the customers). However, no other evidences have been filed by assessee to prove that franking charges have been incurred wholly and exclusively for the purpose of business, CIT(A) confirmed the action of AO. On the same reason, the action of Ld. CIT(A) confirming the action of AO disallowing same is confirmed.
Therefore, issue regarding commission payment is restored back to the file of the AO for verification and the assessee to submit the relevant evidences as stated and the AO to pass order in accordance to law after hearing the assessee. Appeal of the assessee is allowed for statistical purposes.
- 2024 (4) TMI 737
Expenditure incurred by the HO for salary paid to the expatriate employees for rendering services to PE - as per revenue these expenses being not recorded in books of assessee (PE) in India, were neither actually paid nor shown payable in books of Indian PE and as the assessee did receive the services of such value through its HO, simultaneously there was equivalent income also accruing to assessee u/s 28(iv) and once the AO having not made any separate addition u/s 28(iv), the disallowance of expenses claimed directly in computation of income was merely to bring tax neutrality - HELD THAT:- We observe from the record that identical issue is decided in favour of the assessee in the A.Y. 2001-02 [2023 (11) TMI 1250 - ITAT MUMBAI] wherein held that non-reimbursement of expenses incurred by HO for salary of employees of Indian PE did not result in taxable income in the hands of PE/HO under section 28(iv).
Taxability of interest income in the hands of Head Office - HELD THAT:- Identical issue is decided in favour of the assessee in the A.Y. 2001-02 [2023 (11) TMI 1250 - ITAT MUMBAI] interest paid by Branch to the Head office is not taxable under the domestic laws for the year under consideration.
Disallowance of interest paid to Head Office - assessee submitted that Assessing Officer held that interest income is taxable under DTAA at 10% in the hands of the HO and disallowed the claim of deduction on account of non-deduction of tax which is allegedly deductible at source - HELD THAT:- Identical issue is decided in favour of the assessee for the A.Y. 2001-02 [2023 (11) TMI 1250 - ITAT MUMBAI] to allow the deduction of interest paid to HO/OB in line with the decision of the Mumbai Special Bench in case of in case of Sumitomo Mitsui Banking Corporation [2012 (4) TMI 80 - ITAT MUMBAI] Further, the Appellant submit that Special Bench decision in case of Sumitomo (supra) is not only dealing with India-Japan Tax Treaty but also dealt with India-Netherland Tax Treaty. Your Honour will appreciate that the language of India-UK Tax Treaty (applicable in case of the Appellant) is in line with India-Netherland Tax Treaty. Revenue is not able to produce any argument to controvert the facts of the ground raised by the assessee and also not able to controvert the stand taken by the special bench in the case of Sumitomo Mitsui Banking Corporation (supra).
Nature of expenditure on Refurbishment - assessee submitted that these expenses incurred on refurbishment of various branch premises like electrical works, cabling and wiring, etc. Assessing Officer held that these expenses are capital in nature (and not revenue) disallowed the same - HELD THAT:- Identical issue is decided in favour of the assessee for the A.Y. 2001-02 [2023 (11) TMI 1250 - ITAT MUMBAI] as held looked upon expenditure which did bring about some kind of an enduring benefit to the company as revenue expenditure when the expenditure did not bring into existence any capital asset for the company. The asset which was created belonged to somebody else and the company derived an enduring business advantage by expending the amount. In all these cases, the expense has been looked upon as having been made for the purpose of conducting the business of the assessee more profitably or more successfully. In the present case also, since the asset created by spending the said amounts did not belong to the assessee but the assessee got the business advantage of using modern premises at a low rent, thus saving considerable revenue expenditure for the next 39 years, thus the expenditure should be looked upon as revenue expenditure.
TP Adjustment - Disallowance of expenses directly attributable to operation in India - Whether the allocation of cost by the Head Office are eligible and whether it is covered within the provisions of section 44C ? - HELD THAT:- These costs are allocated between the Head office and branches which are nothing but allocation of costs within the cost centers of same assessee, allocated the cost on the basis of allocation key, which are accepted principles without any profit element on it. The arrangements are within the organization and there cannot be any agreement, strictly speaking the agreement on allocation key is itself on an agreed terms between the branches.
It is not necessary that it should have a separate agreement between the branches and also there is no requirement of invoices between the branches it is enough that there are approved internal memo. It is agreed that it is an international transaction there has to be certain documents justifying the allocation with proper allocation key, which has to be documented with mutual agreement for demonstration of acceptance of such allocation key.
Once the branches and head office justifies the allocation key for allocation of various expenses, it justifies the purpose of sharing the internal costs. We observe that these costs are not just shared this year, it is a regular practice over the years by the head office or relevant branches which does services by submitting the various costs with proper allocation key. It is brought to our notice that various services are offered by the head office and relevant branches which also demonstrates the increase in the volume of business as well as services to Indian customers, this itself a benefit derived by the Indian branch. Therefore, in sum and substance, we observe that AO has intended to disallow the whole cost allocation made by the Head office to toe along with the findings in the earlier assessment years and not inclined to relook at the actual material or facts on record.
In our view, he has grossly rejected the documents and justification submitted by the assessee. We do not see any reason to differ from the findings of the Coordinate Bench in the earlier assessment years - AO himself partially accepted the findings of TPO and proceeded to disallow the whole allocation of costs, which demonstrates that he has no inclination to allow the costs incurred by the assessee.
Even the TPO partially recognizes the allocation of costs and rejects the cost which according to him not supported by the sufficient documents. It is Transfer Pricing Officer's obligation to call for the whole documents before closing the Transfer Pricing assessments and also he cannot treat any TP adjustment without properly justifying the reasons for such rejection. In this case, we observe that he has merely considered the submissions made by the assessee and he partially accepted the allocation and other part, he has proceeded to treat them as nil with the observation that there is no proper documents submitted before him.
The revenue cannot reject the CPA certificate since the same are specific and authenticated. As per Rule 10D(2)(A), the document must be supported by authentic documents, which includes authentication by the CPA. Therefore, the certification of allocation key and the same was authenticated by the CPA is proper documents as per Reule 10(2)(A) of the I.T. Rules. Respectfully following the above decision, we observe that in the given case also, the assessee has provided informations under Rule 10D(2)(A) and the cost allocation was also certified by the statutory auditors (CPA) of the Head Office and the service branches are submitted before tax authorities. However, this was not taken cognizance by the tax authorities. Therefore, we direct the Assessing Officer to verify the CPA certificate and verify the allocation key and relevant allocation of the cost to the Indian entity.
Disallowance u/s 14A - HELD THAT:- As following the principle of consistency, the view taken by the Tribunal in A.Y. 2001-02 is respectfully followed, accordingly, Assessing Officer is directed to restrict the disallowance to 1% of exempt income and ground raised by the assessee is partly allowed.
Premium paid on acquisition of retail asset portfolio - HELD THAT:- We observe from the record that the assessee has acquired the retail loan portfolio from Standard Chartered Grindlays Bank Ltd, which is a separate legal entity on the proprietary basis, it is also relevant to note that it has acquired the running retail portfolio business. Therefore, it is only a trading assets acquired by it. In our view, the assessee will get the benefit based on the tenure of this trading assets. It was submitted by the Ld AR that the tenure of this retail loans are for the period 2 to 5 years. Therefore, cost verses benefit has to be recognized in this transaction. The assessee has benefitted and recognized the income in the next 5 years, hence, in our view, it should be treated as deferred revenue expenditure and allocated in 5 equal installments. Therefore, we direct the AO to allow 1/5th of the cost in this assessment year and balance can be carried forward to the subsequent years. Accordingly, the ground raised by the assessee is partly allowed.
Deduction of Head office expenditure - HELD THAT:- Head office expenditure is allowed in entirety under the provisions of Article 26 of the tax treaty without the applicability of restriction under section 44C of the Act, and as the submissions by assessee not controverted by the Revenue, In view of this, ground of appeal of the assessee is allowed.
- 2024 (4) TMI 736
Revision u/s 263 - As per CIT AO has not examined the issue of interest expenditure claimed against interest from third party - SCN was issued relating to advancing of borrowing funds to the third parties without utilizing the funds for assessee's own business - HELD THAT:- We find that the in the notice issued u/s 142(1) of the Act specific questions have been raised in point 6 with regard to the investments/loans appearing in the balance sheet and justification regarding interest paid to others has been asked for. The assessee had made detailed submissions and after considering the same, the assessment has been completed and in the body of the assessment order, this issue has been dealt by the AO.
Assessing Officer has extensively examined this issue and has taken a plausible view after proper application of mind. It is not the case of no enquiry or incomplete enquiry. AO has carried out a detailed enquiry and after considering the fact that the assessee being into real estate project has borrowed funds from SREIIFL for the business purpose and for short term when the funds were idle as a prudent business man and for commercial expediency, the funds were utilized for giving loan to another concern. AO fairly dealt with this issue and on observing that interest expenditure has been claimed in the interest of business has allowed the said claim.
Under these given facts and circumstances, we firstly find that the assessment order is not erroneous as a detailed enquiry has been conducted and secondly not prejudicial to the interest of the revenue as the assessee has set off the interest expenditure against the interest income earned from applying the short term loans and advances - Revisionary proceedings u/s 263 quashed - Decided in favour of assessee.
- 2024 (4) TMI 735
Assessment u/s 153A - Addition u/s 68 - bogus unsecured loan - unexplained cash credit received from shell/paper companies under the garb of unsecured loan - CIT(A) deleted addition - HELD THAT:- As on the date of search i.e., 29/01/2021, Assessment Years 2014-15 and 2015-16 fall under the category of completed/unabated assessment years and addition for such assessment years could have been made only if any incriminating material has been found by the search team indicating that the assessee had any unaccounted income/investment/unaccounted money. Perusal of the assessment order shows that the ld. Assessing Officer has not referred to any incriminating material. He has merely acted upon the informations available in the audited balance sheet relating to unsecured loans taken and based on the post search enquiry/information from third parties have made the alleged additions
We find that the ratio laid down by the Hon’ble Apex Court in Abhisar Buildwell (2023 (4) TMI 1056 - SUPREME COURT] is squarely applicable on the facts of the instant case and, therefore, since the AY 2014-15 & 2015-16 are completed and unabated Assessment Years and no incriminating material was found for the alleged Assessment Years during the course of search and the ld. Assessing Officer has made the addition without referring to any incriminating material, the addition has been rightly deleted by the ld. CIT(A). We thus fail to find any infirmity in the finding of the ld. CIT(A). Accordingly, the grounds of appeal raised by the revenue for both the Assessment Years are dismissed.
- 2024 (4) TMI 734
Addition u/s 69 - AO made addition merely on the reasoning that the payment of consideration was not disclosed - assessee before the CIT(A) contended that the lands purchased by it through sale deed was not disclosed in the books as the consideration was not paid due to dispute - CIT(A) after considering the facts in totality confirmed the addition made by the AO - HELD THAT:- There is no dispute that the land in question was purchased by the assessee much earlier through the sale deed and payment for the same was made subsequently. Generally, such transactions are against the prevailing market forces/ practices. Under standard conditions, the buyer needs to make the payment to the vendor on or before the registration of the sale deed. There can always be exceptions to such kind of prevailing market practices but the same can be accepted if there is some reasonable justification.
We note that in the case of CIT versus Lubtec India Ltd [2007 (7) TMI 281 - DELHI HIGH COURT] has observed that the provisions of section 69C of the Act are applicable with respect to the expenditures which have actually been incurred by the assessee and the assessee fails to offer any explanation about the source of such expenditure. From the judgement, it’s transpired that actual expenditure, the source of which has not been explained, should have been incurred for attracting the deeming provisions provided u/s 69 of the Act.
In the present case there were several justifiable factors for the delayed payment against the purchase of land. These justifiable factors have been elaborated in the preceding paragraph and the same has not been doubted by the revenue authorities. Thus, in such facts and circumstances, we are of the view that the addition cannot be made in the hands of the assessee merely on the reason that the assessee got the property transferred through registered sale without making the payment to the vendor.
There was no document brought on record by the Revenue suggesting that the assessee has incurred the expenses in connection with the purchase of land in cash so as to apply the provisions of section 69 of the Act. As such, the provisions of section 69 of the Act cannot be attracted in the light of the discussion held in the case of Lubtec India Limited. (supra). Thus addition directed to be deleted - Decided in favour of assessee.
- 2024 (4) TMI 715
Validity of Faceless Assessment - demand notice was issued without furnishing a draft order to the Petitioners - violation of principles of natural justice in not furnishing a draft order to the assessee and affording the assessee an opportunity to file its objection to the same - HELD THAT:- An opportunity must be given to the Department to follow the correct procedure and proceed with the matter in accordance with the law. In short, the error on the part of the Department was corrected, but the Department was allowed to proceed after such correction, thereby affording the assessee sufficient opportunity consistent with the principles of natural justice and fair play.
Secondly, M/S CWT India Pvt. Ltd. (2023 (9) TMI 438 - BOMBAY HIGH COURT), though rendered after the decision of the Hon'ble Supreme Court in Mantra Industries Ltd. [2023 (5) TMI 498 - SC ORDER], does not appear to have taken cognisance of the decision (supra). Perhaps this decision may not have even been cited before the Bench.
Instead, the reference can usefully be made to the decision in Faqir Chand [2021 (8) TMI 488 - DELHI HIGH COURT], Kottex Industries Pvt. Ltd. (2022 (10) TMI 1134 - GUJARAT HIGH COURT], Piramal Enterprises Ltd. (2021 (8) TMI 48 - BOMBAY HIGH COURT] where the impugned assessment orders were quashed but liberty was granted to the Department to proceed further in accordance with law and after complying with principles of natural justice and fair play.
Thus, for all the above reasons, we quash and set aside the impugned assessment order and notice and remand the matter to the Assessing Officer/ Department to take corrective measures and pass a fresh order.
- 2024 (4) TMI 714
Rectification of mistake - period of limitation - To give appeal effect of orders passed by the ITAT and issue a refund. - whether the limitation period for the remand by the ITAT would have to be strictly construed to begin from the date when the order of the ITAT is “received” by the concerned authority through an appropriate mechanism, particularly in light of the provisions of Section 254 r.w.s.153(3) of the Act and the judgment rendered by this Court in Odeon Buildwell [2017 (3) TMI 1266 - DELHI HIGH COURT]?
HELD THAT:- The legal landscape in the present lis relates to sub-Section 3 to Section 153 of the Act which stipulates that an order for fresh assessment pursuant to an order u/s 254 or Section 263 or Section 264 of the Act may be made at any time before the expiry of a period of nine months. The said provision further encapsulates that the aforesaid period has to be calculated from the end of the financial year in which the order u/s 254 is received by the authorities mentioned in the said Section.
Evidently, from the extract of the relevant portion of the judgment in Odeon Buildwell (supra) in the preceding paragraph, it is seen that the contextual interpretation of the phrase “received” postulates the time when are the parties notified about the pronouncement and are represented at that instant in the open court. As held that the solitary reason of non-receiving of the order by the concerned authority cannot consequently make the period of limitation cease to run.
Court further noted that once a responsible authority including the Department’s Representative is aware of the order, the communication of the order is purely an administrative arrangement which has to be carried out internally within the Department.
Recently, in the case of Lakhpatrai Agarwal [2023 (2) TMI 533 - BOMBAY HIGH COURT] has held that the legislative intent behind the enactment of Section 254(3) of the Act does not prescribe shifting of the onus of proving the receipt of the order under the said provision on the assessee.
As safely concluded that the expression “received” employed in Section 153(3) of the Act would not strictly mean that a certified copy of the order of the ITAT, in the given facts and circumstances, ought to have been necessarily supplied to the concerned authority through an appropriate mechanism devised by the respondents.
Further, sub-Section 3 to Section 254 of the Act casts a duty upon the ITAT to send the copy of the orders passed under Section 254 of the Act to the assessee as well as to the Principal Commissioner or Commissioner. A conspectus of Section 254 read with Section 153(3) of the Act would reveal that the said provisions cannot be made applicable to the detriment of the petitioner in the case at hand.
There is no force in the argument put forth by the respondents that the order was not received by the concerned authority through appropriate channel. In any case, as decided in Odeon Buildwell (supra), the ground raised by the respondents is only an internal arrangement of the Department and the same cannot be stretched to mean that it is a valid ground for the extension of the limitation period. The underlying rationale of the Legislature behind the enactment of Section 153(3) and setting the limitation therein, cannot be envisaged to expand the time limit for passing of a fresh assessment. Rather, the said provision entails a strict adherence to the time period within which the remand order in the present case should have been complied with by the respondents.
Taking into consideration the ITAT’s response that the concerned order was sent on 24 October, 2018, the Department ought to have passed the order to give the appeal effect within twelve months from then. However, the same has not been done by the Department till date.
Since the respondents have failed to comply with the order of the ITAT in passing a fresh assessment order within the stipulated time, the instant writ petition is allowed.
- 2024 (4) TMI 713
Prosecution Proceedings - Offence u/s 276B and 278B - not depositing the TDS amount for the Financial Year 2019-20 within the statutory period prescribed under law and delay caused by them remained unexplained - petitioners have delayed in depositing the amount collected on behalf of the govt. ranging from 15 days to 394 days - HELD THAT:- The maximum delay of 394 days for depositing the TDS amount to the revenue account have been well explained by the petitioners, therefore, the authorities ought to have been taken into consideration same, particularly for the reasons that the petitioners-company has suffered the I.B. proceeding and the restriction imposed during the COVID-19 pandemic, the petitioners case is directly covered by the judgments cited in the case of Dev Multicom Pvt. Ltd. [2022 (3) TMI 1038 - JHARKHAND HIGH COURT] and M/s. D.N. Homes Pvt. Ltd. Khurda & another [2023 (11) TMI 447 - ORISSA HIGH COURT] because the prosecution indeed has been initiated by the opposite parties against the petitioners after having received the TDs amount along with the interest. Therefore, the entire proceeding arising qua the petitioners stands quashed.
- 2024 (4) TMI 712
Income tax proceedings against company dissolved / insolvent - Jurisdiction or authority to reopen or assess income for any period prior to the approval of the Resolution Plan - Distinction between voluntary and involuntary corporate insolvency - respondents chose to commence proceedings referable to Section 144B
HELD THAT:- Resolution Plan once approved would bring the curtains down on any claims pertaining to a period prior to the approval of the RP is no longer res integra.
We note that while dealing with an identical issue, we had in Ireo Fiverriver Pvt. Ltd [2024 (4) TMI 665 - DELHI HIGH COURT] as held successful resolution applicant cannot be foisted with any liabilities other than those which are specified and factored in the Resolution Plan and which may pertain to a period prior to the resolution plan itself having been approved.
Section 144B power entails proceedings for assessment, reassessment or re-computation being initiated in terms of the faceless procedure of assessment as prescribed therein. Any effort to assess, reassess or re-compute could tend to lean towards a re-computation of liabilities which otherwise stands freezed by virtue of the Resolution Plan having been approved.
Such an action or recourse would clearly be barred by Section 31 of the IBC which binds all creditors of the corporate debtor, including the Central and State Governments or any other local authority to whom a debt is owed. A Section 144B action is what the Supreme Court frowned upon and chose to describe as the “hydra head” and thus being contrary to the clean slate principle which the IBC advocates. We, consequently, find ourselves unable to sustain the impugned action.
We find ourselves unable to sustain that line of reasoning bearing in mind the undisputable legal position which obtains in light of the scheme of the IBC and which fails to incorporate any distinction between voluntary and involuntary corporate insolvency. As we read the provisions of the Act, the IBC does not erect different levels of protection or insulation dependent upon whether corporate insolvency had been initiated voluntarily or on the basis of a petition referable to Section 7 of the IBC.
In our considered opinion, the purport of Section 31 of the IBC stands conclusively settled by the Supreme Court in terms of the judgments rendered in Essar Steel India Ltd. Committee of Creditors v. Satish Kumar Gupta and Ghanashyam Mishra [2019 (11) TMI 731 - SUPREME COURT].
We also bear in mind that upon commencement of CIRP, the petition is duly advertised in terms of the provisions made in Regulation 6 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 and which would thus constitute due public announcement. The respondents, therefore, cannot sustain the invocation of Section 144B based on their own failure to lodge a claim within the time stipulated.
- 2024 (4) TMI 711
Validity of Reopening of assessment - “tangible material” as may ever give rise to a “reason to believe" - Justice M.B. Shah Commission submitted its Report and only suggested possibility of under invoicing of Iron Ore extracted from mines and exported from the State of Goa - HELD THAT:- Undisputed between the parties that the present re-assessment proceeding has arisen under the unamended law i.e. the law that was in force upto 31.03.2021. Under the law as it then existed, no re-assessment proceedings could ever be initiated except against a valid “reason to believe” recorded by the assessing authority.
Second, even in a no assessment case, re-assessment could rise only after such “reason to believe” had been recorded in writing before issuance of notice u/s 148. Thus, recording of “reasons to believe” in writing was a sine qua non for valid assumption of jurisdiction to re-assess an assesse.
As to what amounts to a “reason to believe,” the law has remained settled over long decades. In S Ganga Saran and Sons (P) Ltd. [1981 (4) TMI 5 - SUPREME COURT] in the context of the then existing Section 147(a) of the Act, yet, in the context of initiation of reassessment proceedings upon recording of “reasons to believe”, it was established in law that those words were stronger than “is satisfied”; the “belief” must be based on “reasons” that are “relevant and material”.
For initiation of reassessment proceedings, there must exist “tangible material” indicating some income had arisen either on accrual or actual/ cash basis and that it has escaped assessment. Merely because the invoices issued by the petitioner were below the international price, it could never be alleged that there was any income on accrual basis as the petitioner earned no legal right to receive any higher amount. Therefore, we have to examine if there exists any material indicating receipt of any income on actual/ cash basis, over and above the invoice price.
The entire opinion of the Commission and the recital made in the “reasons to believe” recorded by the petitioner as also reasons recorded by that authority while rejecting the objections raised by the petitioner are directed and confined solely to the observations made by the Commission. The Report is not before us in entirety. To the extent it has been relied by the assessing authority, it only admits of a possibility of higher realizations having been made. Even that possibility exists not on the strength of any material discovered by the commission of higher realizations made by exporters (including the petitioner) but on a presumptuous basis solely by comparing the invoice price with the prevailing international price. Hence, that presumption/ opinion howsoever considered is not based on any hard evidence (either oral or documentary) of any higher price realized. Rather, it is conjectural and in any case on suspicion. Report remains a pure subjective opinion and nothing more.
The vital fact of value/ price realized by the petitioner against the invoice issued, was neither gone into nor any definite opinion was expressed thereto. In any case, no material was discovered by the Commission, as may support that “belief”.
Thus we find reassessment proceedings initiated against the petitioner for the AY 2011-12 were wholly without jurisdiction. It also being beyond the pale of doubt- unless jurisdiction is first clearly established, the reassessment- proceedings may not survive and an assessee may not be forced to participate in the same. Decided in favour of assessee.
Case Laws - GST
- 2024 (4) TMI 781
Forged tax invoices - Grant of Regular Bail - non-existent ghost business entities - commission of offence u/s 132(1)(b)(c) & (l) of the OGST Act - wrongfully availing Input Tax Credit (ITC) without physical receipt and supply of goods - Tests for grant or refusal of bail - right to speedy trial - Violation Of fundamental right as guaranteed under Article 21 of the Constitution of India - HELD THAT:- Keeping in view the core values of personal liberty, when the present case is tested, it appears that there is allegation of wrongfully availing Input Tax Credit of Rs. 316 crores against the petitioners and others. Out of the eight accused persons against whom PR was submitted, the present petitioners are in custody since 06.07.2022. However, the petitioner Niku @ Chhatar Singh was released on interim bail by the order of the learned trial Court and by the order of learned Addl. Sessions Judge for a total period of 81 days and he has surrendered to custody after expiry of interim bail on each occasion. It is also not disputed that the offence alleged against the petitioners is punishable up to five years, meaning thereby, the petitioners can be sentenced to a maximum period of five years in case of their conviction, but it is not sure as to whether the petitioners would be sentenced to the maximum imprisonment, even if on their conviction as the same is the discretion and domain of trial Court which can impose sentence by taking into relevant consideration in this case.
As per the report of the learned trial Court and the affidavit filed on behalf of the petitioner Niku @ Chhatar Singh, 13 out of 23 PR witnesses have already been examined in this case, but the trial is yet to be concluded even after one year & nine months of the custody of the petitioners. It is also clarified by the learned counsel for the CT, GST that out of the 10 remaining witness, one has already been expired and the whereabouts of another is not available and 3 out of the remaining 8 witnesses are official witnesses and rest are private witnesses and therefore, how much time would be required to complete the trial is eventually a guess in this situation.
In the peculiar facts and circumstances of the situation, especially when the prolong custody of the petitioners which frustrates the right to speedy trial and the maximum punishment that is provided for the offence is five years, out of which one year & nine months has already been suffered by the petitioners as a pretrial detention and taking into account a hypothetical consideration that the personal liberty of the petitioners cannot be restored back if the prosecution fails to bring home the charge against them on the face of the prolong incarceration generally militates against the most precious fundamental right as guaranteed under Article 21 of the Constitution of India and already 13 witnesses having examined in this case and the decision of the case revolves around documentary evidence and thereby, further detention of the petitioners in custody reasonably may not be in the interest of justice.
Important tests for grant or refusal of bail is the tripod test which prescribes three tests; (i) whether the accused poses a flight risk? (ii) whether the accused is capable of influencing prosecution witnesses and lastly (iii) whether the accused is capable of tampering prosecution evidence? In this case, the petitioners appears to be resident of different place of Sundargarh District and their apprehension of posing flight risk can be curtailed by imposing appropriate conditions by directing them to surrender Passport or in the event, they are not having any Passport, they may be asked to file an affidavit before the trial Court. Additionally, the petitioner Niku @ Chhatar Singh having surrendered to custody on earlier occasions after expiry of interim bail granted to him also indicative of his not posing any flight risk to some extent. Further, examination of 13 witnesses without any adverse report against the petitioners for tampering their evidence, the apprehension of tampering of evidence can be prima facie ruled out at this stage. Similarly, prosecution report having already been submitted, there is hardly any question of influencing witnesses by the petitioners.
Further, the grant of bail to an accused pending trial should not be confused with his acquittal of the criminal charges, which is of course to be decided by the criminal Court on appreciation of evidence tendered by the witnesses on conclusion of trial, but grant of bail to an accused is a process of transfer of custody of accused from the custody of law to the custody of surety on certain terms and conditions and the surety certainly has a duty to ensure appearance of the accused before the trial Court till conclusion of trial.
In view of the undisputed logical sequitur of the discussions made hereinabove on the face of conspectus of materials placed on record including the long pretrial detention of the individual petitioners, which have punitive content, vis-à-vis the maximum punishment prescribed for the offence alleged against the petitioners being not beyond five years, this Court is persuaded to take a lenient view in favour of the personal liberty of the petitioners to exercise its discretion to grant bail to the petitioners.
Hence, the bail applications of the petitioners stand allowed and the petitioners namely Subash Kandulna, Chhatar Singh @ Niku Singh, Ram Bharose Shaw and Dhanman Shaw are allowed to go on bail on furnishing an unencumbered property surety of Rs. 50,00,000/- (Rupees Fifty Lakhs) each, in addition to bail bonds in the sum of Rs. 5,00,000/- (Rupees Five Lakhs) each with two solvent sureties for the like amount to the satisfaction of the learned Court in seisin of the case, on such terms and conditions as deem fit and proper.
Accordingly, the BLAPL stand disposed of.
- 2024 (4) TMI 780
Violation of principles of natural justice - challenge to the ex parte nature of the order - no proper notice to file reply and in any case, no prior notice of hearing was served to the petitioner before the impugned order came to be passed - HELD THAT:- While there can be no dispute to the fact that the proceedings conducted by the respondent authorities are wholly irregular and contrary to the provisions of law and ex parte, without issuance of any notice to the petitioner and without communication of any date of hearing fixed in the proceedings, detailed note is made of the order sheet to record the wholly unacceptable conduct of the respondent authority in proceeding in the manner in which he has.
Adjudication orders give rise to serious civil consequences. They create demands of tax as also penalties are often imposed. In the self assessment scheme, unless the noticee/assessee is given fair opportunity to furnish its reply and to present his case before the adjudicating authority the adjudication orders may only give rise to frivolous and wholly avoidable litigation contrary to the statutory scheme itself.
The impugned order dated 23.02.2024 is set aside - the petitioner may treat the impugned order to be a final show-cause notice and furnish its detailed reply within a period of two weeks from today - the writ petition is disposed off.
- 2024 (4) TMI 779
Recovery of tax arrears - Seeking lifting of attachment of Bank accounts - DIN of the petitioner got disqualified under Section 164(2)(a) of the Companies Act, 2013 - HELD THAT:- A bare reading of section 79 of the Maharashtra Goods and Service Tax Act, 2017 (MGST Act) would bring about a cumulative effect that the principal liability is not on the “petitioner” who is not a registered person within the meaning of Section 79(1). Further Section 89 clearly provides that before taking any action of recovery against the directors of the company, a subjective satisfaction is required to be achieved by the concerned officer in regard to whether a person concerned against whom recovery is sought to be made was a director of a Private Limited Company for the concerned period. It is only after such satisfaction to the effect that such person was the director of the company, the liability could be fastened against such director - there is no manner of doubt that the impugned order passed against the petitioner is illegal and cannot be sustained. It is certainly in breach of the rights guaranteed to the petitioner under Article 14, read with Article 300A, of the Constitution.
The attachments are lifted - petition allowed.
- 2024 (4) TMI 778
Maintainability of petition - Appellate Tribunal has not been constituted - this Writ Petition filed to review the order passed by the 1st respondent Deputy Commissioner(ST) GST (Appellate Authority)/1st respondent herein - HELD THAT:- The order does not call for any interference. The order does not suffer from any of the vices which would render the impugned order amenable/susceptible to a review under Art.226 of the Constitution of India. The order is also well reasoned and also does not suffer from any short coming. Therefore, the Writ Petition is liable to be dismissed. However, considering the fact that the petitioner has paid the disputed tax on 27.07.2022, the only relief the petitioner can seek is for payment of interest in installment. As per Sec.80 of the TNGST Act, 2017, the petitioner has to approach the Commissioner.
This Writ petition is dismissed with liberty to the petitioner to approach the Commissioner within a period of 30 days from the date of receipt of this order.
- 2024 (4) TMI 777
Validity of impugned assessment order - reply to SCN given or not - violation of principles of natural justice - HELD THAT:- The petitioner is a small time contractor who has incurred the liability in the impugned order for a sum of Rs. 2,77,524/-. The petitioner has also been imposed with penalty of Rs. 27,752/- and interest of Rs. 15,192/-. It appears that petitioner is a semi literate person and may have not been fully aware of the implications of the notices issued by the Tax Department.
Considering the same, this Court is inclined to give a partial relief to the petitioner by setting aside the impugned order and remitting the case back to the respondent to pass a fresh order on merits within a period of 60 days from the date of receipt of a copy of this order provided the petitioner furnishes all the documents that were called for along with a reply to the notice and also pays a token amount equivalent to 10% of the disputed tax to the department. Subject to such compliance, respondent may proceed to adjudicate the issue afresh.
The writ petition is disposed off.
- 2024 (4) TMI 776
Validity of assessment order - Attachment of Bank Account of petitioner - HELD THAT:- The impugned order of attachment pre-date the order passed by this Court on 26.09.2023. Therefore, in the absence of an order staring against the petitioner as on date, continuance of impugned attachment order dated 03.06.2022, bearing reference Na.Ka.No.A8/1944/2021, cannot be sustained. It has to be set aside. Already, this Court has directed the authorities to grant personal hearing to the petitioner and thereafter, pass orders within a period of three months from the date of receipt of a copy of that order. However, more than three months have lapsed, since the order was passed on 26.09.2023. The first respondent is therefore directed to complete the proceedings within a period of 30 days from the date of receipt of a copy of this order.
The writ petition is disposed off.
- 2024 (4) TMI 775
Violation of principles of natural justice - non-speaking order - period between July 2017 to March 2018 - HELD THAT:- It is noticed that the impugned order is not a speaking order. It has also not considered the reply filed by the petitioner on 01.11.2023 which has been referred to in Item No.3 in the reference column to the impugned order.
As the impugned order is without proper reasoning, it is liable to be set aside and remitted back to the respondents to pass a fresh order on merits and in accordance with law within a period of six weeks from the date of receipt of a copy of this order.
The writ petition is disposed off
- 2024 (4) TMI 774
Validity Of Order passed - No opportunity of personal hearing - inadvertent error committed while filing the GSTR 3B return was rectified while filing the annual return in Form GSTR 9 and the reconciliation statement in Form GSTR 9C - HELD THAT:- The impugned order reveals that the tax proposal was confirmed on the ground that the petitioner did not file any documents in proof of its reply. The petitioner had annexed the profit and loss account and the GSTR 9 and 9C returns along with reply dated 18.08.2023. In those circumstances, the conclusion that the petitioner did not file any documents cannot be sustained although the petitioner did not file all the documents listed at pages 76 and 77 of the typed set. It is also noticeable that no personal hearing was provided to the petitioner. Therefore, the impugned order calls for interference.
Thus, the impugned assessment order dated 30.12.2023 is set aside and the matter is remanded for reconsideration. W.P. is disposed of on the above terms and connected miscellaneous petitions are closed.
- 2024 (4) TMI 773
Validity Of order in original - passed without any application of mind - Cancellation of registration of petitioner - HELD THAT:- In the present case, the facts are similar to one in Surendra Bahadur Singh [2023 (8) TMI 1262 - ALLAHABAD HIGH COURT], wherein the appeal was barred by time u/s 107 of the Act. However, the Division Bench in Surendra Bahadur Singh's case (supra) took into consideration the original order and set aside the same being non-reasoned and allowed the petitioner therein to file reply to the show cause notice.
Thus, the orders impugned herein are liable to be set aside. Accordingly, the order in original dated February 21, 2023 and the appellate order dated February 21, 2024 are quashed and set aside. The petitioner is directed to file its reply to the show cause notice within three weeks from date and the adjudicating authority is directed to proceed de novo and pass order after granting opportunity of hearing to the petitioner.
With the above directions, the writ petition is allowed.
- 2024 (4) TMI 772
Violation of principles of natural justice - No opportunity of 'personal hearing' - mandatory requirement u/s 75(4) of the Uttar Pradesh Goods and Services Tax, Act, 2017 - impugned adjudication order has been passed in breach of principle of natural justice or not - HELD THAT:- The significance of the word "or'' in Section 75(4) of the UPGST Act, 2017 cannot be underestimated. The usage of the word "or'' extends beyond its disjunctive function; it serves as a pivotal indicator of legislative intent regarding the necessity of providing an opportunity for personal hearing. Personal hearing represents a fundamental aspect of procedural fairness and natural justice, ensuring that individuals have the opportunity to present their case, respond to allegations, and address any concerns or mitigating factors directly to the decision-maker. It is a vital safeguard against arbitrary or unjust decisions.
The inclusion of "or'' in Section 75(4) of the UPGST Act, 2017, emphasizes the dual nature of the obligation to provide a personal hearing, accommodating both proactive requests from individuals seeking to defend their interests and reactive responses to adverse orders contemplated by tax authorities. In either scenario, the statutory mandate remains clear: the individual must be afforded an opportunity for personal hearing before any final determination is made regarding tax or penalty imposition.
Moreover, the statutory mandate for personal hearing reflects an acknowledgement of the complex and multifaceted nature of tax and penalty determinations, which often involve intricate legal and factual considerations. Personal hearing provides a forum for nuanced discussion and exploration of these complexities, enabling decision-makers to make well-informed and equitable decisions based on a comprehensive understanding of the circumstances at hand.
This Court in M/s Shree Sai Palace v. State of U.P. and Another [2024 (3) TMI 49 - ALLAHABAD HIGH COURT] relying on two judgments of coordinate Bench of this Court in Bharat Mint and Allied Chemicals v. Commissioner Commercial Tax and Others [2022 (3) TMI 492 - ALLAHABAD HIGH COURT] and M/s Primeone Work Force Pvt. Ltd. v. Union of India,[2024 (1) TMI 625 - ALLAHABAD HIGH COURT], in similar facts and circumstances has held that no orders can be allowed to pass through the legislative barriers of natural justice erected to safeguard individual rights and prevent abuse of power and that the opportunity of hearing is required to be afforded to the petitioner before passing orders.
Thus, let there be a writ of certiorari issued against the order dated July 12, 2023 and the order dated August 18, 2022. These orders are quashed and set aside. This writ petition is, accordingly, allowed.
- 2024 (4) TMI 771
Writ Petition Challenging the Penalty order - Wrong description of the vehicle is entered by the dealer in the e-way bill - Goods shifted through Truck, accompanying delivery challan, e-way bill and bilty - intercepted the goods and detained the vehicle - HELD THAT:- It is not in dispute that goods were being transported by the dealer through stock transfer from its unit at Saharanpur to its sale depot at Ghaziabad. From perusal of the e-way bill which has been brought on record, it is clear that the vehicle number has been mentioned as UP-14BT/3276.
As there is no dispute to the fact that it is a case of stock transfer and there is no intention on the part of dealer to evade any tax, the minor discrepancy as to the registration of vehicle in State in the e-way bill would not attract proceedings for penalty u/s 129 and the order passed by the detaining authority as well as first appellate authority cannot be sustained. Moreover, the Department has not placed before the Court any other material so as to bring on record that there was any intention on the part of the dealer to evade tax except the wrong mention of part of registration number of the vehicle in the e-way bill. The number of vehicle through which the goods were transported was manually corrected by the transporter while only there is a minor discrepancy in Part-B of the e-way bill where the description of the vehicle is entered by the dealer.
Thus, the orders dated May 21, 2018 and August 5, 2019 are unsustainable in the eyes of law and both the orders are hereby set aside. Writ petition succeeds and is hereby allowed.
- 2024 (4) TMI 770
Validity Of Assessment order passed - discrepancies between the petitioner's GSTR 3B returns and the auto populated GSTR 2A - show cause notice - credit notes were erroneously reported as ITC - certificate produced by the Chartered Accountant rejected, without assigning any reasons - HELD THAT:- On examining the findings, I find that the explanation of the petitioner was not duly examined from the perspective of ascertaining whether the amount reflected as ITC tallies with the value of credit notes issued by the petitioner. If such exercise had been carried out, it would become clear as to whether there was revenue loss by way of excess availment of ITC. Since such exercise was not carried out and findings were recorded confirming the tax demand merely because credit notes were not duly reported in GSTR 1 or in the auto populated GSTR 2A, the impugned order calls for interference on this issue.
As regards the provision of a Chartered Accountant's certificate to explain the discrepancy to the extent of about Rs. 53,18,913/-, the impugned order merely records that the certificate issued by the Chartered Accountant and the petitioner's reply are not accepted. It is unclear as to why the certificate was rejected because no reasons are discernible from the impugned order.
Thus, the impugned order calls for interference and is hereby set aside. As a corollary, the matter is remanded for re-consideration by the respondent. The respondent is directed to provide a reasonable opportunity to the petitioner, including a personal hearing, and thereafter issue a fresh order after taking into consideration the contentions of the petitioner. Such order shall be issued within two months from the date of receipt of a copy of this order.
W.P. is disposed of on the above terms. No costs. Consequently, W.M.P. are closed.
- 2024 (4) TMI 769
Seeking grant for Anticipatory Bail - Input Tax Credit - Prayer to release the attached bank account - non-existent at the given registered addresses - purchase invoices issued by the non-existent/ bogus suppliers without any actual supply of goods - Violation to Section 16(2) of the CGST Act, 2017, read with section 155 of the Act - burden to Prove - Summon issued - Petitioner failed to participate in the proceedings on various occasions - HELD THAT:- It is pertinent to note that, the petitioner’s firm, is not in existence on the three addresses given as the registered addresses, but even the suppliers, from whom the petitioner has claimed to have purchased the goods, are non-existent at their given address. The petitioner has not come before this Court with clean hands. The petitioner has been time and again issued various summons adhering to the provisions of law, in order to provide an opportunity to the petitioner, to participate in the investigation and put forth his case. He has failed to participate in the proceedings on various occasions. The fake addresses of the petitioner’s firm as well as suppliers do not make him eligible for any protection from this Court. The conduct of the petitioner is availing ineligible ITC of Rs. 10.38 Crores, amounts to playing fraud on the Public Exchequer.
The case of the petitioner would prima facie be covered by Section 132(1)(c) read with Section 132(5) of the CGST Act, 2017.
Considering that the Appeal of the petitioner regarding the cancellation of registration is already sub-judice before the appropriate authority, and the allegations made by the petitioner in the present writ petition, prima-facie, do not appear to be correct, therefore, we do not think that the petitioner should be granted any order of protection. After going through the petition along with the annexures, and the reply filed by the respondent No. 2 herein, we do not find that the petitioner has made out a case for grant of any protection. Prima facie, it appears that the petitioner, has in fact, availed the ITC, from non-existent entities.
The burden of proof on the contrary is on the petitioner, as per Section 155 of CGST Act, 2017 to prove he is eligible for ITC. The petitioner has been granted several opportunities. The petitioner was summoned, to participate in the investigation and submit documents/information regarding the ongoing investigation as provided u/s 70 of the CGST Act, 2017. The petitioner has failed to show to the respondents, the existence of the entities. Hence, there is no merit in the contention of the petitioner that principles of natural justice have not been followed.
The petitioner has placed reliance on the Judgment of the Hon’ble Apex Court, in the case of State of Gujrat V/s. Choodamani Parmeshwaran Iyer [2023 (7) TMI 1008 - SUPREME COURT], in order to demonstrate that a person summoned under the CGST Act, 2017, cannot invoke Section 438 of the Cr. P.C., for Anticipatory Bail. The petitioner therefore claims to have approached this Court seeking protection Orders. However, after going through the reply filed by the respondent No. 2 herein, we do not find that the petitioner has made out a prima-facie case for grant of any protection to the petitioner.
Thus, we are not inclined to grant protection to the petitioner. Hence, the writ petition stands dismissed. As a result, the interim protection stands vacated. Petition stands disposed of accordingly.
- 2024 (4) TMI 768
Condonation of delay of 120 days in filing appeal - It is the specific case of the petitioner that after the order was passed, the petitioner had given the papers to the Chartered Accountant, who failed to prefer an appeal in time - HELD THAT:- The petitioner has already paid the disputed tax on 14.03.2024. There are no impediment in giving liberty to the petitioner to challenge the impugned order before the Appellate Commissioner within a period of 30 days from the date of receipt of a copy of this order. If such an appeal is filed within such time, the Appellate Commissioner shall dispose of the appeal on merits and in accordance with law without reference to the limitation. The release of the vehicle is subject to the final outcome of the confiscation proceeding.
The writ petition is disposed off.
- 2024 (4) TMI 767
Maintainability of Writ Petition since GST Appellate Tribunal not constituted - Period of limitation - Order Appealable u/s 112 of the CGST/OGST Act, 2017 - Statutory benefit of stay - Non-constitution of the Appellate Tribunal as required u/s 109 - HELD THAT:- The respondent State authorities have acknowledged the fact of non-constitution of the Tribunal and come out with a notification bearing Order No. 09/2019-State Tax, S. O. 399, dated 11.12.2019 for removal of difficulties, in exercise of powers u/s 172 of the B.G.S.T Act, which provides that period of limitation for the purpose of preferring an appeal before the Tribunal u/s 112 shall start only after the date on which the President, or the State President, as the case may be, of the Tribunal after its constitution u/s 109 of the B.G.S.T Act, enters office.
This Court is, therefore, inclined to dispose of the instant writ petition in the following terms:- (i) Subject to deposit of a sum equal to 20 percent of the remaining amount of tax in dispute, if not already deposited, in addition to the amount deposited earlier under Sub-Section (6) of Section 107 of the B.G.S.T. Act, the petitioner must be extended the statutory benefit of stay under Sub-Section (9) of Section 112 of the B.G.S.T. Act. The petitioner cannot be deprived of the benefit, due to non- constitution of the Tribunal by the respondents themselves. The recovery of balance amount, and any steps that may have been taken in this regard will thus be deemed to be stayed. It is not in dispute that similar relief has been granted by this Court in the case of SAJ Food Products Pvt. Ltd. vs. The State of Bihar & Others [2023 (3) TMI 1390 - PATNA HIGH COURT]
(ii) The statutory relief of stay, on deposit of the statutory amount, however in the opinion of this Court, cannot be open ended. For balancing the equities, therefore, the Court is of the opinion that since order is being passed due to non - constitution of the Tribunal by the respondent- Authorities, the petitioner would be required to present/file his appeal u/s 112 of the B.G.S.T. Act, once the Tribunal is constituted and made functional and the President or the State President may enter office. The appeal would be required to be filed observing the statutory requirements after coming into existence of the Tribunal, for facilitating consideration of the appeal.
(iii) In case the petitioner chooses not to avail the remedy of appeal by filing any appeal u/s 112 of the B.G.S.T. Act before the Tribunal within the period which may be specified upon constitution of the Tribunal, the respondent - Authorities would be at liberty to proceed further in the matter, in accordance with law.
(iv) If the above order is complied with and a sum equivalent to 20 per cent of the remaining amount of the tax in dispute is paid then, if there is any attachment of the bank account of the petitioner pursuant to the demand, the same shall be released.
(v) Whatever has been deposited, would be given account in determining the 20 per cent directed to be paid herein.
With the above liberty, observation and directions, the writ petition stands disposed of.
- 2024 (4) TMI 766
Validity Of Order in original - No reasonable opportunity provided to contest the tax demand - mismatch between the GSTR 3B and GSTR 1 returns - HELD THAT:- From the impugned order, it is evident that such order was issued without hearing the petitioner. No doubt, the petitioner was provided an opportunity but failed to avail of such opportunity. It is also clear that the tax liability pertains to three issues, namely, output mismatch between GSTR 3B and 1, input mismatch between GSTR 3B and 2A and e-way bill verification. As contended by learned senior counsel, on the first two issues, the extent of discrepancy is not substantial. The summary of the show cause notice does not appear to deal with the issue relating to e-way bill verification. It is also noticeable that an aggregate sum of Rs. 6,04,893/- was debited from the petitioner's electronic credit ledger towards tax liability confirmed in the impugned order. Thus, it is just and necessary to provide an opportunity to the petitioner to contest the tax demand on merits.
Therefore, the impugned order dated 09.11.2023 is set aside and the matter is remanded for reconsideration. Upon receipt thereof, the 1st respondent is directed to provide a reasonable opportunity to the petitioner, including a personal hearing, and thereafter issue a fresh order within two months from the date of receipt of the petitioner's reply.
The writ petition is disposed of. Consequently, connected miscellaneous petitions are closed.
- 2024 (4) TMI 765
Seeking activation of GSTIN and granting final certificate of registration to the Petitioners from 01.07.2017 and appropriating the GST paid and returns filed by the Petitioners under the current GSTIN thereunder - permission to file returns, avail input tax credit and pay applicable tax under currently active GSTIN - HELD THAT:- It appears that there is no fault on part of the petitioner for not being able to utilise the provisional GST number which was given to the petitioner on transition after the petitioner has taken over the business of the proprietorship concern. The GSTN Portal is required to map the PAN number of the petitioner with the GST number instead of PAN number of the partnership firm, which was not done and therefore, the petitioner was unable to utilise the input tax credit during the interregnum period for the goods purchased from 01st July, 2017 till March, 2018.
The contentions raised on behalf of the respondent is, therefore, required to be considered in light of the facts of the case that there was no option for the petitioner but to obtain new PAN number for the proprietorship which was inactive and there was no question of filing GST Returns with regard to the GSTN which was allotted to the petitioner after mapping of PAN number as the petitioner had already obtained fresh GSTN number. Therefore, the only remedy which would be available to the respondent Department was to get the GST number which was obtained by the petitioner in the year 2018 to make it effective from 01st July, 2017 so as to enable the petitioner to get the input tax credit for the goods purchased during the interregnum period from 01st July, 2017 to March, 2018.
Petition disposed off.
- 2024 (4) TMI 764
Short payment of Interest - denial of interest from 01.04.2017 to 18.12.2020, the period during which the amount of input tax credit was lying in the electronic credit ledger of the petitioner - section 38 of the VAT Act.
HELD THAT:- On perusal of provisions of subsection (2) of section 38 of the Act, it is clear that the registered dealer is entitled to refund from the date immediately following the date of closure of the accounting year to which the said the amount of refund relates till the date of payment of the amount of such refund. In the facts of the case, appellant order would be the relevant date or the end date however, the date from which the interest starts running is the date of immediately following the accounting year which is 01.04.2017 under the facts of the case.
Merely because the petitioner has transferred the amount to the electronic credit ledger coupled with the fact that such amount remained unutilized till it was reversed by the petitioner by filling Form DRC-03, the transfer of amount to the electronic credit ledger was only a memorandum entry on 01.07.2017 which was reversed on 18.12.2020. For all effect and purpose, the amount was never utilized by the petitioner and the Commissioner has also rightly not granted refund of the amount input tax credit which is utilized by the petitioner.
It is pertinent to note that the petitioner made claim of refund for the amount of Rs. 42,35,215/- after considering already utilized amount of Rs. 3,45,133/- and there was shortfall of Rs. 22,500/ and therefore, the Commissioner, while granting refund, has taken into consideration this aspect and granted refund of only Rs. 42,34,894/- to the petitioner. Therefore, respondent-authority is required to calculate the interest on the amount as per the order passed by the appellate-authority from 01.07.2017 till the date of order i.e. 22.05.2023.
The respondent authorities are directed to refund balance amount of Rs. 8,81,322/- within a period of four weeks from the date of receipt of copy of this order - Petition allowed.
- 2024 (4) TMI 763
Classification of goods - rate of tax - Classic Malabar Parota - Whole Wheat Malabar Parota - classifiable under Chapter Heading 1905 or same are to be covered under Chapter Heading 2106- exemption from payment of GST in terms of entry No. 97 of N/N. 2/2017 dated 28.06.2017 Central Tax/ SRO No. 361/2017 dated 30.06.2017 - HELD THAT:- The Explanatory Notes to HSN sub heading 1905 provides that the most common ingredients of the products of this Heading are cereal flours, leavens and salt but they may also contain other ingredients such as gluten, starch, milk, sugar, fats, improvers etc., like yeast, sour dough, baking soda which facilitates fermentation and improve characteristics and appearances of the products. The products of this heading may also be obtained from dough based on the flour of any cereal - Rule 4 of GRI provided that goods which cannot be classified in accordance with the Rules I to III shall be classified under the Heading appropriate to the goods to which they are akin. It cannot be doubted that the products of the petitioner would be in category of Chapter Heading 1905, and therefore, by applying the fourth GRI which provides that goods which cannot be classified in accordance with the above rules shall be classified under the Heading appropriate to the goods to which they are most akin should be applied to see whether the goods should fall under the Chapter Heading 1905 or not.
It is also relevant to take note of the fact that Chapter Heading 21 particularly, Entry HSN 2106 prescribes food preparation not elsewhere specified or included and the petitioner product or not akin to any of the products which are mentioned in Chapter Heading 2106. In view thereof, the petitioner’s product are to be included in Chapter Heading 1905.
The two Rate Notification mentioned above would provide that similar products such as Khakhra, plain chapati or Roti are exigible for 5% tax as per 99A of the Schedule I or they are exempted from the payment of GST as per the Rate Notification - It is no doubt that the petitioner’s product is not specifically included in the exemption from payment of GST under entry 97 as the exemption notifications are to be constituted strictly and they are item specific. The petitioner’s item is not included in the exemption notification, and therefore the petitioner claims the exemption from payment of the GST has no merit.
When there is no doubt in any manner that the petitioner’s product should fall within the HSN 1905, as the petitioner’s products are akin / similar to the products mentioned in the said Chapter Heading 19 and the ingredients used in and the process applied in their preparations are somewhat similar to the other products which are specifically mentioned there, the tax in the products of the petitioner’s at the rate of 18% would not be justified.
If the petitioner products are akin / similar to the products mentioned in HSN code 1905 of Chapter 19 with heading Preparations of cereals, flour, starch or milk; pastrycooks’ products as the ingredients used and process applied in their preparations are somewhat similar to the products mentioned in Chapter heading HSN Code 1905, excluding the petitioner’s products from Entry 99A of the Rate Notifications which are almost similar to the three products mentioned in the said Entry, cannot be justified - the petitioner's products are also exigible at the rate of 5% GST and not 18% as contended by the learned Special Government Pleader and held by the Advance Ruling Authority and Advance Ruling Appellate Authority.
The present writ petition is partly allowed.
- 2024 (4) TMI 762
Cancellation of registration of petitioner - SCN not responded - HELD THAT:- In the peculiar facts and circumstances of the present case and taking into consideration no objections on behalf of the respondents, the present petition is disposed of by directing the petitioner to approach the Officer concerned for restoration of his GST number within a period of seven days who shall restore the GST number of the petitioner and thereafter the petitioner shall deposit the taxes, penalty along with interest within a period of seven days in terms of the Act.
Petition disposed off.
Case Laws - Customs
- 2024 (4) TMI 732
Penalty imposed on the appellant being the employee of the Shipping Line u/s 114AA - manipulation in the document - statement recorded u/s 108, wrongly stated that the supplier of the goods in the subject container was Jubilee Middle East General Trading LLC, Dubai - HELD THAT:- From the RUDs placed on record by the learned AR, we find the Bill of Lading dated 6.11.2014 the supplier has been mentioned as M/s. Jubilee Middle East General Trading LLC Dubai, UAE. Therefore, the appellant is not wrong in saying that the shipper/supplier is M/s. Jubilee Middle East General Trading LLC. Hence, no fault can be attributed on the appellant.
The provisions of section 114 AA provides for imposition of penalty on a person who knowingly or intentionally make, sign, uses or causes to be made any declaration, statement or documents, which is false or incorrect in any material particular in the transaction of any business for the purpose of the Act. From the statement of Shri Ravinder Singh, we find that the manipulation in the documents were done by the Dubai Branch of the shipping line at the behest of the actual supplier. There is no evidence to link the appellant with the said manipulation done at Dubai office. The shipping line has not been roped in the present proceedings. The revenue has not substantiated the charge of connivance of the appellant with the illegal import rather he was instrumental in ascertaining the correct valuation of the impugned goods. We, therefore, do not find any justification for imposition of penalty u/s 114AA of the Act.
The consistent stand taken in the judicial pronouncements is that no penalty can be imposed on the employee, who acts under the instructions of his employer unless and until there is proof of fraud having been committed by him. We are, therefore of the view that no penalty can be imposed on the appellant who was working as an employee being the Operation Manager with the Shipping Line and on the basis of the Bill of Lading made the statement that the supplier was M/s. Jubilee Middle East General Trading LLC, Dubai and the manipulation in the document was at the Dubai office of the shipping line stands proved by the statement of Shri Ravinder Singh, the present employee of the shipping line.
The impugned order deserves to be set aside and the appeal needs to be allowed. Accordingly, the appeal stands allowed.
- 2024 (4) TMI 731
Penalty under Rule 18 (1) of CBLR 2018 on customs broker - exporter availed undue benefit under Merchandise Exports from India Scheme (MEIS) in the export of safety matches - misclassifying the same under CTH 36050090 as against CTH 36050010 - facilitated the filing of documents relating to export on behalf of their exporter client - violation of Regulations 10(d) & 10 (e) ibid - HELD THAT:- In the case of M/s. Max Miller Agencies [2024 (1) TMI 1220 - CESTAT CHENNAI] this Bench has considered an almost similar issue and after considering several judicial pronouncements has found it proper to delete penalty imposed for violations of regulation in 10 (d) and 10 (e).
Thus, I deem it proper to delete the penalty imposed on the appellant and therefore, the impugned order calls for interference. Resultantly, the impugned order is set aside and the appeal is allowed.
- 2024 (4) TMI 730
Period of limitation for filing refund claim of SAD - Period start from the date of payment Or from the date of sale of the goods - HELD THAT:- The ratio laid down in the case of M/s. Abhishek Marketing [2024 (3) TMI 1050 - CESTAT KOLKATA] wherein the Tribunal has held that the one-year period for filing the refund claim should start from the date of payment of additional customs duty, is squarely applicable to the factual matrix of the present appeals.
I observe that the judgements of the Hon’ble Delhi High Court cited by the appellant pertain to refund claims filed prior to the amendment carried out vide Notification No. 93/2008-Cus. dated 01.08.2008. Thus, I find that the decisions cited by the appellant are not relevant in the facts and circumstances of the present case.
Accordingly, I do not see any reasons for interfering with the impugned orders and the same are accordingly upheld.
In the result, the appeals filed by the appellant stand dismissed.
- 2024 (4) TMI 729
Benefit of exemption from Customs Duty - Validity Of Original re-assessment orders - Modification of self assessment made by the appellant claiming the benefit of exemption under Sl. No. 29 and 30 of Notification No.24/2005-Customs as amended - Classification of impugned goods viz. “Open Cells” under CTH 85.24 and in classification of “associated parts of Open Cells” under CTH 85.29 - whether the imported goods is the ‘Liquid Crystal Device’ or not - HELD THAT:- On careful reading of the impugned order passed by the learned Commissioner of Customs (Appeals), it transpires that he has given a specific finding that there is no dispute in the classification of impugned goods viz. “Open Cells” under CTH 85.24 and in classification of “associated parts of Open Cells” under CTH 85.29. Further, he had stated that the issue in contention is whether exemption under Serial No. 29 & 30 of Notification No.24/2005-Customs dated 01.03.2005 is applicable to the impugned goods or not. In answering to the issue in dispute, learned Commissioner of Customs (Appeals), had concluded that “Open Cell” cannot be considered as the Liquid Crystal Display (LCD) itself, as certain other components have to be attached to convert it into a fully functional LCD.
We also find that such an examination has not been carried out. This is for the reason that firstly, the description of the goods specified in the exemption entry at Sl. No. 39 viz., ‘Liquid Crystal Devices’ has not been explained to state whether the imported goods is the ‘Liquid Crystal Device’ or not. Instead, it has been simply stated that the imported goods are not a fully functional ‘Liquid Crystal Display’, as open cell needs to be added with certain other components to make it so. Even the original authority did not examine these aspects despite the claim made by the appellants that ‘Open Cell’ is a ‘Liquid Crystal Device’ in terms of HSN Explanatory note to the heading 8524.
The facts of the case further indicate that in the Original order dated 17.11.2022, customs duty exemption benefits under Sl. No.515A and 516 of Notification No.50/2017-Customs dated 30.06.2017 have been extended, whereas in the Original order dated 29.11.2022, merit rate of duty has been applied without extending any duty exemption benefit, while reassessing the B/Es u/s 17(5) ibid, in contrary to the declaration made for self assessment of goods by the appellants u/s 17(1) ibid. In this context, the learned Commissioner of Customs (Appeals), has not examined in detail how the exemption was allowed for imported goods under one B/E and in other B/E the same was rejected, without verifying the fulfillment of the exemption entries under Sl. No.515A and 516 of Notification No.50/2017-Customs dated 30.06.2017 which are subject to certain conditions under Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017, and upheld this contradictory original orders, in the same Order-in-Appeal i.e., impugned order dated 21.02.2023. Thus, in our considered view is a clear case of non-application of the mind and thus the impugned order dated 21.02.2023, is liable to be set aside on these grounds alone.
From the arguments advanced by the Advocates for the appellants, explaining in detail the relevant customs tariff entries and the Chapter 85 and 90, introduction of Chapter Note 7 chapter 85 and the explanation for the insertion of new CTH 85.24 and the entries therein, legislative history of ‘open cell’, ‘technical literature and explanation’ in the form of an affidavit duly notarized stating that open cell are used for Television or monitor or display screen application and the various process involved in manufacture of such articles, concluding that open cell and panel are both LCD devices; various decisions of the Tribunal and the judgements of the Hon’ble Supreme Court relied upon by them, there is legal force in the argument that the exemption benefit under Sr. No.29 & 30 of the Notification No.24/05-Cus., dated 01.03.2005 should be extended to the impugned goods.
We are also of the considered view that the authorities below in reassessment of impugned goods u/s 17(5) ibid, are required to pass a reasonable order, which is of a speaking nature, conforming to the requirements of the definition of ‘assessment’ which include such ‘reassessment’. Hence, it is imperative that amongst other issues, tariff classification of imported goods and exemption or concession of duty issued under notifications issued under Section 25 ibid are required to be examined and determined in order to fulfill the requirements of reassessment in terms of Section 2(2) ibid.
We are of the considered view that the impugned order passed by the learned Commissioner (Appeals) cannot be sustained on merits. However, we are also of the considered view that in order to examine the various issues of reassessment of impugned goods covered under the two Bills of Entry (B/E) No. 9574139 dated 16.07.2022 and B/E No.2453614 dated 15.09.2022 for deciding upon the eligibility to Customs duty exemption benefits under Sl. No. 29 and 30 of Notification No.24/2005-Customs dated 01.03.2005, as amended, the matter needs to be decided afresh in de novo proceedings by the original authority.
Therefore, the impugned orders are set aside and the appeals are allowed in favour of the appellants by remanding the matter for a fresh decision by Original Authority after duly taking into consideration the various submissions made by the appellants and the points advanced by Revenue in these appeals before the Tribunal.
In the result, the appeals are allowed by way of remand for fresh de novo proceedings in the above terms.
- 2024 (4) TMI 704
Territorial jurisdiction of Court - Confiscation of gold - levy of penalty on the petitioner - burden lies on the respondents to establish that the seized gold was smuggled in nature and there was violation of the Customs Act, 1962 by the petitioner or not - seeking release of seized gold - HELD THAT:- This Court observes that the preliminary objection of the respondent regarding the territorial jurisdiction of this Court deserves acceptance and the same is hereby accepted, because after a perusal of the record as a whole, it is clear that the entire proceedings, including confiscation, recording of the statements, hearing of the case etc. were conducted at Shillong (Meghalaya), and that, the gold biscuits i.e. the articles in question, never reached the territory of the State of Rajasthan.
Therefore, only on count of the fact that the residence of the petitioner is situated in the State of Rajasthan, the territorial jurisdiction does not lie with this Court. While making such observations, this Court is conscious of the fact that the present matter is quite old, but the same also cannot persuade this Court to hear and decide the case on its own merits, for lack of jurisdiction, and that, in reiteration, not even a fraction of the cause of action arose in the State of Rajasthan, so as to persuade this Court to make the effective adjudication of the case. Moreover, no interim order is operating in the present case.
This Court does not find it a fit case so as to grant any relief to the petitioner in the present petition - petition disposed off.
- 2024 (4) TMI 703
Jurisdiction - DRI - proper officer to issue SCN - power of assessment under Section 17 - When Section 28(11) of Customs Act, 1962, envisages that all persons appointed as officers of Customs under sub-Section (1) of Section 4 before the 6th day of July 2011, shall be deemed to have and always had the power of assessment under Section 17 and shall be deemed to have been and always had been the proper officers for the purpose of this Section, whether CESTAT is correct in disputing/questioning the jurisdiction of the DRI to issue show-cause notice?
HELD THAT:- The issue raised in this appeal had already been dealt with by this Court in THE COMMISSIONER OF CUSTOMS VERSUS SHRI SANKET PRAFUL TOLIA [2021 (6) TMI 432 - MADRAS HIGH COURT] where the same substantial question of law has been raised, and it was held that The appeals are restored to the file of the Tribunal with a direction to keep the appeals pending and await the decision of the Honourable Supreme Court.
The impugned order is set aside - appeal allowed.
- 2024 (4) TMI 702
Summons issued to attend the office of the DRI - seeking permission for presence of their advocate and videography of the Petitioner’s interrogation - HELD THAT:- We have perused the Judgment of this Court passed in Ronak Kumar, Jasraj Jain and Chetan Kumar [2022 (2) TMI 470 - BOMBAY HIGH COURT] as well as the Judgment passed by this Court in Gagan Jot Singh [2024 (3) TMI 747 - BOMBAY HIGH COURT] Considering the prayers made in the Petition, we do not find any impediment in permitting the Petitioner’s advocate to remain present when the Petitioner is summoned for interrogation by the Respondent No. 2. The Petitioner’s advocate to remain present at a visible but not audible distance. We also permit videography of the said interrogation, however, at the cost of the Petitioner.
We make it clear that if the Petitioner’s advocate is unable to remain present or if the person video graphing is not present, that will not be a ground for the Petitioner, not to remain present, before the Respondent No. 2–DRI, when summoned.
Writ Petition is accordingly allowed and is accordingly disposed of.
- 2024 (4) TMI 701
Seeking to change the classification of the product imported by the appellant - WAXSOL-911(A) grade - to be classified under the heading 2710 or under 3405? - HELD THAT:- The dispute involved in the instant case is identical to the dispute involved in the case decided in PANOLI INTERMEDIATES INDIA PVT LTD AND OTHERS VERSUS C.C. -KANDLA [2023 (6) TMI 317 - CESTAT AHMEDABAD]. In the said decision after examining the dispute the tribunal observed A detailed examination about the nature of product, its usage and its proper classification based upon exclusion clauses of HSN explanatory note is warranted including of consideration of chapter 2712. In view of claim of product being in the nature of Slag wax, same needs elaborate discussion and findings from the authority below.
It is seen that the matter was remanded to the original adjudicating authority for fresh adjudication on the ground that the adjudicating authority needs to give his own finding on the issue of classification and also various other issues mentioned - it is felt that this matter should also be remanded back to the original adjudicating authority or identical terms as in order above, to be decided a fresh.
Appeal allowed by way of remand.
- 2024 (4) TMI 700
Absolute Confiscation - Imposition of penalty under Section 112 of the Customs Act, 1962 - Smuggling of Gold - foreign origin Gold - non-recording of statements to corroborate the allegation of smuggling of gold - HELD THAT:- It is observed that nowhere appellants, namely, Shri Rupam Ghosh and Shri Vijay Bhagat, during the course of interrogation or thereafter, have denied their implication in the case. Only at the time of appellate stage, they are claiming that they have been falsely implicated in the case - As gold has been recovered from the possession of Shri Vijay Bhagat and Shri Rupam Ghosh, therefore, they cannot claim that they have been falsely implicated in this case and recovery of the gold was made on the basis of foreign marking, having a reasonable belief that gold is of foreign origin.
The gold in question has been rightly confiscated absolutely by the ld. adjudicating authority. As recovery of gold has been made from Shri Vijay Bhagat and Shri Rupam Ghosh, therefore, they cannot be exonerated. Accordingly, the penalty imposed on them of Rs.3,00,000/- each is confirmed.
Although the name of Shri Suresh Patil has been given by Shri Rupam Ghosh and Shri Vijay Bhagat during the course of investigation, but no corroborative evidence has been produced by the Revenue apart from the statement of the co-accused to allege that Shri Suresh Patil or Shri Balaji Abaso Patil (appellants herein) were involved in the activity of smuggling of the gold in question - As no evidence has been produced by the Revenue against Shri Suresh Patil and Shri Balaji Abaso Patil, therefore, no penalty can be imposed on the said two appellants.
Appeal disposed off.
- 2024 (4) TMI 699
Seizure of Gold - Extension of time u/s 110 (2) of the Customs Act for issuance of SCN - Absolute Confiscation of gold recovered during the course of search - imposition of penalties - failure to submit the documents of procurement of gold bars of foreign origin at the time of seizure in terms of Section 123 of the Customs Act, 1962 - Admissibility of statements.
Extension of time under Section 110 (2) of the Customs Act - HELD THAT:- It is found that during the course of investigation, Panchanama was drawn and in Panchanama while seizing the gold, some papers were also recovered from the possession of the Appellant No. (2), but the details of those papers were neither supplied or mentioned in the Panchanama nor recorded in the relied upon documents - further the fact noted is that as per the examination report of CRCL, the purity of gold was found 99.5%. Although the gold is having a foreign markings that does not establish that the gold is foreign gold as the foreign marking gold contains purity of 99.9%. In that circumstances, the Revenue has failed to make the reason to believe that the gold in question is smuggled in nature.
Applicability of provisions of Section 123 of the Customs Act, 1962 - HELD THAT:- As the purity of gold was 99.5%, although there is an inscription of gold being of foreign origin, which does not establish that the gold in question is of smuggled in nature. Moreover, one of the gold bar is having marked as “MMTC PAMP” that the gold bar cannot be of foreign origin and smuggled one, which itself breaks the case of the Revenue. The Revenue is also relying the marking of “MMTC PAMP” Indian marks, therefore, how can it be alleged that the gold in question is of foreign origin and smuggled one, therefore, the Revenue has failed to make out a case of reasonable belief that the gold in question is smuggled one. Consequently, the provisions of Section 123 of the Customs Act, 1962 are applicable to the facts of the case.
Admissibility of statements - HELD THAT:- The case of the Revenue is based only on the basis of statement of the Appellant No.(2) during the course of interrogation on 19.06.2016, no further corroborative evidence has been produced by the Revenue in support of their allegation that the gold in question is of foreign origin and smuggled one. Without corroborative evidence, the statement of the Appellant No.(2) dated 19.06.2016 is inadmissible.
Thus, the gold in question cannot be held liable to be confiscated. Consequently, the order for confiscation of gold in question is set aside. As the gold in question is not liable for confiscation, therefore, no penalties can be imposed on the appellants.
The impugned order is set aside - appeal allowed.
- 2024 (4) TMI 698
Town Seizure - Absolute confiscation of gold - imposition of penalties on the firm as well as on the appellants - onus to prove u/s 123 of CA - HELD THAT:- It is found that it is a case of town-seizure. Moreover, the gold bars recovered were having no markings and having purity of 99.96%. In that circumstances, the Revenue has failed to discharge their onus how they form an opinion that they have a reasonable belief that the gold is of foreign origin and smuggled one. Moreover, the appellants have been able to prove by producing various documentary evidences, like, their Books of Accounts and certification from M/s G.N.H. & R [P] Ltd., Kolkata and the appellants have also produced certain “Hall Marking” issued by them from time to time. In that circumstances, the appellants were able to discharge their onus of procurement of gold through licit means in terms of Section 123 of the Customs Act, 1962.
The gold in question cannot be held liable to be confiscated. Consequently, the order for confiscation of gold in question is set aside and as the gold in question is not liable for confiscation, therefore, no penalties can be imposed on the appellants.
The impugned order set aside - appeal allowed.
- 2024 (4) TMI 697
Classification of imported goods - amino acid powder - whey protein powder - to be classified them under the Customs Tariff Item (CTI) 29379090 or under CTI 21069099? - multiple assessments in the same Bills of Entry - Finalization of provisional assessment - violation of principles of natural justice - Jurisdiction - Assistant Commissioner of Customs, proper officer or not - enhancement of value of Insane Lab Psychotic (Amino Acid Powder).
Were there multiple assessments in the same Bills of Entry in these cases contrary to the provisions of section 17 as alleged by the appellant? - HELD THAT:- Assessment has to be done by the importer himself and the proper officer can (a) verify the entries made, i.e., the details provided in the Bill of Entry with regard to the nature of goods, specifications, value, etc; and (b) verify the self-assessment of the goods; and then re-assess the duty. Both the self-assessment and the re-assessment are assessments as per section 2(2). But there could be occasions when the assessment cannot be done at that stage because of some details or test report, etc. are required. In such cases, the goods are provisionally assessed to duty and the goods are cleared for home consumption and thereafter, the provisional assessment is finalized. In such a case, although the goods cease to be imported goods once they are cleared for home consumption, the assessment which was only provisional before such clearance has to be finalized. This finalization is not a new assessment but a completion of the assessment which was left incomplete before the goods were cleared.
Once an order under section 47 is issued, the goods cease to be ‘imported goods’ as per section 2(25) and therefore, no assessment of duty is possible. Thus, it puts an end to the process of assessment under section 17. Thereafter, the assessment already made can be modified either on appeal to the Commissioner (Appeals) by either side or an appeal by higher appellate authorities or it can be reopened and revised by the department by issuing an SCN under section 28 - until the order clearing the goods for home consumption under section 47 is issued, the goods continue to be imported goods and assessment and re-assessment is permissible more than once. It is this flexibility within the system which greatly facilitates trade and expedites clearances while providing an opportunity to the assessing officer to make changes in the assessment if necessitated before clearing the goods for home consumption.
Finalization of provisional assessment - Was there any violation of principles of natural justice in these cases? - HELD THAT:- As per the Customs Act, SCN has to be issued under section 28 (if a demand is being raised) or under section 124 (if the goods are to be confiscated or penalty is to be imposed). Regular assessment under section 17 or its finalization under section 18 have no provision for issue of SCN. However, if the duty is re-assessed under section 17(2) by the proper officer, unless the importer accepts such re- assessment in writing, he has to issue a speaking order within 15 days. Similarly, nothing in section 18 which deals with provisional assessment or its finalization provides for issue of an SCN. In these cases, initially, the Bills of Entry were provisionally assessed awaiting the test reports of CRCL on receiving which the assessments were finalized. The appellant was provided copies of the test reports and the appellant made written submissions which were considered - thus, no violation of either any provision of the Act or the principles of natural justice in not issuing an SCN to the appellant before finalizing the assessment.
Was the Assistant Commissioner of Customs who passed the OIO the proper officer to do so? - HELD THAT:- The provisional assessment order was issued by Assistant Commissioner, ICD, Piyala and it was finalized by the Deputy Commissioner, ICD, Piyala. A successor in office naturally completes the action by the predecessor. There are no infirmity in the order of finalization of assessment being done by the successor officer.
Were the imported goods classifiable under CTI 29379090 as claimed by the appellant or CTI 21069099 as classified in the impugned orders? - HELD THAT:- It is evident both from the test reports of CRCL as well as copies of the labels of the imported goods enclosed with the appeal that they are mixtures of amino acids and also contain vitamins and caffeine or tea extract and other similar substances. They are meant to be consumed as such or after mixing in water. They are not meant to be consumed in unlimited quantities and the recommended consumption is also indicated - Nothing in the test reports or in the labels indicates that they are either hormones or hormone-stimulating factors as is claimed by the learned counsel.
The imported goods are not protein concentrates (such as whey protein) but are mixtures of amino acids, vitamins, etc. for use by dissolving in water. In our considered view, Chapter Note 5(b) squarely puts the imported goods under heading 2106 and since they do not exactly fall under any of the other Customs Tariff Items, CTI 2106 90 99 is the correct classification.
Can the enhancement of value of Insane Lab Psychotic (Amino Acid Powder) 35 SU/220 grams be sustained? - HELD THAT:- The assistant Commissioner, finding the value of US$ 10.25 per piece much lower, rejected it under rule 12 of the Customs Valuation Rules and enhanced it to US$ 12.50 per piece based on a previous import by the appellant itself, under Rule 4 of the Customs Valuation Rules. The Commissioner (Appeals), observing that the contemporaneous value adopted was for the same product imported by the same importer, upheld the re-determination of value. We find that the appellant’s submission that the previous import by the invoice dated 22.10.2018 was for only 1176 pieces while this import by Invoice dated 24.09.2018 was for 15,624/- pieces deserves to be accepted. When 14 times as many goods are imported, a reduction in pieces per piece from US$ 12.50 to US $ 10.25 is explicable in the normal course of business. The enhancement of value cannot, therefore, be sustained.
Appeal allowed in part.
- 2024 (4) TMI 696
Valuation of imported goods - Ethylene Vinyl Acetate [EVA] - rejection of declared value - redetermination of value based on the contemporaneous imports - reliability on the test report of CIPET - correctness of method of re-determination of value - HELD THAT:- The test report clearly states that the sample which was tested was from the Bill of Entry in dispute. It also specifies which standard methodology was adopted for testing each of the parameters. CIPET is the premier plastics research and training institute of the country and when it has adopted specific testing methods, there are no reason to doubt them. The appellant provided no reasons whatsoever to support its assertion that the method adopted by CIPET was incorrect. The method adopted by CIPET was ASTM E 1131 (TGA method). The appellant says ASTM D 5594-98 was the correct method and it will give the result according to its declaration. ASTM stands for American Society for Testing and Materials which lays down standards for materials as well as testing protocols which are followed world over - there are no reason to believe that the ASTM standard followed by the CIPET is incorrect.
Insofar as the other test reports submitted by the appellant are concerned, any test report is as good as the sample. For instance, if we say, blood sugar content is very high, we should specify whose blood was drawn and tested and if it was drawn fasting or post prandial. Otherwise, the blood sugar levels in the test report mean nothing. Neither of the test reports relied upon by the appellant indicates that the samples which were tested were from the goods imported against the Bill of Entry - Further, even if there is one report from the Government laboratory and another from a private party, the law laid down by the Supreme Court in Reliance Cellulose is that the test report of the government laboratory cannot be discarded in favour of some private test report - it is held in favour of Revenue and against the appellant insofar as the test report is concerned.
Valuation of imported goods - imported EVA was declared to have 18% vinyl acetate but on testing by CIPET was found to contain 22.4% vinyl acetate - HELD THAT:- If the assessing officer rejects the transaction value under Rule 12, then the value has to be re-determined under Valuation Rules 4 to 9 - The assessing officer determined the value under Rule 9 observing that the other Rules from 4 to 8 do not apply and, therefore, determined the assessee value as per the contemporaneous values as per Independent Commodity Intelligence Service (ICIS) data. Learned counsel submits that if contemporaneous values must be considered they must originate from the same area. While its imports were from Saudi Arabia, the contemporaneous values adopted were based on the values of imports from other regions - the officer had no choice but to look at the values of EVA with 22% vinyl acetate imported from other countries. After considering all such values, he adopted the lowest of such values - there are no infirmity in the determination of the assessable value in this case.
The impugned order is upheld - the appeal is dismissed.
- 2024 (4) TMI 695
Revocation of Customs Broker License - forfeiture of security deposit - imposition of penalty - fulfilment of obligations as required under CHALR, 2004/CBLR, 2018 or not - undervalued goods or not - mis-declaration in import of goods in order to evade payment of customs duty - contravention of Regulations 13(d), 13(e) and 13(n) of CHALR, 2004 corresponding to 10(d), 10(e) and 10(m) of CBLR, 2018.
Violation of Regulation 10(d) - HELD THAT:- The appellants have duly filed the bills of entry as per the documents given by the importers and they were not aware of the purported mis-declaration of the imported goods. In the instant case, the violations were found by the department only on the basis of specific information received by NSPU and further investigations carried out thereafter. Hence the appellants CB cannot be found fault for the reason that they did not advise their client importer to comply with the provisions of the Act. Further, as the purported mis-declaration of imported goods was not known to the appellants, the non-compliance by the importer in respect of imported goods could not have been brought to the notice of the Deputy Commissioner of Customs (DC) or Assistant Commissioner of Customs (AC) by the appellants CB - the violation of Regulation 10(d) ibid, as concluded in the impugned order is not sustainable.
Violation of Regulation 10(e) - HELD THAT:- The documents submitted by the importer to the appellants CB included invoice, packing list, Bill of lading and country of origin certificate. The copy of these documents were perused and we find that the Commercial invoice and Bill of lading No. SHASEA03943 specifically mentions the name and address of the supplier/consignor as Hangzhou Westlake Automotive Spare Parts Group, INC., Hangzhou, China. Besides the country of origin certificate issued by China Trade Council specify that imported goods are of HS code 8708.93 of Harmonized System of international classification and that the goods are of origin of the People’s Republic of China. However, while declaring the imported goods in the B/E, the tariff classification mentioned in these documents were not cross verified by the appellants CB - the conclusion arrived at by the Commissioner of Customs (General) has merits and his findings on the violation of said Regulation 10(e) ibid is sustainable on basis of above documents.
Violation of Regulation 10(m) - HELD THAT:- Before the imported goods were taken up for investigation, the customs duty on declared value was duly paid on 13.07.2009 i.e., the same day of filing B/E. Even during investigation proceedings, right from detailed examination of the goods under panchnama proceedings, the appellants CB's representative was present and cooperated with investigation authorities. Further, voluntary statements were also given during the investigation by the partner Shri Lalit Agarwal, of appellants CB and S/Shri Sampat Phatangare, Arjun Nishit, employees of the appellants CB. The details of Retail Sale Price (RSP) in respect of all the 89 items of imported goods had been declared in the B/E. Further, there is no case of importer or any other person having complained about the inefficiency or delay in clearance of the imported goods by the appellants CB. Therefore, the conclusion arrived at by the learned Commissioner of Customs that the appellants have failed to discharge their obligations cast on him under Regulation 10(m) ibid is factually non supported by any evidence and thus it is not legally sustainable.
The appellants could have been proactive in fulfilling their obligation as Customs Broker for exercising due diligence, particularly when the import documents indicated the correct tariff classification. Thus, to this extent the appellants CB are found to have not complied with the requirement of Regulation 10(e) ibid and thus partial forfeiture of security deposit for an amount of Rs.5000/- for not being proactive for fulfilling of obligation under Regulation 10(e) ibid alone, is appropriate and justifiable.
There are no merits in the impugned order passed by the learned Commissioner of Customs (General), Mumbai in forfeiture of security deposit of Rs.15,000/- for violations under Regulations 13(d), 13(e) and 13(n) of CHALR, 2004 corresponding to 10(d), 10(e) and 10(m) of CBLR, 2018 - in view of the failure of the part of appellants in not having acted in a proactive manner in fulfillment of the obligation under Regulation 10(e) ibid, corresponding to 13(e) of CHALR, 2004 particularly when they had received the documents indicating the correct HS code for the imported goods, it is found that it is justifiable to partially forfeit the security deposit to the extent of Rs.5,000/-, which would be reasonable, commensurate with the violation and would be in line with the judgement of the Hon’ble Supreme Court in the case of COMMISSIONER OF CUSTOMS VERSUS M/S K.M. GANATRA & CO. [2016 (2) TMI 478 - SUPREME COURT], in bringing out the importance of crucial role played by a Customs Broker.
Appeal allowed in favour of appellant.
- 2024 (4) TMI 694
Recovery of SAD refund sanctioned erroneously - benefit of N/N. 102/2007-Cus dated 14.09.2007 denied - mis-match between the imported goods and sale of imported goods - purchase of wooden logs but sale after processing i.e. in sawn sized - As per the department since the imported goods were not sold as such the refund is not admissible - Extended period of Limitation -HELD THAT:- Obviously when the form of the wooden timber is changed the description and quantity will be different in the sale invoice as compared to the bill of entry. However, there is no allegation of the department that the goods sold by the appellant is not imported goods but some different goods. Therefore, so long the same imported goods have been sold due to minor difference in the details will not jeopardise the substantial benefit of the refund to the appellant.
The main condition for granting the refund is that the importer should pay the VAT/sales tax which is not under dispute. Therefore, the SAD paid in lieu of sales tax has to be refunded. The main reason for difference of description is that the timber logs imported have undergone the process of sawing and sawn timber was sold. This issue has been raised against various importers of timber logs and in some of the cases the Tribunal has held that merely because the timber log is converted into sawn timber and the same has been sold, the benefit of the N/N. 102/2007-Cus cannot be denied.
As regard other discrepancies raised by the department, the difference in description and certain other details does not prove that the goods sold by the appellant on which Notification No. 102/2007 was availed is not for the imported goods but for some other goods. Therefore, due to minor difference of details between the invoice and bills of entry is at the most merely a procedure lapse which does affect the vital facts that the SAD was paid by the importer and against sale of the said goods the appellant has discharged the VAT/sales tax, therefore, there is no concrete reason for denial of the refund.
Extended period of Limitation - HELD THAT:- Admittedly the show cause notice has been issued after one year from the date of sanction of refund. The refund was sanctioned by the sanctioning authority after due verification of all the documents and if there is any difference of description, it was found that the same is not a forgery with intention to defraud the government. Therefore, it cannot be said that the appellant have suppressed the facts or mis-represent with intention to evade payment of duty. In this fact, the judgments cited by the appellant in the case of Tamil Nadu Housing Board [1994 (9) TMI 69 - SUPREME COURT] directly supports their case on limitation. Accordingly, the demand is not sustainable on limitation also.
The demand for recovery of refund already sanctioned is not sustainable. Hence, the impugned order is set aside - Appeal allowed.
- 2024 (4) TMI 693
Valuation of goods - addition of franchise fee and international marketing charges incurred and of services obtained, in transaction value under the authority of rule 10 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 - Penalty under section 114AA of Customs Act, 1962 - extended period of limitation - HELD THAT:- In the extant version of section 14 of Customs Act, 1962, between ‘transaction value’ and the proviso therein, as set out in section 14, is the mandate for inclusions in the price, agreed upon for the particular shipment and which is not in doubt, to render the ‘transaction value’ compatible with ‘value’ intended for assessment in section 14 of Customs Act, 1962. It also empowers framing of rules to that end besides resort to rules for attending upon circumstances in which ‘transaction value’ is not available. The valuation provision itself thus distinguishes ‘transaction value’ and ‘transaction value not being determined’ which calls for recourse to the Rules framed under that empowerment. The Rules provide for substitution when ‘transaction value’ of imported goods are not available, for inclusion in ‘transaction value’ for adjustment to conform to ‘value’ and for empowering the deeming of ‘transaction value’ as not being available. Merely owing to the remedies for these contingencies being collated in one statutory instrument, every recourse is not to be attended by taint on ‘transaction value’ meriting rejection.
The ‘franchise fee’ and ‘international marketing charges’ are to be included in the ‘transaction value’ for conformity with section 14 of Customs Act, 1962. To that extent, and in the context of not being pressed on behalf of the appellants, the includibility attains finality. On the issue of inclusion of third element in order of Commissioner of Customs, Air Cargo Complex (ACC), it has been submitted that the dispute for subsequent period has been remanded to the original authority. It is, however noted, that dropping of that element in the adjudication orders has not been appealed against by Revenue. It must be presumed to have attained finality in favour of appellant herein.
Penalty under section 114AA of Customs Act, 1962 - HELD THAT:- The decision in SHRI. T.R. VENKATADARI, SHRI. SANJAY AGGARWAL, SHRI. A. RAGHUNATHAN, SHRI. VIJAY MALLYA VERSUS COMMISSIONER OF SERVICE TAX-I, MUMBAI [2017 (10) TMI 455 - CESTAT MUMBAI], combined with the lack of any evidence of roles played by any individual, suffices to set aside that detriment. The imposition of penalty under section 114A of Customs Act, 1962 in one of the orders of Commissioner of Customs, Nhava Sheva is contrary to law and must be set aside.
Confiscation - penalty u/s 112 of Customs Act, 1962 - HELD THAT:- The confiscation ordered in all three orders and penalty ordered under section 112 of Customs Act, 1962 in two of the orders are without sufficient examination of law and fact. Likewise, the invoking of extended period in all the orders has been undertaken without proper examination of factual circumstances that enable such demand. These require re-ascertainment in accordance with our observations supra including quantification of demand legally recoverable.
All the orders are set aside and restored to the original authority for fresh proceedings that shall be limited to justification, if any, for invoking extended period and consequent quantification of tenable demand and to evaluate the grounds on which liability to confiscation are supported by law and facts with penalty under section 112 to follow only in the event of validation of confiscation.
Appeal disposed off.
- 2024 (4) TMI 643
Maintainability of petition - availability of alternative remedy of appeal - compounding of offence - CESTAT has jurisdiction to entertain an application vis-a-vis compounding of an offence under Section 137 of the Customs Act, 1962, or not - HELD THAT:- Bearing in mind the submissions of learned senior counsel and also the fact that the CESTAT has now remanded the matter to the Chief Commissioner to reconsider the application filed for compounding of the offence under Section 137 of the Customs Act, 1962, the matter needs no interference.
The Chief Commissioner is now to re-consider the said application in accordance with law. The Chief Commissioner to dispose of the said application filed under Section 137 of the Customs Act as expeditiously as possible.
SLP disposed off.
- 2024 (4) TMI 642
Revocation of Customs Broker Licence - forfeiture of security deposit - levy of penalty - mis-declaration of quantity of imported goods - violation of the provisions of Regulation 11(n) of CBLR, 2013 - HELD THAT:- From the facts of the present case, it is evident that the manner in which Shri Bansal was dealing with the appellant in relation to the imports for all practical purposes, he was the actual importer and Shri Praveen Singh Patwal was merely a dummy IEC holder. He categorically stated that whenever the consignment arrived, the documents were sent to him by Shri Rajesh Bansal or else his field boy used to go to the office of Shri Rajesh Bansal at Tip Top Market, Karol Bagh to collect the documents. More important was that after customs clearance, the goods used to go to the premises of Shri Rajesh Bansal at Karol Bagh is a pertinent factor which could not have been ignored by the appellant. Similarly, the payments used to be made by Shri Rajesh Bansal or Sunil Badlani. The entire working was within the knowledge of the appellant and the fact that this modus-operandi was followed in the past clearances of around 60-70 consignments clearly reflects connivance on the part of the appellant.
Also on same set of facts that Narendra Narula, Proprietor of GND Cargo Movers (CHA) was well aware of the fact that Shri Praveen Singh Patwal was the proprietor of M/s. Royal International and Shri Rajesh Bansal was actually importing the goods in the name of M/s Royal International, although Shri Bansal was not the proprietor of the said firm, show cause notice dated 29.11.2013 was issued under the Customs Act, 1962 and on adjudication, order-in-original dated 30.03.2018 was passed whereby penalty of Rs.10 lakhs was imposed on Shri Narendra Narula under Section 112 (a) of the Act. The findings given on the same facts in the collateral proceedings on adjudication are binding.
Customs broker is expected to act with great sense of responsibility and take care of the interest of both the client and the revenue. Violations even without intent are sufficient to take action against the appellant.
Proportionality of punishment - HELD THAT:- The adjudicating authority had taken a balanced view that CB cannot escape his duty of KYC verification just by obtaining photo copies of two identity and interest proof documents and therefore having violated regulation 11 (n) rightly revoked the CB license and forfeited the security deposit amount but refrained from imposing separate penalty on the appellant. In M/S FALCON INDIA (CUSTOMS BROKER) VERSUS COMMISSIONER OF CUSTOMS (AIRPORT & GENERAL) NEW DELHI [2022 (3) TMI 1268 - CESTAT NEW DELHI], the Tribunal was of the view that there is no reason to show any leniency once violation is noticed and it is not for the Tribunal to interfere with the punishment meted out by the disciplinary authority, i.e. the Commissioner, unless it shocks the conscience.
Referring to the provisions of Regulation 11(n) and the judicial pronouncements, Mr. Rakesh Kumar, learned Authorised Representative submitted that Shri Narula (CB) in his statement recorded under Section 108 of the Act accepted that he has not verified the antecedents of the importer as the documents were handed over by Shri Badlani, an Associate of Shri Rajesh Bansal, who is not the IEC holder and he also admitted that the imports were made through a dummy IEC holder - there are no infirmity or perversity in the conclusion arrived at in imposing the punishment by the impugned order.
The impugned order upheld - appeal dismissed.
- 2024 (4) TMI 641
Valuation of imported goods - rejection of value - enhancement of value, on the basis of a price quote appearing on the internet website - Confiscation on account of mis-match colour, batch number and batch quantity, which occurred on account of mistake on the part of the foreign supplier - confiscation also on the ground that one batch number being omitted to be mentioned by mistake in the Test Certificate of the Testing Laboratory.
Enhancement of value - HELD THAT:- Merely on the basis of the quote available on particular website it is not sufficient to enhance the value of the imported goods. at the same time the value appearing on website is abnormally high i.e. 0.36 per piece therefore the matter needs to be reconsidered on the basis of other material, if any. It is also observed that for applying the value of contemporaneous import it will also be important to see various factor such as similar goods, same quality, country of the export and the time of import. Therefore, merely on the basis of the quote available on the website value cannot be enhanced.
Confiscation of the goods on the basis mis-match of colour, batch number and batch quantity - appellant submitted that the mistake has occurred in the part of the supplier which has subsequently been clarified by the supplier - HELD THAT:- It is prima facie found that because of this error it does not conclusively lead to any mala fide on the part of the appellant. The Adjudicating authority must reconsider the clarification given by the supplier and also to see that whether there is any intention to evade/ short paid the custom duty. It is also the submission of the appellant that even though this mistake has occurred the total quantity of the goods is matching. This aspect also needs to be re-looked into by the adjudicating authority.
Confiscation on allegation that in test certificate one batch number is mentioned wrongly - HELD THAT:- It is found that it was a typographical error and the testing laboratory has rectified the error. Once the typographical error has been rectified, the mistake dose not remains and after rectification only for the mere typographical error goods cannot be confiscated. Therefore the adjudicating authority has to reconsider this matter accepting the rectification of the error done by the concerned laboratory.
The entire matter needs to be reconsidered therefore the impugned order is set aside. The appeals are allowed by way of remand to the adjudicating authority for passing a fresh order.
- 2024 (4) TMI 640
Valuation of imported goods - inclusion of royalty in the invoice value - Rule 10(1)(c) of the Customs Valuation Rules, 2007 - HELD THAT:- Impliedly, the direction of the first appellate authority is not relatable to goods under import or under proceedings for recovery of duty short-paid on import. A proceedings which does not pertain to goods under import or already imported and cleared is not a proceedings acknowledgeable under Customs Act, 1962. Neither Learned Counsel nor Learned Authorised Representative were able to evince notice under section 28 of Customs Act, 1962 for recovery of duty arising from proposed addition to declared value by recourse to rule 10(1)(c) of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 or for finalization of assessment under section 18 of Customs Ac, 1962 which, other than section 124 of Customs Act, 1962, should be the requisite framework for adjudication and appellate disposal.
The order impugned before the first appellate authority has its origins in a peculiar institution of customs administration, viz., Special Valuation Branch (SVB) or GATT Valuation Cell (GVC), found in some of the older customs houses with specific remit to investigate acceptability of price declared for assessment of goods transacted between related persons. This arises from provisioning in section 14 of Customs Act, 1962 for assessable value to factor in relationship affecting price arrangement in transactions which frailty of human expression could but, in the nascent stage of harmonized approach to valuation, inadequately articulate as the norm or the deviation, and as remedies appurtenant thereto, to justify institutionalized support to assessment hierarchy.
Furthermore, from the absence of show cause notice, as well as response by or on behalf of appellant about fiscal detriment in proceedings, we may not be wrong in speculating that such imports as may be subject to oversight of Special Valuation Branch (SVB) are, invariably, assessed provisionally for finalization to be undertaken upon completion of ascertainment by Special Valuation Branch (SVB) - As appeal has not been directed before first appellate authority against order of such ‘proper officer’, it transgresses the remand jurisdiction of such appellate authority to issue directions to a ‘proper officer’ who has yet to undertake finalization. Direction to the ostensible ‘original authority’ is nothing but an exercise in futility and direction to the ‘proper officer’, and the statutorily empowered potential ‘original authority’, is beyond appellate jurisdiction of Commissioner of Customs (Appeals) before whom assessment was not under challenge.
There was no cause for grievance to initiate appellate remedies. Such opportunity would have presented itself after finalization. Implicit in acknowledgement of appellate remedy against ‘advisory’ of Special Valuation Branch (SVB) is another round of appeal through the first appellate authority on the same goods and on the same facts which does not sit well with the principle of comity of courts. The appeal before the first appellate authority was, thus, premature. This aspect of disposal of the appeal within the scheme of Customs Act, 1962, and the role of Deputy Commissioner, Special Valuation Branch (SVB) within it, had not been evaluated by the Commissioner of Customs (Appeals).
The impugned order set aside - appeal restored to first appellate authority to dispose off the pleas of the appellant-Assistant Commissioner in accordance with the scheme of Customs Act, 1962 - appeal allowed by way of remand.
Case Laws - Corporate
- 2024 (4) TMI 728
Professional Misconduct by CA - Failure to disclose a material fact known to him which is not disclosed in a financial statement, but disclosure of which is necessary in making such financial statement where the statutory auditors are concerned with that financial statement in a professional capacity - Failure to report a material misstatement known to him to appear in a financial statement with which EP is concerned in a professional capacity - Failure to exercise due diligence and being grossly negligent in the conduct of professional duties - Failure to obtain sufficient information which is necessary for the expression of an opinion, or its exceptions are sufficiently material to negate the expressions of an opinion - Failure to invite attention to any material departure from the generally accepted procedures to audit applicable to the circumstances - sanctions and penalties.
HELD THAT:- EP and PHD committed professional misconduct as defined by Section 132 (4) of the Companies Act, 2013, read with Section 22 and Clause 5 of Part I of the Second Schedule of the Chartered Accountants Act, 1949 (No. 38 of 1949) as amended from time to time, which states that a CA is guilty of professional misconduct when he “fails to disclose a material fact known to him which is not disclosed in a financial statement, but disclosure of which is necessary in making such financial statement where he is concerned with that financial statement in a professional capacity” - This charge is proved as PHD and EP failed to disclose in their report the material noncompliances the Company made.
EP and PHD committed professional misconduct as defined by Section 132 (4) of the Companies Act, 2013, read with Section 22 and Clause 6 of Part I of the Second Schedule of the Chartered Accountants Act, 1949 (No. 38 of 1949) as amended from time to time, which states that a CA is guilty of professional misconduct when he “fails to report a material misstatement known to him to appear in a financial statement with which he is concerned in a professional capacity” - This charge is proved as EP and PHD failed to disclose in their report the material misstatements made by the Company.
EP, EQCR Partner and PHD committed professional misconduct as defined by Section 132 (4) of the Companies Act, 2013, read with Section 22 and Clause 7 of Part I of the Second Schedule of the Chartered Accountants Act, 1949 (No. 38 of 1949) as amended from time to time, which states that a CA is guilty of professional misconduct when he “does not exercise due diligence or is grossly negligent in the conduct of his professional duties” - This charge is proved as EP, EQCR Partner and PHD conducted the Audit of a Public Interest Entity in total disregard of their statutory duties, evidenced by multiple critical omissions and violations of the standards. The instances of failure to conduct the audit in accordance with the SAs and applicable regulations, and failure to report the material misstatements in the financial statements and non-compliances made by the Company.
EP, EQCR Partner and PHD committed professional misconduct as defined by Section 132 (4) of the Companies Act, 2013, read with Section 22 and Clause 8 of Part I of the Second Schedule of the Chartered Accountants Act, 1949 (No. 38 of 1949) as amended from time to time, which states that a CA is guilty of professional misconduct when he “fails to obtain sufficient information which is necessary for expression of an opinion or its exceptions are sufficiently material to negate the expression of an opinion” - This charge is proved since EP, EQCR Partner and PHD failed to conduct the audit in accordance with the SAs and applicable regulations as well as due to their total failure to obtain sufficient appropriate audit evidence to support their opinion on the financial statements.
EP and PHD committed professional misconduct as defined by Section 132 (4) of the Companies Act, 2013, read with Section 22 and Clause 9 of Part I of the Second Schedule of the Chartered Accountants Act, 1949 (No. 38 of 1949) as amended from time to time, which states that a CA is guilty of professional misconduct when he “fails to invite attention to any material departure from the generally accepted procedure of audit applicable to the circumstances” - This charge is proved since EP and PHD failed to conduct the audit in accordance with the SAs as explained in Paras C1 to C7 above but falsely reported in their audit report that the audit was conducted as per SAs.
Thus it is concluded that the charges of professional misconduct in the SCN, as detailed above, stand proved based on the evidence in the Audit File, the audit reports on the standalone financial statements and consolidated financial statements for the FY 2018-19, the submissions made by EP, EQCR Partner and PHD and the Annual Report of RCL for the FY 2018-19.
Sanctions and penalties - HELD THAT:- Section 132 (4) of the Companies Act, 2013 provides for penalties in a case where professional misconduct is proved. The seriousness with which proved cases of professional misconduct are viewed is evident from the fact that a minimum punishment is laid down by the law.
Because professional misconduct has been proved and considering the nature of violations and principles of proportionality, in the exercise of powers under Section 132 (4) (c) of the Companies Act, 2013, it is ordered: a. Imposition of a monetary penalty of ₹3 crore (Rupees Three Crore) on the Audit Firm M/s Pathak H.D. & Associates. b. Imposition of monetary penalties of ₹1 crore (Rupees One Crore) and ₹50 Lakh (Rupees Fifty Lakh) respectively on EP CA Parimal Kumar Jha and EQCR Partner CA Vishal D Shah. c. In addition, EP and EQCR partners are debarred for 10 years and 5 years respectively from being appointed as an auditor or internal auditor or from undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate.
- 2024 (4) TMI 635
Seeking directions against the respondent no. 1/National Housing Bank (NHB) to consider and decide upon the petitioner’s representation dated 18th August, 2023 - seeking direction to call upon respondent no. 2, i.e., India Bulls Housing Finance Limited (IBHFL) to produce the responses and relevant documents, disclosing the actions taken by them in respect of the query dated 6th April, 2023 addressed by the petitioner.
HELD THAT:- The petitioner has been in litigation with IBREL and seeks to collect information and documents through the process of the present petition, so as to use the same to file intervention application before NCLAT, New Delhi in the appeal filed by IBREL against the order dated 9th May, 2023 passed by NCLT, Chandigarh, or to file a separate appeal himself against the order dated 9th May, 2023 passed by NCLT, Chandigarh.
Writ jurisdiction of this Court cannot be used by a party for collecting evidence and documents against another party, against whom the petitioner has pending disputes. Writ jurisdiction is meant to safeguard the constitutional, legal and vested rights of a party. The powers vested with this Court under writ jurisdiction are large that are used by this Court to ensure that the constitutional and legal rights of parties are protected and secured - The Court process, much less a writ jurisdiction, cannot be used as a fishing and roving enquiry against a party with whom the petitioner has pending disputes, for the purposes of collecting evidence and documents to be used against such a party. The present petition filed by the petitioner is clearly a misuse and abuse of the process of the Court.
The petitioner is trying to collect evidence and documents against IBREL, as is manifest from the representation dated 18th August, 2023 submitted by the petitioner to NHB. Neither any constitutional nor any legal right of the petitioner is being violated or breached, for protection of which the present petition has been filed. This Court will not become a party in a fact finding and evidence collecting process in order to aid the petitioner, which is the manifest purpose of filing the present petition. The present petition is clearly a misuse and abuse of the process of law.
Thus, no merit is found in the present petition - petition dismissed.
- 2024 (4) TMI 480
Oppression and Mismanagement - Validity of the Lease Deed - Doctrine of Res Sub-Judice - Appellants argued that the Tribunal overstepped its jurisdiction by setting aside the lease deed while its validity was under scrutiny in a civil court - HELD THAT:- The bedrock of this case is the lease deed dated 26.08.2019, executed pursuant to the resolution dated 23.08.2019 which is not only contrary to the provisions of Section 188(1) of the Act r/w Rule 15 of the companies (Meeting of board and its powers) Rules 2014 but also clause 36(ii) of the AoA as on 23.08.2019, which provides that the board of directors shall not, without consent of 100% members of the company, in duly convened general meeting can lease and dispose of the property of the company by way of lease etc. and that the consent of 100% members of the company in a duly convened general meeting is conspicuous by its absence. There are no traces of the alleged oral settlement which has been made the basis of the lease, the terms of which are more against the company (R1) than its favour, therefore, these are unconscionable terms and conditions which would attract the provisions of Section 241 and 242 of the Act.
Moreover, the Appellant did not deliberately implead Rohit Agarwal and Shobhit Agarwal as parties to the present appeal though they were respondents in the main petition only in order to conceal the fact that Shobhit Agarwal who is the son of Appellant No. 1 (Ajay Kumar Agrawal), is a partner of Appellant No. 3 (TX Homes LLP) whereas as per Section 188 r/w 2(76) of the Act and Rule 4 of Companies (Specification of Definition Details) Rules, 2014, the lease deed would not have been executed in favour of the related party. The power under Section 241 and 242 of the Act would include the power to set aside the lease deed which has been executed on behalf of R1 in violation of mandatory provisions of the Act, AoA and terms and conditions of the impugned lease deed are against the very interest of R1 and is oppressive, therefore, the lease deed has rightly been set aside by the Tribunal.
Thus, it is a fit case in which the Tribunal has interfered and set aside the registered lease deed and as such, the impugned order does not call for any interference by this Court, the same is hereby upheld - appeal dismissed.
- 2024 (4) TMI 479
Rightful owners of 4000 shares or not - Exercise of jurisdiction under Section 8 of the Arbitration and Conciliation Act - HELD THAT:- Language of Section 8 of the Arbitration and Conciliation Act has inherent restrictions. The Section puts a bar on the courts not to go outside the contours of Section 8 and the Court can only exercise jurisdiction to see if there is a valid clause and whether the dispute is arbitrable. Thus to give a finding at this stage to the effect R1 and R2 are owners of 4000 shares, which in fact is the main relief claimed in the Company Petition, the Ld. NCLT certainly had travelled beyond its jurisdiction. There was no occasion for Ld. NCLT to delve into the issue of ownership of 4000 shares in an application under Section 8 (Supra) and the said question would arise only when the maintainability of the main case would be decided.
Thus though the appellant forego their claim to challenge dismissal of its application under Section 8 of the Arbitration and Conciliation Act but the observations in the impugned order so far as it relate to the declaring of the ownership of 4000 shares was never warranted at this stage and is set aside.
This issue needs to be decided by the Ld. Tribunal at an appropriate stage and this order be not construed as an expression/opinion on merits upon the ownership of shares which fact shall be now decided by the Ld. NCLT on facts and law.
Appeal disposed off.
- 2024 (4) TMI 442
Demand of unearned increase value - Amalgamation or merger of the two companies does not involve any transfer within the meaning of the Transfer of Property Act, 1882 or not - Interpretation of Lease Agreement Clause - HELD THAT:- There is a specific clause in the order of amalgamation which holds that the said plots stand transferred from the original permanent lessee to the transferee M/s. Jaypee Rewa Cement Ltd, which is now known as M/s. Jaiprakash Associates Ltd. Clause II(4)(a) covers all the categories of transfers as it provides that the lessee shall not sell, transfer, assign or otherwise part with the possession of the whole or any part of the commercial plots without the written consent of the lessor. The said clause does not exclude involuntary transfers. In the facts of the case, it cannot be said that there is an involuntary transfer, as the transfer is made based on a petition filed by the lessee and the transferee for seeking amalgamation. In a sense, this is an act done by them of their own volition.
A similar issue arose for consideration before this Court in the case of DELHI DEVELOPMENT AUTHORITY VERSUS NALWA SONS INVESTMENT LTD. AND ANR. [2019 (4) TMI 2009 - SUPREME COURT]. The Court was dealing with a case where the Company Court passed an order of arrangement and demerger. As a result, the plot given on lease to a company was transferred to another company. In paragraph 5 of the decision, this Court had set out the policy instructions regarding charging an unearned increase.
This Court was dealing with an order of the Company Judge, which provided that the property of a company shall stand transferred to the respondent before this Court, and therefore, it was a case of transfer to which clause 6(a) of the lease deed will be attracted. Clause 6(a) in the lease subject matter of the said case was identical to clause II(4)(a) of the perpetual lease in the present case. This Court also held that clause 2(d) of the policy determining unearned income was attracted in the case of transfer due to demerger. The same principles will apply to a merger, and an unearned increase will be payable.
In the case of Indian Shaving Products Limited [2001 (10) TMI 1042 - HIGH COURT OF DELHI], the High Court of Delhi dealt with the amalgamation of companies under the SICA and not under the Companies Act. In any event, this court confirmed the said decision by summarily dismissing the petition. In the present case, the relevant clause II(4)(a) of the leases covers involuntary transfers as well.
The relevant clause II(4)(a) in the perpetual leases subject matter of this appeal is very wide. It not only covers transfers but also parting with possession. Therefore, the transfer contemplated by the said clause is much wider than what is defined under Section 5. Importantly, Section 5 clarifies that nothing contained therein shall affect any law for the time being in force in relation to the transfer of property to or by companies. Therefore, Section 5 of the TPA will not be of any assistance to the appellant.
There is nothing illegal about the impugned judgment - appeal dismissed.
- 2024 (4) TMI 308
Liability of stamp duty on increase in share capital - How stamp duty is to be applied to Articles of Association in cases of increased share capital? - HELD THAT:- Filing of Form No. 5 is only a method prescribed, whereby “notice” of increase in share capital or of members of a company has to be sent to the Registrar, within 30 days of passing of such resolution. The Registrar then has to record such increase in share capital or members, and carry out the necessary alterations in the articles. Stamp Duty is affixed on Form No. 5 as a matter of practical convenience because a company itself cannot carry out the alterations and record the increase in share capital in its Articles of Association. It is only the articles which are an instrument within the meaning of Section 2(l) of the Stamp Act and accordingly have been mentioned in Article 10 of Schedule-I of the Stamp Act.
It is a settled position of law that in case of conflict between two laws, the general law must give way to the special law. A conjoined reading of the Stamp Act and the Companies Act would show that while the former governs the payment of stamp duty for all manner of instruments, the latter deals with all aspects relating to companies and other similar associations - In the case at hand, we are concerned with an instrument which is chargeable to Stamp Duty and finds its origin in the Companies Act. The various provisions of the Companies Act provide the purpose and scope of the instrument. Thus, it has to be said that the Companies Act is the special law and the Stamp Act is the general law with regards to Articles of Association, and the special will override the general.
Whether the maximum cap on stamp duty is applicable every time there is an increase in the share capital or it is a one-time measure? - HELD THAT:- It is an admitted fact that when the respondent increased its share capital from Rs. 36 crores to Rs. 600 crores it paid a stamp duty of Rs. 1,12,80,000/- and at that time there was no provision for a maximum cap or upper ceiling on the amount payable - The fact that the maximum cap of Rs. 25 lakhs would be applicable as a one-time measure and not on each subsequent increase in the share capital of a company is fortified directly by the Maharashtra Stamp (Amendment) Act, 2015 which amended the charging section for Articles of Association i.e., Article 10 of the Stamp Act.
It is true that the amendment does not have retrospective effect, however since the instrument ‘Articles of Association’ remains the same and the increase was initiated by the respondent after the cap was introduced, the duty already paid on the same very instrument will have to be considered. It is not a fresh instrument which has been brought to be stamped, but only the increase in share capital in the original document, which has been specifically made chargeable by the Legislation.
The appellants are directed to refund Rs. 25 lakhs paid by the respondent along with interest @ 6% per annum. Let the needful be done within 6 weeks from today - order of the High Court of Bombay upheld - civil appeal dismissed.
- 2024 (4) TMI 307
Division of shares among the deceased's children - Interpretation of will - To be treated as part of her "movable properties" or not - equal division of the 100 shares of the appellant company-Vantage Construction (P) Limited, between the three children of the testator - cancellation of allotment of 9800 shares - HELD THAT:- What is apparent is that the issue with regard to the shareholding of the deceased was very much alive and in the knowledge of the parties. The whole tone and tenor of the correspondence between the parties referred hereinabove would show that HPSC was always ready and willing to transfer 1/3rd shareholding in the two companies, provided both NPSC and NCD were to agree to compensate him for so called cumulative losses, which incidentally were never spelled out. Therefore, there is merit in the submission by the learned counsel for the respondents that after the death of HPSC on 03.04.2014, the legal heirs/successors of deceased HSPC are attempting to set up a new case, which was never espoused by the deceased - late HPSC. HPSC never challenged the entitlement of the respondents as regards 1/3rd shareholding in the company with regard to the shares left behind by the deceased – Smt. Ram Piari Chawla - the finding given by the CLB that the shareholding to the extent of 100 shares in Vantage Construction Private Limited and 5 shares in Earl Chawla & Company Private Limited were in the nature of movable properties encompassed in the Will dated 04.07.1986, appears to be without any blemish and the same cannot be faulted on any ground whatsoever. It is a finding based purely on the prevailing facts and on a fair and reasonable interpretation of the Will.
Decision of the CLB to cancel the allotment of 9800 shares in the appellant No. 1 company in favour of appellant No. 2/HPSC represented through legal heirs - HELD THAT:- It is pertinent to mention that the aspect of allotment of 9800 shares in the name of HSPC from 10.10.2002 was not indicated in the letter dated 22.11.2008 and it only came to be revealed in the subsequent letter dated 01.12.2008. There was a clear attempt on the part of late HPSC in dragging his feet on the matter by calling upon the respondents to submit certain documents vide letter dated 15.12.2009, despite being the real brother of the respondents and having common knowledge of the entire factual background.
It is also borne out from the record that the register of shareholding was fabricated so as to show 100 shares of his deceased mother in the name of his own daughter and as his mother had died on 27.10.1990. There is brought not an iota of evidence that any other person was brought in as the second director for mandatory compliance with the provisions of the Act and in the said circumstances the decision by the CLB thereby raising an inference that HPSC allotted 9800 shares to himself without holding any valid meeting as required by law and thereby making such increase behind the back of NPSC and NCD, required to be invalidated.
This Court finds that the impugned judgment dated 24.06.2013 passed by the CLB does not suffer from any patent illegality, perversity or incorrect approach in law. Accordingly, the present appeal is dismissed.
- 2024 (4) TMI 306
Recovery of outstanding dues - priority of charges - whether Andhra Bank, which had the first charge over the property in question and is evidently a secured creditor, could have effected a sale of the property in question by way of a private treaty? - Legitimacy and consequences of a Sale Deed executed by the company in liquidation. - HELD THAT:- This Court has gone through the relevant provisions of the SARFAESI Act, 2002 as also the Companies Act of 1956. There is no gain saying that the company (in liquidation) was a borrower in terms of Section 2(f) of the SARFAESI Act and the debt was taken and in existence against the property in question, which was recoverable by the Bank. Further, the property in question was a financial asset of the Bank in terms of Section 2(l) and there also arose a default in so far that there was apparently non-payment of the debt taken by the borrower in terms of Section 2(j) of the SARFAESI Act.
Where a secured asset is an immovable property, sale by any method other than public auction or public tender may be effected on such terms as may be settled between the secured creditor and the proposed purchaser in writing. Although, in terms of sub-Section (2) to Section 13 of the SARFAESI Act, there was no specific declaration as to the account of the company in liquidation having become a Non-Performing Asset, such recourse was definitely on the cards.
This court finds substance in the plea advanced by the learned counsel for Andhra Bank, that by virtue of the order dated 03.12.2012 passed by the CLB, whereby liberty was granted to the Bank to take action against the mortgaged property as per law, the sale of the property in question by way of a private treaty with the borrower and the purchaser was squarely included and envisaged.
Whether the sale of the property in question on 30.01.2013 should be validated by this Court? - HELD THAT:- Unhesitatingly from the trail of correspondence viz., the letters/emails dated 20.12.2012, 22.12.2012, 27.12.2012, 28.12.20212 that preceded between the principal borrower i.e. the company (in liquidation) through Ms. Manju Kanwar and Andhra Bank before the sale was effected, does go to show that all efforts were being made to set the company (in liquidation) on course to recovery and revive it, and further to ensure that its account with the Bank does not become an NPA. If the said letters dated 20.12.2012, 22.12.2012, 27.12.2012 and 28.12.20212, emanating from the company (in liquidation) are to be believed, the company was going through a poor commercial phase due to a world-wide recession which greatly impacted Europe and United Kingdom in particular.
This Court finds that the reliefs claimed in Company Application No. 340/2016 moved on behalf of the Official Liquidator are not sustainable. There are no justifiable reasons to invalidate the sale deed, for the simple reason that the sale had been effected by Andhra Bank under its aegis through the principal borrower/debtor, under its overall supervision and control and the entire sale consideration was duly received and accounted for. There is not an iota of material placed on the record to suggest that any part of the sale consideration was siphoned off or misappropriated by anyone connected with the company (in liquidation).
Application dismissed.
- 2024 (4) TMI 242
Seeking conversion from an unlimited liability company to a limited liability company - Section 18 of the Companies Act, 2013 - whether the Appellant’s application filed on 21st October, 2014 before the ROC will be governed by the conditions in the statutory provision of Section 18 of the Act as it existed on the said date or the additional criteria provided in Rule 37, which was inserted subsequently by the Legislature w.e.f. 27th July, 2016, would also be applicable to the said application? - HELD THAT:- The submissions of the Appellant cannot be accepted and it is opined that the Appellant did not acquire any vested right of conversion upon filing the application under Section 18 of the Act on 21st October, 2014 with the ROC. It is well settled by Supreme Court that the relevant law for grant of approval of an application would be the date on which the approval is granted.
Reference made to the judgment of Supreme Court in USMAN GANI J. KHATRI OF BOMBAY AND ORS VERSUS CANTONMENT BOARD AND ORS [1992 (5) TMI 205 - SUPREME COURT] where it has been held that At present the statutory bye-laws published on April 30, 1988 are in force and the fresh building plans to be submitted by the petitioners, if any, shall now be governed by these bye-laws and not by any other bye-laws or schemes which are no longer in force now.
Further the Supreme Court in RAMESH PRASAD VERMA VERSUS THE STATE OF BIHAR AND ORS [2009 (8) TMI 1291 - PATNA HIGH COURT] has held that a legislation, if clarificatory, declaratory or explanatory in nature and purport will have retrospective operation especially in the absence of any indication to the contrary.
The contention of the Appellant that the ROC by insisting on NOCs from the creditors, lenders and stakeholders has sought to render Section 18(3) otiose is without any merit. The requirement of NOC has been statutorily incorporated in Rule 37 and the said Rule also contemplates issuance of notice by the applicant-company to each of its creditors inviting objections, if any, to the proposed conversion. The Appellant has not challenged the vires of the Rule 37 and, in fact, consciously abandoned the challenge initially made to the said Rule. Thus, with the said Rule existing on the statute book, the objection of the ROC with respect to the non-circulation of this application of conversion to the creditors, lenders and stakeholders of the applicant-company is not arbitrary and is in conformity with Rule 37.
The contention of the Appellant that ROC in the impugned decision erred in referring to Section 366 of the Act read with Rules 3 and 4 of the Companies (Authorised to Register) Rules, 2014 as it is not attracted to an application filed under Section 18 of the Act, does not persuade to set aside the impugned decision. The ROC has recorded in the impugned order that it adverted to the principles laid down in Section 366 and the Rules, 2014 as the applicant herein was objecting to the newly inserted Rule 37 and as per ROC, the Rules of 2014 also embodied the same spirit of the statute.
There are no merit in the present appeal and the same is dismissed.
- 2024 (4) TMI 177
Maintainability of Criminal proceedings - Violation of principles of natural justice - facts as mentioned in the chargesheet as well as other material placed on record were not taken into consideration - illegal allotment of shares - illegal appointment of petitioner as a director and transfer of shares by misusing the digital signatures of the petitioner - HELD THAT:- Without going into the details of the present case, this Court is of the considered opinion that the learned Trial Court while passing the impugned order did not take into consideration the facts as mentioned in the chargesheet as well as other material placed on record by the Investigating Officer. So far as the reliance placed by respondent no. 2 to 4 on the judgment of Hon’ble Supreme Court in Satish Mehra [1996 (7) TMI 555 - SUPREME COURT] is concerned, it is relevant to note that the said judgment has been overruled by the Hon’ble Supreme Court in STATE OF ORISSA VERSUS DEBENDRA NATH PADHI [2004 (11) TMI 564 - SUPREME COURT], wherein it has been recorded in our view, clearly the law is that at the time of framing charge or taking cognizance the accused has no right to produce any material. Satish Mehra case holding that the trial court has powers to consider even materials which the accused may produce at the stage of Section 227 of the Code has not been correctly decided.
So far as the ground that the petitioner did not specifically deny the execution of the MoU in the proceedings before the learned NCLT is concerned, it is pertinent to note that the rejoinder filed on behalf of the petitioner before the Company Law Board was placed on record wherein in paragraph 2 thereof, it was categorically stated that the MoU is a forged and fabricated document and does not bear the true signatures of the petitioner. It is also pertinent to note that the material placed by the Investigating Officer along with the chargesheet filed before the learned Trial Court was not placed on record before the learned NCLT.
The impugned order dated 17.08.2019 passed by the Learned Trial Court is set aside. The matter is remanded back to the learned Trial Court for fresh consideration on the point of charge. The learned Trial Court shall give opportunity to the parties and thereafter pass appropriate orders in accordance with law - Petition allowed.
- 2024 (4) TMI 176
Anti-competitive agreements - Cartelisation - allegation is that appellant wrongly clubbed with members of the Cartel without any application of mind by the Commission - contravention of the provisions of Section 3(3)(a), 3(3)(c) and 3(3)(d) read with Section 3(1) of the Competition Act - HELD THAT:- In STATE OF MAHARASHTRA VERSUS KAMAL AHMED MOHAMMED VAKIL ANSARI & ORS. [2013 (3) TMI 731 - SUPREME COURT] it was held in a proceeding under the Competition Act, the strict rules of evidence are not applicable. Admittedly, all the statements are made by witnesses who were the authors/recipients of the emails and have confirmed their interaction with each other. Admittedly the appellant had never challenged the correctness of statements made by the other members and never sought a permission to cross examine them. All the evidence has been construed holistically by the Commission before giving its justification. The oral statements and the email are completely consistent with each other. Moreso in view of the very definition of cartelisation in Section 2(c ) of the Act, even an attempt to rig a bid is sufficient to attract the provision.
In alleged anti-competitive conduct in the Beer Market in India, suo Motu Case No.6 of 2017 and in Federation of Corrugated Box Manufacturers of India etc, Case No.24 of 2017, it has clearly been held in bid rigging cases mere exchange of information is sufficient to attract the provisions of the Act. The Appellant argued it had never sent any such email and only ‘received’ such emails and mere ‘receipt’ of the emails does not amount to ‘exchange’ of emails, is not acceptable. The appellant continuously ‘received’ emails for over five years without any protest and never requested the cartel to stop sending such emails to it. This itself indicates a meeting of mind. More importantly, the evidence shows all the parties had access to the user name and password to the email id jgadikar@yahoo.com, hence it cannot be concluded the appellant was never a part of the Cartel.
The appeal and all pending applications are dismissed.
- 2024 (4) TMI 121
Oppression and Mismanagement - Deletion of names of Respondent No. 4 to 8 and 13 from the array of the Respondents - Section 241, 242 and 243 of Companies Act - HELD THAT:- The very fact that the stay granted against the Respondent No. 4 to 8 and 13 continued for two years and was vacated on 18.12.2019 may be with an observation that Respondent No. 4 to 8 were nowhere related with such transaction, the recourse of which lie in the civil court and also the fact that the said order was not challenged rather the civil suit was filed by the Appellants and thereafter in order to avoid legal complication of maintaining the main petition on the same cause of action against Respondent No. 4 to 8 and 13 against whom the civil suit has also been filed on the same cause of action, application for deletion of their name and the prayer made in the main petition would be enough to show that Respondent No. 4 to 8 and 13 were unnecessary dragged in the litigation initiated against them in the main petition in which Respondent No. 4 to 8 and 13 had to file their reply, contested the application and the said proceedings continued for two years till the stay was vacated and the application bearing 219 of 2020 was filed in the year 2020 is sufficient to hold that Respondent No. 4 to 8 and 13 had rightly been awarded the amount of Rs. 5,00,000/- by the Tribunal on account of being unnecessarily dragged in the main petition in which stay was also operating against them in respect of the plot in question which is stated to have been purchased by them lawfully as alleged.
There is no error in the approach of the Tribunal in so far as direction granted in the impugned order, which does not call for any interference by this Court - Appeal dismissed.
- 2024 (4) TMI 120
Recovery of premium dues, interest, default interest, penal interest, interest overdue etc. - priority of charges - waterfall mechanism - whether as per the Concession Agreement and the Escrow Agreement, payment of premium has priority over the payment of debts of the Bank? - HELD THAT:- The Concessionaire has agreed that it shall pay to the Authority for each year of the Concession Period, a premium in the form of an additional concession fee. The Clauses 25.4 and 26.2 contain an agreement of Concessionaire to pay the Authority a premium in the form of an additional concession fee. The definition, thus, clearly indicate that premium is treated to be additional concession fee - on looking into Clause 31.3.1 and Clause 4.1.1, it is clear that both the provisions provide same priority and Clauses (e) [Concession Fee due and payable to the Authority], (f) [monthly proportionate provision of Debt Service due in an Accounting Year] and (g) [Premium due and payable to the Authority] are the same. The bone of contention between the parties are that since Clause (e) uses word ‘Concession Fee due and payable to the Authority’, it is higher in priority from Clause (f), which deals with ‘monthly proportionate provision of Debt Service due in an Accounting year’ and concession fee includes the premium, hence, the premium has to be paid priority to the payment under Clause (f).
Parties having categorized ‘premium’ in different Clause, which is below the monthly proportionate provisions of Debt Service due in an Accounting year, it cannot be said that the same was done without any meaning and ‘premium’ payment is in lower priority to monthly proportionate provision of Debt Service due in an Accounting Year. There are substance in the submission of learned Counsel for the Applicant that with regard to withdrawal from Escrow Account, the priority as given in Clause 4.1.1 of Escrow Agreement has to be followed.
It is noticed that in the present case, the ‘resolution’ of Respondent No.2 as per the Resolution Framework approved by this Tribunal on 12.03.2020 is in final stages. The order dated 15.09.2021 passed by the NCLT has been brought on the record, which notices the approval by Justice D.K. Jain also. When an entity is to be resolved as per Resolution Framework, payments to all creditors/ claimants including the Lenders have to be as per the Resolution of the Entity - It is also relevant to notice that when Resolution of Respondent No.2 is at the final stages, there is no occasion for Respondent No.1 to proceed to terminate the Concession Agreement to further complicate the Resolution of an Entity.
Application allowed.
- 2024 (3) TMI 1243
Oppression and Mismanagement - denial of inspection of the books of accounts - EOGM not called for - purchase of loan without consent - failure to comply with statutory compliances - Validity of direction for independent forensic audit - HELD THAT:- The appellant was directed to file reply affidavit. Admittedly the appellant neither filed its reply affidavit nor documents as are now filed before us. It is in these circumstances it is needed to examine if the impugned order was wrong. Admittedly if the reply affidavit and documents were not filed before the Ld. NCLT then there was nothing before the Ld. Tribunal except to proceed on submissions made in the petition or in an application for interim relief. Such submissions have been duly noted in the impugned order. Para 9 of the impugned order rather says it is only in view of the averments made by the petitioner in its petition the interim order is passed.
There are no infirmity in the impugned order before us, specially in view of the fact only oral submissions were made before the Ld. NCLT as alleged, without support of any documents or reply. Even otherwise conduct of forensic audit does not determine the rights and liabilities of the parties but merely would enable the Ld. Tribunal to appreciate the issues involved. The issues raised in the petition before Ld. NCLT are allegations of siphoning of funds, grave lapses in the appointment of statutory auditors, lack of approval of petition on reserved matter, non-maintenance of proper books of accounts and hence this conduct of forensic audit will only come to the aid of the Tribunal to adjudicate the petition.
Thus in view of the allegations of serious lapses and non-compliance in the financial statements, no proper disclosure of related party transactions, non-reporting, non-disclosure and non-compliance of statutory compliances, as alleged in the petition before Ld. NCLT, the interim order passed by the Ld. NCLT is justified and there are no reason to interfere in the impugned order.
Appeal dismissed.
- 2024 (3) TMI 1242
Seeking restoration of name of the company on ROC - failure to file the Financial Statement and Annual Returns since incorporation - Section 252 of Companies Act, 2013 - HELD THAT:- It is not the case of the respondent that appellant company was ever engaged in the transfer of the funds to its own sister concerns or that it is a Shell company or is engaged in siphoning of funds of another company. Rather the appellant claims to have carried commercial transactions with a view to establish a relationship with DPIL in order to commence its operations in consonance with the objectives of the appellant company and had amassed substantial assets but due to the fact DPIL went into insolvency in the year 2017, the company suffered a loss.
On going through the auditor reports for the financial years 2016- 17, 2017-18, 2018-19, 2019-20, 2020-21 which show the Non-Current Liabilities to the tune of Rs.7,36,23,359/-; Current Liabilities to the extent of Rs.88.00 Crores; Non-Current Assets to the extent of Rs.06.00 Crores (approximately), the Current Assets of Rs.25.94 Crores, the Fixed Assets of Rs.56.32 Crores; the Loan & Advances of Rs.25.93 Crores etc., and further since it is not a case of RoC the appellant is a Shell company and was at any time engaged in siphoning of the funds, hence, if the company’s name is restored it shall cause no prejudice to RoC. Admittedly, Nil revenue from operations cannot be a sole cause for striking of the name.
The appellant undertakes to be more cautious and vigilant in future in filing compliances under the applicable Laws and would adhere to all stipulated timelines designated without fail and shall pay cost imposed as per law. An affidavit in this regard be filled within a week from today before this Tribunal.
It is just and equitable to restore the name of the appellant company to the record of RoC - the impugned order set aside - RoC, New Delhi is directed to restore the name of the company to the Register of Companies subject to the fulfilment of compliances imposed - appeal disposed off.
- 2024 (3) TMI 1241
Sanction of composite scheme of amalgamation - Section 230-232 of the Companies Act read with Companies (Compromises, Arrangements and Amalgamation) Rules, 2016 - The appellants contested the impugned order, alleging it was passed without considering the relevant clauses of the scheme of amalgamation - HELD THAT:- The impugned order doesn’t discuss if the scheme of amalgamation was separable as pointed out in clauses no. 1.2.2 and 23.1. The impugned order is completely silent on these clauses.
Even otherwise, section 231(1) (b) of the Companies Act duly empowers the Ld. NCLT to exercise discretion to “give such directions in regard to any matter or make such modifications in the compromise or arrangement as it may consider necessary for the proper implementation of the compromise or arrangement”. The Ld. NCLT was thus duly vested with sufficient powers under the Companies Act, to even partly sanction the scheme.
The impugned order dated 23.02.2023 is set aside - the Ld. NCLT, New Delhi Bench is directed to revisit the application of second motion in the light of the observations made by this Tribunal above and after considering the observations/clarifications of Regional Director, may dispose of the petition in accordance with law within six weeks from the date of communication of this order.
Appeal disposed off.
- 2024 (3) TMI 1240
Professional mis-conduct by CA - SCN was not accompanied with documents relied upon against the Appellant and only a reference to the documents has been made in Annexure A appended with the show cause notice - non-compliance/violation of principle of natural justice by the NFRA - HELD THAT:- The fact remains that the Appellant has relied upon the reply filed by the Firm to the SCN which is pari materia the same in which he was working as engagement partner and shall knock the bottom of his case as now he cannot be allowed to take a different stand. The Appellant was required to file the reply to the show cause notice dated 15.11.2022 within a period of 30 days up to 15.12.2022. No such reply was filed within this period, rather, the Appellant sought extension of time of 45 days to submit his response vide his letter dated 14.12.2022. The NFRA considered the request made by the Appellant and on 03.01.2023 the period was extended till 29.01.2023. The Appellant during this period did not ask for any documents from the Respondent and rather relied upon the reply filed by the Firm which is apparent from the letter dated 30.01.2023, in which the Appellant has categorically stated that “the Auditor (firm) has submitted detailed reply dated 24.01.2023 to the SCN issued on the Firm.
Since the Appellant himself has relied upon the reply filed by the Firm to whom all the documents had already been served and has made a statement that the reply filed by the Firm shall be considered as his reply to the show cause notice then the nothing remains in this case to raise hue and cry for the alleged violation of principle of natural justice especially when the Appellant also did not ask for a personal hearing as well. No other point has been argued.
There are no merit in the submission made by the Appellant and hence the appeal fails and the same is hereby dismissed though without any order as to costs.
- 2024 (3) TMI 1144
Oppression and Mismanagement - Appointment of Whole Time Director to the Company for a period of three years under Section 408 of the Companies Act, 1956 - control and interference by the Central Government appointees in the Board to cease consequent to the repeal of Section 408 of the Companies Act, 1956 or not - Advocates representing the appellants argued against the CLB's orders, focusing on the irregularities in the appointment of directors, the lack of effective management, and the adverse impact on the residents due to undeveloped infrastructure.
HELD THAT:- It is a matter of record that the Government nominated Directors, over the last four decades, have been unable to undertake any appreciable measures so as to develop the site in question despite having sold over 300 plots of the company. Even the CLB in the impugned order dated 24.05.2011, had the occasion to comment that the Directors nominated by the Central Government had thoroughly mismanaged the affairs of the company and yet on account of inter se disputes amongst the appellant/shareholders that exhibited lack of interest in managing and running the affairs of the company, it was not possible to give them back the control of the company.
It is pertinent to mention that although doubts have been orally raised on the status of the unsold inventory described vide Annexure- C, no one has filed any objections disputing it, except the Greenfields Plot Holders-cum-Residents Association, the appellant in CO. A (SB) NO. 37/2011, but apparently there are just levelled bald allegations in their reply to the affidavit dated 03.01.2024, without substantiating the same with any categorical averment and/or documents - It is also pertinent to mention that the entire mess has been created due to inter se disputes amongst the shareholder. There is no plea except for the mismanagement of the affairs of the company by the erstwhile shareholders and that none of the promoters and/or the directors have been proceeded with any kind of cheating, fraud or misappropriation in any criminal court or by the Serious Fraud Investigation Office (SFIO).
In view of the dismal track record of the shareholders which demonstrates a history of lack of credibility on their part, the disposition agreed as per the MOU dated 18.04.23 with regard to the sale, alienation or disposal of the properties of the company, is quite understandably, not acceptable to the other stakeholders. All said and done, there is no gainsaying that the proposal put forth by the MCF is worth consideration.
The crux of the problem is that there are too many stakeholders and each wants to have a say in the matter. While that is understandable as they have suffered insurmountable problems due to lack of basic amenities and facilities for a very long and difficult forty years, that were promised by the company - This Court finds that certain calculated and strategic measures can be initiated so to commence development work at the site and ameliorate the suffering of the stakeholders.
In view of the aforesaid disposition laid down by this Court, all the pending applications shall stand answered with regard to the management and running of affairs of the company. However, it is provided that in case this disposition does not fructify and the desired results are not reached on being assessed objectively, the concerned applicants shall be at liberty to revive the applications in future, for hearing and disposal.
Re-notify for compliance on 15.05.2024.
- 2024 (3) TMI 991
Validity of SCN proposing to declare the petitioners as wilful defaulters - Classification of Account as NPA - Impact of CIRP proceedings under IBC - Declaring the petitioners as wilful defaulters in terms of the Master Circular on Wilful Defaulters issued by the Reserve Bank of India (RBI) on July 1, 2015 - whether the injunction order passed by the writ court against the respondent-Bank, on the premise that the NPA classification was de hors the Master Circular, can be a relevant consideration for vitiating the Show-cause Notice? - HELD THAT:- In the present lis, even if the best case of the petitioners is taken into consideration, applying the Pandemic Circulars of the RBI extending the time for making good defaults, on and from November 30, 2020, the petitioner no. 1 was a defaulter. Apparently, no repayment has been made since then. Thus, it cannot be said that merely because the NPA classification is clouded in a writ petition, the respondent-Bank cannot proceed with the wilful defaulter proceeding.
However, it is made clear that the purported communications of the petitioners handed over by the Bank at the time of arguments cannot be looked into at this stage, having not been referred to in the Show-cause Notice. The principle laid down in MOHINDER SINGH GILL & ANR. VERSUS THE CHIIEF ELECTION COMMISSIONER, NEW DELHI & ORS. [1977 (12) TMI 138 - SUPREME COURT] is squarely applicable as well, precluding the respondent from furnishing new grounds which were not there in the original Show cause Notice.
Show-cause Notice contains reference to the assets of the petitioner nos. 2 to 9, who were Directors of the Company, which assets are not part of the assets of the borrower-Company - HELD THAT:- A Show-cause Notice need no plead in detail the full particulars of the requirements of the Master Circular but is required merely to outline the broad spectrum of offences committed by the borrower, its Directors and the guarantors to be labelled as wilful defaulters. The proper stage for consideration of compliance of Clause 2.6 on all other aspects is the order passed by the Wilful Defaulter Identification Committee on consideration of the Show-cause Notice and the reply thereto. Hence, the merits of the said allegation cannot be considered in detail.
Sufficient ingredients to justify the allegations have been spelt out in the Show-cause Notice to bring the same within the broad purview of the Master Circular. The said ingredients, read in conjunction with the FAR and other documents which may be relied on by the Bank, are to be taken in conjunction at the time of consideration by the Wilful Defaulter Identification Committee and not at the show-cause stage. The composite effect of the documents and the broad allegations made in the Show-cause Notice are the subject-matter of adjudication by the said Committee, and thereafter the Review Committee. At the stage of Show-cause Notice, the court cannot adopt a fault-finding approach but such a Notice is to be seen in the perspective of disclosing sufficient ingredients to make the noticee aware of the nature of allegations made against it.
Moreover, it is well-settled that under normal circumstances, courts are loathe to interfere at the show-cause stage since the noticee has the remedy of giving a reply thereto available to it. The merits of the allegations and defences can only be gone into by the first committee while deciding the matter.
Thus, a wilful defaulter proceeding does not come within the contemplation of Section 14 or Section 96 of the IBC, which primarily pertains to legal actions to foreclose, recover or enforce security interest, or recovery of any property of the debt-in-question.
In P. MOHANRAJ & ORS. VERSUS M/S. SHAH BROTHERS ISPAT PVT. LTD. [2021 (3) TMI 94 - SUPREME COURT], the Supreme Court has repeatedly highlighted, particularly in paragraph nos. 35.2 and 35.3, that the moratorium concerns not merely recovery of debt but any legal proceeding even indirectly relatable to recovery of any debt. Hence, the moratorium applies to recovery proceedings and proceedings which directly or indirectly “relatable” to such recovery. A wilful defaulter proceeding cannot, by any stretch of imagination, be said to be even remotely relatable to recovery of debt but is merely an off-shoot of the debt. The corpus of debt is not the subject-matter of a wilful defaulter proceeding, unlike a recovery proceeding, but is a mere stimulus to spur the wilful defaulter proceeding into motion.
Petition is disposed of by directing the respondent-bank to serve a copy of the Forensic Audit Report and/or any other document, on which the bank intends to rely to substantiate the show-cause allegations, on the petitioners within a week from date.
- 2024 (3) TMI 990
Declaration of Wilful Defaulter of the petitioner - Liability of Directors - It is argued that in none of the Committee Orders, any cogent ground has been made out under the Master Circular of the Reserve Bank of India (RBI) for declaration of Wilful Defaulters - HELD THAT:- The petitioner admittedly parked some amounts from its sales realizations not in the cash credit account but in a different account opened with a different Bank, that is, the ICICI Bank, Darjeeling Branch. Hence, at a time when the borrower-Company was duty-bound to channelize its entire funds through the respondent no. 1-Bank due to its agreement with the latter, it failed to meet such obligation, which was a condition of the cash credit facility, and routed some money through a different bank account. Such act is sufficient to come within the purview of diversion of funds as contemplated in the Master Circular.
Admittedly, an agreement was entered into in the year 2004 which was much prior to the directions of the Central Government to take over management from the borrower-company. Even the Division Bench order of this Court directed the management to be continued by the borrower-Company. Hence, the lame excuse of the workers’ interest is mere lip-service in the mouth of the petitioner, since the borrower-company, evidently without knowledge or permission of the lender-Bank, had transferred the security, invoking the umbrella of the Central Government directions - The moratoria contemplated in the IBC were introduced for the protection of the corporate debtor in order to facilitate resolution. Such legal fiction, however, was created only in order to sustain the business of the company in the hands of the successful resolution applicant, inter alia, to protect the interests of the workers and the business of the unit in general. However, even if CIRP commences, the Directors, who were the masterminds in control and charge of affairs of the Company at the relevant juncture, cannot be absolved of any wilful default committed by the borrower-Company at the relevant juncture.
In the present case, the petitioner was a Director and at the helm of affairs, responsible for the business operations of the company. The business decisions of the Company are attributable to the Directors, who are the living hands of the company which is a juristic person. Thus, the petitioner cannot be absolved of the wilful default committed by the borrower-Company in his capacity as a director and promoter, irrespective of an ongoing Corporate Insolvency Resolution Process.
There are no patent irregularity or perversity in the impugned decisions or the procedure adopted by the Committees for arriving at the same, sufficient to interfere under Article 226 of the Constitution of India.
The petition is dismissed on contest without any order as to costs.
Case Laws - IBC
- 2024 (4) TMI 727
Approval of Resolution Plan - whether the Appellant is secured creditor of the Corporate Debtor or not? - whether the decision of the RP declaring the Appellant as unsecured creditor is in accordance with law? - HELD THAT:- It is true that Section 3(31) does not refer to any registration of charge under Section 77. The judgment of the Hon’ble Supreme Court in Paschimanchal Vidyut Vitran Nigam Ltd. vs. Raman Ispat Pvt. Ltd. [2023 (7) TMI 831 - SUPREME COURT], which has been relied by learned Counsel for the Appellant, is noticed. The above was a case where a claim was filed under IBC for government dues. The assets of the Corporate Debtor were attached and in the above context issue arose as to whether Electricity Department is ‘secured creditor’ or not and further in the above context Section 77 of the Companies Act was looked into - Hon’ble Supreme Court did not consider it appropriate to rule on the submissions of the Liquidator, vis-à-vis the fact of non-registration of charges under Section 77 of the Companies Act.
On looking into the definition of Section 3(31), it is clear that right, title or interest or a claim to property, created in favour of, or provided for a secured creditor by a “transaction which secures payment or performance of any obligation and includes mortgage, charge, hypothecation, assignment and encumbrances or any other agreement or arrangement securing payment or performance of any obligation of any person”, no transaction has been placed on record, under which a security interest is created in favour of the Corporate Debtor with regard to assets of the Corporate Debtor. As noted above, mortgages of immovable property and non-agricultural land were mortgages, which were referred in Sanction Letter, were mortgages by Guarantors and no assets of the Corporate Debtor was mortgaged to the Appellant. The Sanction Letter cannot be said to be a transaction, which secures payment or performance of an obligation.
The Adjudicating Authority, thus, was very well aware that Application has been filed for extension on 11.08.2023 and the Plan was approved on 23.08.2023. The mere fact that no formal orders were passed on that Application are not sufficient to set aside the impugned order on this ground. It is to be noted that 13.08.2023 was a date when 180 days was expiring. Present is not a case that there was any other extension claimed for. The Adjudicating Authority after noticing the aforesaid fact, approved the Resolution Plan, which makes it clear that Adjudicating Authority did not find any infirmity in approval of the Resolution Plan on 23.08.2023. In any view of the matter, exclusion having been prayed for and no order having been passed by the Adjudicating Authority on the said extension, no infirmity can be found on that ground and exclusion as prayed for was fully admissible and is required to be granted.
There are no error in order of the Adjudicating Authority approving the Resolution Plan - appeal dismissed.
- 2024 (4) TMI 692
Dismissal of application seeking direction to release payment as an Operational Creditor, for the services rendered during the CIRP period - it was held by NCLAT that In view of the aforesaid discussion and the fact that Resolution plan was approved way back on 28.02.2020 by the Hon’ble Supreme Court and has been implemented, we do not find any merit in the present appeal and the same is hereby dismissed.
HELD THAT:- There are no reason to interfere with the impugned order - appeal dismissed.
- 2024 (4) TMI 691
Prayer for condonation of delay - it was held by NCLAT that Our jurisdiction to condone the delay being limited to 15 days and we having held that benefit of Section 14 of the Limitation Act cannot be extended to exclude period during which I.A. No. 2337 of 2023 and I.A. No. 3270 of 2023 remained pending before the Adjudicating Authority, the Delay Condonation Applications which prays condonation of 74 days delay deserves to be dismissed.
HELD THAT:- There are no reason to interfere with the order of the National Company Law Appellate Tribunal since no substantial question of law is involved in the appeal - appeal dismissed.
- 2024 (4) TMI 690
CIRP - Preferential Transaction - transactions infringing section 43 of the IBC - it was held by NCLAT that In the background of the report of ‘Forensic Audit’ of the ‘Corporate Debtor’, it is quite clear that the said transactions amounting to Rs.7,81,352 are ‘preferential transactions’, as defined under section 43 of the IBC - HELD THAT:- There are no good ground and reason to interfere with the impugned judgment and hence, the present appeal is dismissed.
- 2024 (4) TMI 634
Maintainability of petition - availability of alternative remedy - discharge of the Advocate appointed by the JCM group and seeking appointment of its own Advocate - representative of Petitioner No. 1-Company - whether Petitioner No. 1 had followed the procedure provided under Rule 120 of the NCLT Rules whilst seeking discharge of the Advocate appointed by the JCM group and seeking appointment of its own Advocate to represent Petitioner No. 1-Company? - Violation of the principles of natural justice.
HELD THAT:- In the present case, there is no doubt that the NCLT had the jurisdiction to pass the said Order dated 22nd March 2024, inter alia, in respect of Interlocutory Application No. 859 of 2024 filed by Petitioner No. 1. The NCLT, in its Order dated 22nd March 2024, has considered Interlocutory Application No. 859 of 2024 filed by Petitioner No. 1 and has recorded reasons as to why the said Interlocutory Application was being dismissed. This clearly shows that there is no violation of the principles of natural justice. The case of the Petitioners is that Petitioner No. 1 had followed the procedure provided under Rule 120 of the NCLT Rules and therefore the NCLT ought to have decided the said Application in its favour. On the other hand, it is the case of Respondent No. 3 that Petitioner No. 1 had not followed the procedure under Rule 120 of the NCLT Rules, and, therefore, the NCLT has correctly rejected Petitioner No. 1’s Application. This is surely an issue which can be raised in Appeal by Petitioner No. 1 and does not warrant interference by this Court in its writ jurisdiction under Article 226 of the Constitution of India.
Moreover, this Court cannot lose sight of the fact that this inter se dispute between two groups for representing the Petitioner No. 1, who is the Corporate Debtor, cannot delay or jeopardize the proceedings filed by Respondent No. 3 as the financial creditor under Section 7 of the IBC. Any interference by the Writ Court would clearly affect the said proceedings as, by the said Order dated 22nd March 2024, the Petition filed by Respondent No. 3, under Section 7 of the IBC, has been admitted against the Corporate Debtor, i.e., Petitioner No. 1.
Petition dismissed.
- 2024 (4) TMI 633
CIRP - Liquidation of corporate debtor - Refusal to approve the private sale in favour of Eshan Minerals Private Limited - It is submitted that Appellant Eshan Minerals Private Limited has already undertaken to pay all MIDC dues, including transfer charges directly to the MIDC - Appellate being successful bidder and a prospective bidder for the debtor's assets - HELD THAT:- Adjudicating Authority did not commit any error in issuing a direction for issue of a fresh Notice of conducting sale to other interested parties one party had been already expressed interest.
The submission of Sh. Abhijeet Sinha that Sachani Developers who had shown interest and filed an I.A. No.261/2024 subsequently withdrawn his offer by letter dated 26.02.2024 there is no occasion to proceed with the Auction any further. The Auction Notice was already issued on 21.02.2024 and the letter dated 26.02.2024 was issued by Sachani Developers on 26.02.2024 subsequent to e-Auction and in pursuance of Notice for fresh Auction, EMD has already been received at least by one party - fresh Auction need to be conducted by issuance of corrigendum by Liquidator in continuation of the e-Auction Notice by 21.02.2024 by fixing a date within two weeks from today for conduct of the e-Auction. The Liquidator in the corrigendum may also state that the successful bidder has to pay all the dues of MIDC.
The interest of the Appellant Eshan Minerals Private Limited are also protected by the impugned order since the bid given by the Appellant has been treated to be anchor bid. In event no higher bid is received in a Swiss Challenge Method, private sale in favour of the Appellant as per LoI dated 21.11.2023, need to be confirmed without requiring any further approval from the Adjudicating Authority.
The prayer of the Appellant Best One Infraventures Pvt. Ltd., challenging the order of the Adjudicating Authority insofar as it direct for adopting Swiss Challenge Method cannot be accepted. Appellant- Best One Infraventures Pvt. Ltd. in event intend to participate in the Swiss Challenge Method. It is open for Best One Infraventures Pvt. Ltd. to submit an EMD in pursuance of EoI already issued by the Appellant and subject to this liberty to the Appellant- Best One Infraventures Pvt. Ltd., no other relief can be granted.
The order passed by the Adjudicating Authority, challenged in the above Appeals is upheld - Liquidator to issue a corrigendum fixing a date of e-Auction within two weeks from today in continuation of e-Auction Notice dated 21.02.2024 to conduct the e-Auction by Swiss Challenge Method as directed by Adjudicating Authority by order dated 13.02.2024.
- 2024 (4) TMI 632
Rejection of application against admission of CIRP u/s 7 application filed by the Financial Creditor (Respondent herein) - Financial Debt or Equity investment - disbursement by financial creditor to corporate debtor - HELD THAT:- The financial creditor i.e. ‘Surya Testing Services Limited’ was not a party to the said agreement and the said agreement was between three different parties which are neither the financial creditor nor the corporate debtor - Agreement, thus, supersedes any prior oral or written agreements, commitments or understandings with respect to the matter provided therein. With regard to acquisition of ownership of ‘Selma Precision Technologies NC, LLC’, earlier transactions were superseded.
The facts on the record clearly indicate that the financial creditor has neither been given any equity percentage in M/s. Selma Precision Technologies, NC, LLC nor its claim has been admitted in the liquidation of M/s. Selma Precision Technologies, NC, LLC which is going in U.S. Court. Amount of Rs.1.85 Crores was disbursed to the Corporate Debtor which disbursement have clearly been admitted in the balance sheet of the corporate debtor, the said amount has been shown as borrowing from the financial creditor. It is clear that the letter of intent dated 23.12.2017 could not be fructified which was subsequently clearly superseded by 14.02.2018 agreement as noted above. Hence, the amount disbursed by the financial creditor to the corporate debtor has to be treated to be borrowing by corporate debtor which was required to be refunded. As noted above, in the agreement dated 14.07.2018 in which director of the corporate debtor was also party, there was undertaking recorded in paragraph 5 as noted above that Warm Forgings Pvt. Ltd. shall refund amount of Rs.1.85 Crores to the Corporate Debtor.
There is no denial that on 22.05.2018 amount of Rs.25 lacs was returned by the corporate debtor to the financial creditor which is an admitted fact. Had the amount of Rs.1.85 Crores was given by financial creditor only for the purposes of equity in M/s. Selma Precision Technologies, NC, LLC, there was no question of refund of any amount. The refund of Rs.25 lacs clearly proves that amount was borrowed by the corporate debtor as reflected in its balance sheet as noted by the Adjudicating Authority.
Counsel for the Appellant has also referred to the Civil Suit filed by Ajay Kumar Jain in Gurugram Court which suit has been filed by Ajay Kumar Jain against Amit Rajput and others. The injunction has been sought with regard to suit property. Ajay Kumar Jain has claimed that the amount was paid by ‘Surya Testing Services Limited’ to M/s. Warm Forgings Pvt. Ltd. which was payment made by the Appellant. The said pleading by Ajay Kumar Jain in a suit which was filed subsequent to filing of Section 7 application cannot be treated to be pleading on behalf of the financial creditor. The present appeal arises out of the order passed by the Adjudicating Authority rejecting two IAs being IA No.651/JPR/2022 & IA No.652/JPR/2022 by which corporate debtor has prayed for dismissal of Section 7 application. The applications have been rejected by the Adjudicating Authority by the impugned order dated 19.01.2024.
Thus, no ground has been made out to interfere with the impugned order passed by the Adjudicating Authority - The Appeal is dismissed.
- 2024 (4) TMI 631
Acceptance of claim as Financial Creditor - mutually agreed settlement arrived at - whether by virtue of Deed of Security dated 20.03.2020 SPIL was discharged from its obligation of the financing document, Consent Term, and Amendment Agreement and no claim of Financial Debt of the Financial Creditor survived after Deed of Security dated 20.03.2020? - HELD THAT:- The Consent Term between the parties dated 09.09.2019, in para 2(a) clearly contemplated creation for first and exclusive charge by way of registered mortgage in respect of 2,00,000 sq. ft. carpet area in favour of IIFL and IIFL Home Finance Ltd. as additional security in respect of the loan extended by the Financial Creditor. The Deed of Security dated 20.03.2020 is clearly in reference to Consent Term paragraph 2(a) and i.e., a Deed of Additional Security - Clause E of the Deed of Security clearly referred to creation of first ranking mortgage and charge over the property described in Clause 4.1 and Schedule 3. Clause F also referred to same obligation by mortgagor to execute this indenture/deed in favour of the lender on behalf of the obligor/SPIL as security for the payment of the secured obligation payable to the lenders in accordance with the Consent Terms and this Amendment Agreement.
The present is case where from the Mortgaged Properties debt and dues of SPIL has not been discharged and SPIL is claiming discharge only on basis of execution of Security Agreement dated 20.03.2020, which is unacceptable. When all the Clauses E, F, G, I and J are read, it is clear that the Deed of Security was nothing but additional security by creating a mortgage of the assets i.e., 2,00,000 sq. ft. carpet area in the Project - The submission of the Appellant that Deed of Security discharged its obligation under the financial documents cannot be accepted. The deed of security was not an Amendment Agreement to the financial documents, Consent Terms or Amendment Agreement already executed.
There is no applicability of Section 41 in the present case, since the Deed of Security dated 20.03.2020, cannot be read as discharge by the lenders to the obligations of SIPL. SIPL, who continued to be responsible for repayment which were never discharged from its obligation.
The Deed of Security does not novate the terms of the facility document. Facility document were amended by the Amendment Agreement which recorded that terms of the Loan Agreement and Additional Laon Agreement shall be amended only to the extent provided therein. Deed of Security was executed as the additional security document and is not novation of financial documents or Consent Term.
The Judgment of the Hon’ble Supreme Court in VENKATARAMAN KRISHNAMURTHY AND ANOTHER VERSUS LODHA CROWN BUILDMART PVT. LTD. [2024 (2) TMI 1154 - SUPREME COURT] was on its own facts and present is not a case where Adjudicating Authority has created any terms of Agreement for the parties. The Adjudicating Authority has after noticing the relevant Agreement between the parties have only interpreted them in the facts and backgrounds of the case. The Judgment of the Hon’ble Supreme Court in Venkatraman Krsihnamurthy & Anr. thus is clearly distinguishable and has no application in the present case.
The Adjudicating Authority did not commit any error in allowing the application. The Adjudicating Authority has rightly held that the Security Agreement was to provide for Additional Security only - thus, no error has been committed by the Adjudicating Authority, in directing for admission of the claim of the Financial Creditors.
Appeal dismissed.
- 2024 (4) TMI 630
Recall application - power to recall/review - jurisdiction to review a judgment - HELD THAT:- The jurisdiction of this Tribunal to recall an order has already been stated by the 5 Member Bench of this Tribunal in Union Bank of India Vs. Dinkar T. Venkatasubramanian & Ors. [2023 (7) TMI 209 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI] 5 Member Bench has held that the Tribunal has a power to recall however, it has no jurisdiction to review a judgment and the circumstances under which the Court can recall a judgment has also been noted. It was further held that the recall disguised as review cannot be entertained.
By the present application, although its styled as recall but Appellant is virtually asking the Court to review its judgment which was delivered after hearing the Appellant - Present application is misconceived on the ground which are submitted in the application the order cannot be recalled - application for recall is dismissed.
Admission of section 7 application - existence of debt and dispute or not - HELD THAT:- Adjudicating Authority after hearing the parties noted that the only submission expressed by the Respondent is to pay the amount in instalment due to loss in their auto business - The Adjudicating Authority held that the Financial Creditor has proved the `debt’ and `default’. It is well settled that when debt and default has been proved, Adjudicating Authority had to admit Section 7 application more so, looking to the pleadings of the Corporate Debtor before the Adjudicating Authority - thus, no ground has been made out to interfere in the impugned order admitting Section 7 application - appeal dismissed.
- 2024 (4) TMI 573
Aggrieved person or not - sufficient cause or not - it was held by NCLAT that the Leave prayed for, by the Petitioner / Appellant, to prefer the present Comp. App is not accorded to, by this Tribunal, based on the facts and surrounding circumstances of the case, which float on the surface - HELD THAT:- The appellant – T. Johnson, who was a Director of the company under liquidation had earlier submitted a proposal during the Corporate Insolvency Resolution Process, which upon consideration, was not accepted - at this stage, he should not be allowed and permitted to raise or propose a scheme. Further, the sale, as envisaged and accepted, was after long drawn process, in which opportunity was available to anyone to participate.
Appeal dismissed.
- 2024 (4) TMI 572
Condonation of delay of 15 days in filing of the appeal - Jurisdiction - power of Tribunal to condone the delay - Section 61(2) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- After having perused the application for condonation of delay and the explanation offered for the delay, it is held that the Tribunal ought to have condoned the delay.
The delay is condoned - impugned order set aside - appeal allowed.
- 2024 (4) TMI 571
Seeking extension of CIRP beyond the period of 330 days - liquidation of the Corporate Debtor - it was held by NCLAT that the applications filed for extension of time by the RP has rightly been dismissed and the application filed by the RP for an order of liquidation of the Corporate Debtor has rightly been passed which does not require interference by this Tribunal - withdrawal of CIRP application.
HELD THAT:- In view of the subsequent development and as Indian Renewable Energy Development Agency Ltd. and National Asset Reconstruction Company Limited have accepted the proposal, the impugned order as well as the judgment/order dated 27.06.2023 passed by the National Company Law Tribunal is set aside, and the matter remitted to the NCLT, to examine and follow the procedure established by law in terms of Section 12A of the Insolvency and Bankruptcy Code, 2016.
Appeal disposed off.
- 2024 (4) TMI 570
Maintainability of appeal - Approval of Resolution Plan - case in impugned order is that an order approving the Resolution Plan was passed by a Single Member of the NCLT in violation of the provisions of Section 419 (3) of the Companies Act 2013 - HELD THAT:- Since the impugned order of the NCLAT is by way of an order of remand, the appeal is not entertained at the present stage keeping open all the rights and contentions of the parties to be urged before the NCLT. The parties would be at liberty to approach the NCLT at an early date so that orders can be passed in accordance with the above directions.
Appeal disposed off.
- 2024 (4) TMI 569
Withdrawal/modification of approved Resolution Plan - Section 31(1) of IBC - HELD THAT:- Resolution plans are not prepared and submitted by lay persons. They are submitted after the financial statements and data are examined by domain and financial experts, who scan, appraise evaluate the material as available for its usefulness, with caution and scepticism. Inadequacies and paltriness of data are accounted and chronicled for valuations and the risk involved. It is rather strange to argue that the superspecialists and financial experts were gullible and misunderstood the details, figures or data. The assumption is that the resolution applicant would submit the revival/resolution plan specifying the monetary amount and other obligations, after in-depth analysis of the fiscal and commercial viability of the corporate debtor - Absence or ambiguity of details and particulars should put the parties to caution, and it is for them to ascertain details, and exercise discretion to submit or not submit resolution plan.
Records of corporate debtor, who are in financial distress, may suffer from data asymmetry, debatable or even wrong data. Thus, the provision for transactional audit etc, but this takes time and is not necessary before information memorandum or virtual data room is set up. Financial experts being aware, do tread with caution. Information memorandum is not to be tested applying “the true picture of risk” obligation, albeit as observed by the NCLAT the resolution professional’s obligation to provide information has to be understood on “best effort” basis.
The impugned order set aside - appeal allowed.
- 2024 (4) TMI 568
Condonation of delay in filing appeal - Auction of the Corporate Debtor as a going concern - lease deed continues in the name of Corporate Debtor - sale of shares of corporate debtor - it was held by NCLAT that There are no error in the carrying out auction of the corporate debtor as going concern - HELD THAT:- The impugned order of the NCLAT is dated 1 March 2023. The appeal has been filed on 24 May 2023. The delay of 22 days in filing the appeal is beyond the period of fifteen days which can be condoned under Section 62 of the Insolvency and Bankruptcy Code.
The Civil Appeal is dismissed on the ground of delay.
- 2024 (4) TMI 567
Admissibility of section 9 application - initiation of CIRP against the Corporate Debtor - Respondent No. 1 and the Corporate Debtor both filed civil suit for recovery against each other - after the formation of the NCLT, the matter stood transferred in terms of the Notification dated 07.12.2016 of the Ministry of Corporate Affairs, Government of India - HELD THAT:- The judgment of MOBILOX INNOVATIONS PRIVATE LIMITED VERSUS KIRUSA SOFTWARE PRIVATE LIMITED [2017 (9) TMI 1270 - SUPREME COURT], is considered, which is heavily relied upon by the counsel for the appellant to contend that due to pendency of civil suit application u/s 9 of the IBC cannot be admitted, where it was held that So long as a dispute truly exists in fact and is not spurious, hypothetical or illusory, the adjudicating authority has to reject the application.
After going through the same and considering the findings as recorded by the NCLT and NCLAT, it is concluded that the argument as advanced by the counsel for appellant is of no help to them and the Tribunal has rightly admitted the application filed by the operational creditor for CIRP. Therefore, the order impugned of NCLT and NCLAT need no interference.
Appeal dismissed.
- 2024 (4) TMI 566
Amendment of section 7 application - time limitation - date of default - HELD THAT:- It is clear from the amendment that the case of the respondent is that though the first default arose on 30 April 2014, the petition under Section 7 is not barred by limitation in view of the subsequent events including the acknowledgements in the balance sheets and the recovery certificate.
The NCLAT while affirming the order of the NCLT allowing the amendment has specifically kept the question of limitation open. In that sense, the plea of the appellant that the petition under Section 7 of the IBC is barred by limitation is not prejudiced - Bearing in mind the above circumstances, it is not necessary for the Court to entertain the appeal.
All aspects on the question of limitation would be decided by the NCLT. This order merely affirms the correctness of the order allowing the amendment without expressing any opinion on the merits of the plea on limitation - Appeal disposed off.
- 2024 (4) TMI 565
CIRP - Partnership Form - Maintainability of petition - Invocation of Section 95 of the Insolvency and Bankruptcy Code - Whether a petition against a partnership firm or its Directors is fileable and maintainable under Section 95 of the Insolvency and Bankruptcy Code, 2016 before the National Company Law Tribunal? - HELD THAT:- The maintainability of the petition before the Tribunal cuts at the root of the matter, as it relates to jurisdiction, to entertain the petition by the Tribunal. The Code does not permit it. If that be so, even a speck of paper cannot move before a fora that has no jurisdiction. It is un-understandable as to how and why the petitioners have to go before the Tribunal and tell the Tribunal that it has no jurisdiction to entertain the petition. The very acceptance of filing by the Tribunal is contrary to law.
It is declared that the e-filing by the 2nd respondent under Section 95 of the Insolvency and Bankruptcy Code, 2016 as non est and illegal and consequently, the proceedings at whatever stage they are, before the National Company Law Tribunal, stands quashed.
Petition allowed.
- 2024 (4) TMI 564
Interest on deposit - sale consideration amount deposited by the appellant - claim of interest after completion of the sale - rate of interest - HELD THAT:- The sale consideration was deposited by the Appellant, which was lying with the Liquidator and has earned interest. Sale consideration received for the assets of the Corporate Debtor is to be distributed to the stakeholders. The present is a case where assets have been handed over to the Appellant. Present is not a case where due to any reason, the Appellant is entitled for refund of sale consideration. In event the Appellant may be entitled for refund of sale consideration the prayer for refund of the sale consideration along with interest could have been considered. But, here the sale consideration, which was deposited and which has earned interest is in lieu of the assets, which have been ultimately sold to the Appellant and handed over to him.
There is no merit in the submission of the Appellant that Liquidator should be directed to make payment of interest on the sale consideration, which was deposited by the Appellant due to delay in handing over of assets to the Appellant, which assets could not be handed over earlier due to restraint order of the Adjudicating Authority dated 04.04.2022, which could be vacated only on 01.06.2023.
There are no merits in the appeal - appeal dismissed.
- 2024 (4) TMI 563
Liability of Corporate Guarantor - Guarantee has not been invoked by any of the financial creditors nor any claim was filed before the liquidator - existence of debt or not - HELD THAT:- From the facts brought on record, especially by RoC that 23 charges are still showing against the Company and the Company has issued Corporate Guarantee. The submission which has been pressed by the Appellant is that since Corporate Guarantee has not been invoked and no claim has been filed that cannot be relied for rejecting the liquidation application.
The fact that guarantee has not been invoked, does not absolve the Corporate Guarantor from debt. The debt which is Corporate Guarantor, the Company has been given corporate guarantee and undertaken to pay the debt.
The judgment of MUDHIT MADANLAL GUPTA VERSUS SUPREME CONSTRUCTIONS AND DEVELOPERS PVT. LTD. [2023 (7) TMI 1397 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] was a case where this court took a view that default occurred between 10A period and it was held that default on the Guarantor shall be on the date when the Corporate Guarantee has been invoked. The above was a case arising out of Section 7 application which was rejected on the ground of 10A which order was upheld. The above judgment in no manner support the submission of the Appellant.
The liability of Corporate Guarantor is coextensive with the Lenders and the Lenders are at liberty to require the performance by the Guarantor of its obligation. The Adjudicating Authority after noticing the fact which was brought by the RoC as well as Central Bank of India and has rightly taken the view that the present in the not case for liquidating the Company under the process of voluntary liquidation. The submission of the Appellant that since guarantee has not been invoked there is no debt, cannot be accepted. Guarantee continues to bind the Corporate Guarantor to discharge its liability and the fact that as on date, guarantee has not been invoked, cannot be a ground for Appellant to be liquidated under Section 59 of the IBC.
There are no error in the impugned order - appeal dismissed.
Case Laws - PMLA
- 2024 (4) TMI 718
Seeking grant of pre-arrest bail - Money Laundering - predicate offence - proceeds of crime - illegal gratification - section 45 of PMLA - HELD THAT:- In the case of ROHIT TANDON VERSUS THE ENFORCEMENT DIRECTORATE [2017 (11) TMI 779 - SUPREME COURT], three-judge bench of the Hon'ble Apex Court has held that such statements are admissible in nature and can make out a formidable case about involvement of accused in the offence of money laundering.
Furthermore, the challenge to Section 50 of PMLA was rejected by the Hon'ble Apex Court in case of Vijay Madanlal Choudhary [2022 (7) TMI 1316 - SUPREME COURT], wherein it was held that the statements recorded under Section 50 of PMLA cannot be compared to statements under Section 67 of NDPS Act, and that such statements were not in violation of Article 20(3) of the Constitution of India - thus, at the stage of adjudicating an anticipatory bail application, the statements recorded under Section 50 of PMLA, will be relevant to be considered and appreciated, alongwith other evidence collected by the investigating agency, for the purpose of ascertaining whether the offence of money-laundering is prima facie made out against an accused or not.
There is no doubt that a person is entitled to all remedies, reliefs and fundamental rights available to him under the Constitution and law, such as to seek anticipatory bail, when apprehending arrest by the investigating agency or to file a petition challenging validity of summons issued to him. However, to hold that filing of a petition or an application, which is not diligently pursued, would amount to a justification for not joining investigation despite repeated summons and notices being received from the law enforcement agency, will be a dangerous proposition.
The Courts of law cannot allow a legal strategy, commonly used by a person, to obstruct investigation or join investigation as that would amount to stripping the investigating agency of their valuable right to summon a person under the law, to give information about a suspected crime especially under the law, which has been upheld by the Hon'ble Apex Court as constitutional and not illegal.
The investigating agencies are involved in investigating offences, as per law, and rather it is the boundened duty of every citizen to join investigation when called for. Needless to say, this Court should not be laying down that a citizen will not have a right to seek anticipatory bail, however, to make that a ground for not appearing before the investigating agency cannot be permitted by Courts.
Whether non-co-operation with the investigation agency will come in way of grant or refusal of anticipatory bail? - HELD THAT:- The State has a right to summon a person, through the investigating agencies, to ensure rule of law and bring those who are in conflict with law and in violation of law, within the confines of law. The power of Directorate of Enforcement to summon a person is circumscribed under Section 50 of PMLA and as held by Hon'ble Apex Court in case of Vijay Madanlal Choudhary and Directorate of Enforcement v. State of Tamil Nadu [2024 (4) TMI 667 - SC ORDER], a person so summoned under Section 50 is bound to respect the same - Not responding to or attending to the notices or summons of an investigating agency would amount to non-cooperation with investigation.
As a public servant i.e. a person who is in service of public, especially the one who professes that his whole life is for public service, he should have cooperated with the investigation. Moreso, since the allegations are also of misuse of public funds to his own use by purchasing properties through his associates as well as other irregularities committed by him as Chairman of the Delhi Waqf Board, it becomes crucial that he joins and cooperates with investigation.
When this Court analyzes the material available on record and the investigation conducted so far, it appears that the basic purpose for calling or summoning the applicant herein in the present ECIR is that the evidence collected so far, be it the diaries seized during investigation or the statements recorded under Section 50 of PMLA, have revealed that the properties in questions were purchased from money, including cash amount of about Rs. 27 crores, which is the proceeds of crime generated by the applicant - Non-joining of investigation on this ground therefore, cannot be held in the favour of the applicant/accused since the assessment of evidence gathered by the investigating agency will ultimately be put before the Court of law.
Balancing the right of accused and right of investigating agency - HELD THAT:- Right to life, liberty and security of a person is paramount under the Constitution of India and in the criminal law in India. However, at the same time, the powers of the investigating agency to investigate an offence wherein the joining and providing information by a person is required, sending of summons cannot amount to infringing one's right to freedom and personal liberty on the pretext that the person concerned has apprehension of being arrested. For that, he has a separate remedy to take recourse too, in the form of anticipatory bail as well as regular bail before the Court of law or quashing of summons on whatever ground he deems appropriate - Thus, a person in India has a fundamental right to liberty and life, and the shield of law remains available even to an accused against whom an offence is alleged and his liberty can be curtailed only, as per law. His right against arbitrary detention or arrest to be informed of specific offence, he is accused of, at appropriate stage of investigation, protection against self incrimination, presumption of innocence till held guilty, bail not jail being a rule etc. remain available to an individual who is suspected accused.
Undoubtedly, every such person as any other citizen of India is entitled to the protection of law, however, the law will also equally apply to him, subject to any privilege if at all, in a case applicable to him. Needless to say, the protection as per law which is available to all citizens is also available to such members and public figures. Their standing in lives or being an elected representative of the people does not create a class or elite class entitling them to different treatment being extended under the same law - an MLA or a public figure is not above the law of the land.
In the realm of governance and public service, the role of an elected official carries significant weight and responsibility. As an MLA, the applicant stands as a figure of authority and influence, entrusted with representing the interests and aspirations of their constituents. It is crucial to acknowledge that the actions of such public figures are observed closely by those they serve, often looking up to them for guidance and leadership. Thus, the applicant's failure to cooperate with the investigating agency sets a perilous precedent.
The seizure of diary by the investigating agency which reveals that the properties in question were purchased for about Rs. 36 crore out of which Rs. 27 crores were paid in cash, and out of the total amount of Rs. 36 crores, an amount of Rs. 8.33 crores was paid by the present applicant - Recovery of one Sale Agreement which shows the sale consideration as Rs. 36 crore, as against one alleged false and fabricated agreement which shows the sale consideration as Rs. 13.40 crore which has been allegedly prepared at the behest of present applicant to conceal the proceeds of crime and misguide the investigating agency.
The material evidences so gathered during the course of investigation under PMLA revealed that the applicant Amanatullah Khan has acquired huge cash amounts, being the proceeds of crime out of criminal activities relating to his corrupt and illegal activities relating to illegal recruitment of the persons in Delhi Waqf Board, leasing out the properties of Delhi Waqf Board in unfair & illegal manner, misappropriation of Delhi Waqf Board funds including others while being the public servant i.e. Chairman of Delhi Waqf Board and MLA from Okhla Legislative Assembly of Delhi during the period from 2015 onwards. In order to launder the same, he had hatched a criminal conspiracy along with his close associates and others and in pursuant thereupon, he had invested his ill-gotten money i.e. proceeds of crime, in the immovable properties through his associates namely Zeeshan Haider, Daud Nasir and others.
The material brought before this Court at this stage is sufficient to attract bar under Section 45 of PMLA, and it prima facie shows the offence of money laundering being committed by the present accused/applicant - this Court does not find it a fit case for grant of pre-arrest bail to the present applicant Amanatullah Khan.
The present bail application stands dismissed.
- 2024 (4) TMI 689
Money Laundering - summons issued by the petitioner, ED under Section 50 of the Prevention of Money Laundering Act, 2002 (PMLA) - HELD THAT:- From the documents produced on record today, it appears that the said respondents – Collectors instead of respecting this Court’s order, did not appear in person and filed their replies to the summons dated 01.03.2024 issued by the ED, stating inter alia that the information and data sought for is maintained by the other executive wings and would be required to be collected from different departments and offices located at various places and the process will require some time.
When the Court had passed the order directing them to appear in response to the summons issued by the ED, they were expected to obey the said order and remain present before the ED. By not following the order, they have created an impression that they do not have respect either for the Court, or for the law, much less for the Constitution of India. Such an approach is strongly deprecated.
It is directed that the respondents – District Collectors shall remain personally present and appear before the ED on 25.04.2024 and respond to the summons issued under Section 50 of the PMLA in respect of the information /data sought therein, failing which, strict view shall be taken in the matter.
List on 06.05.2024 for reporting the compliance.
- 2024 (4) TMI 688
Seeking grant of anticipatory bail - Money Laundering - twin conditions of Section 45 of the PMLA Act satisfied or not - main accused was exonerated on identical allegations by the Adjudicating Authority - HELD THAT:- It is not in dispute that the FIR was registered on 19.02.2010 whereas the respondent filed a complaint arraying the applicant as accused in ECIR on 04.01.2021 i.e. after 10 years. From the summons issued to the applicant, it is quite vivid that she was permitted to appear through an authorized person and it cannot be said that she did not cooperate in the investigation. According to the proviso appended to Section 45 of the PMLA Act, a woman may be granted anticipatory bail.
The judgment passed by the Hon’ble Supreme Court in the matter of Satender Kumar Antil [2022 (8) TMI 152 - SUPREME COURT] cannot be lost sight of as the applicant is a lady and she cooperated in the investigation of the matter and other co-accused persons against whom similar allegations were made, have already been granted anticipatory bail by the Hon’ble Supreme Court and by this Court, therefore, in the considered opinion of this Court, the present is a fit case to extend the benefit under Section 438 of Cr. P.C. to the applicant.
The anticipatory bail application is allowed and it is directed that in the event of arrest of the applicant in connection with the aforesaid offence, she shall be released on anticipatory bail on her furnishing a personal bond for a sum of Rs. 50,000/- with one surety in the like sum to the satisfaction of the arresting officer on the fulfilment of conditions imposed - bail application allowed.
- 2024 (4) TMI 687
Money Laundering - Proceeds of crime - attachment of moveable property of the appellant - HELD THAT:- The perusal of the provision of Section 5 of PMLA reveal that the attachment of the property is warranted when it is involved in money laundering and the person is in possession of the proceeds of crime and such proceeds of crime are likely to be concealed, transferred or dealt with in any manner which may result in frustrating any proceedings relating to confiscation. The attachment of the property thus pre-supposes not only it to be proceeds of crime but apprehension of its concealment or transfer, etc.
In the instant case, it is not in dispute that Bund Garden Police Station has frozen the bank account No.920020062949058 of TIET on 29.08.2021. It is for the amount of proceeds of crime to the tune of Rs.7.96 crores and additional amount is of Rs.1.5 crores for which a property of the appellant in the connected appeal has been attached. Till the order of Competent Authority of police remains in force, there cannot be any likelihood of transfer or alienation of the said amount by the appellant. In view of the above, there was no reason for the respondent to attach the TIET Bank account and accordingly we find that attachment was caused by the respondent without there being an element of any apprehension or alienation or to deal with the property in a manner to frustrate the confiscation.
The proceeds of crime involved in this case is for a sum of Rs.8,67,98,250/- and the amount available in the TIET account is of Rs.7.96 crore, however attachment was to bemade to the extent of Rs.8,67,98,250/-and accordingly a property worth of Rs.1.50 crores of the appellant in the connected appeal was attached. The attachment of the amount in this case is of Rs.7,17,98,250/- - Since we have caused interference in the order of attachment and its confirmation in reference to Section 5(1) of the Act of 2002 as a greater amount than attached has been frozen by the Bund Garden Police Station, Pune, our order in favour of the appellant would operate till amount of Rs.7.96 crores remains frozen with the Bund Garden Police Station and is not interfered or withdrawn.
Appeal disposed off.
- 2024 (4) TMI 686
Money Laundering - provisional attachment order - Without there being any evidence to prove a case of money laundering by the appellant, the order of attachment has been confirmed by the Adjudicating Authority - violation of principles of natural justice - HELD THAT:- As per the accounting system, payment towards the supply of material has to be made by the firm to whom supplies have been made. It cannot by a stranger firm unless proper arrangements in writing are made. The facts of this case are quite alarming. The transaction to deposit the amount in the bank account of the appellant was not under normal circumstances but was at the time of demonetization of money by the Govt. of India. Although the appellant is not an accused but the proceeds of crime has been channelized to him, thus attachment cannot be held to be illegal.
The detailed charge sheet has not been quoted which otherwise refers further facts as to how demonetized money was channelized in the bank accounts of the companies and ultimately it came in the account of appellant.
The appellant no doubt submitted the invoices to show supply of cloths to Ajay Kumar Jain but he has not produced any material to show arrangement for payment towards the supply to Ajay Kumar Jain through the bank account of three non-existing companies. The appellant has shown his innocence for receipt of the money towards its supply to Ajay Kumar Jain but it cannot be accepted. The appellant was knowing receipt of money through the firms to whom he never supplied any material.
There are no illegality in the impugned order - appeal dismissed.
- 2024 (4) TMI 667
Money Laundering - grant of interim stay of the operation of the impugned summons issued by the petitioner – ED - Section 50 of PMLA - HELD THAT:- From the section it clearly transpires that the concerned officers as mentioned therein, have the power to summon any person whose attendance he considers necessary, either to give evidence or produce any record during the course of investigation or proceeding under the PMLA. Since, the petitioner – ED is conducting the inquiry / investigation under the PMLA, in connection with the four FIRs, and since some of the offences of the said FIRs are scheduled offences under PMLA, the same would be the investigation/proceeding under the PMLA, and the District Collectors or the persons to whom the summons are issued under Section 50(2) of the Act are obliged to respect and respond to the said summons.
The operation and execution of the impugned order is stayed, pending the present SLPs. The District Collectors shall appear and respond to the summons in question issued by the petitioner – ED on the next date, that may be indicated by the ED.
List after four weeks.
- 2024 (4) TMI 629
Seeking release of petitioner - illegality in the arrest of the petitioner or not - whether petitioner was not produced before the learned Special Court within 24 hours of his arrest as mandated in law? - HELD THAT:- It is Section 19 of the PMLA which gives power to the Investigating Officer to arrest an individual against whom material is collected as contemplated under Section 2(1)(na), after following the process contemplated under Section 50 of the PMLA. Thus, the petitioner became an accused only when he was arrested under Section 19 of the PMLA, after the authority on the basis of material in his possession had reason to believe that the petitioner was guilty of the offence. Thus, when the petitioner came to the ED office under a summons under Section 50 of the PMLA, the petitioner was not an accused. Thus, if the said time-line is considered the petitioner was produced well within 24 hours of his arrest before the Special Court.
As far as producing the petitioner before the nearest Magistrate is concerned under Section 167 Cr.PC, the term ‘nearest Magistrate’ used in Section 167 has to be considered where it is not possible for the investigating agency to take the arrestee before the jurisdictional Magistrate within 24 hours - In a case, where the arrestee can safely be produced before the jurisdictional Magistrate within 24 hours, then, there is no necessity of taking him first before the nearest Magistrate and then before the jurisdictional Magistrate - there is no merit in the allegations that the petitioner was not produced within 24 hours before the jurisdictional Court and as such, the petitioner’s arrest cannot be termed as ‘illegal’.
The petitioner was produced before the Special Court well within 24 hours and as such, there are no illegality in the arrest of the petitioner and as such, the petition being devoid of merit, is dismissed.
From a perusal of Section 50, it is evident that summons are issued under Section 50(2) by the Director, Additional Director, Joint Director, Deputy Director or Assistant Director to ‘any person’ whose attendance they consider necessary whether to give evidence or to produce any records during the course of any investigation or proceeding under this Act. Section 50(3) of the PMLA provides that all such summoned persons shall be bound to attend in person or through an authorised officer - Thus, statements recorded under Section 50(2) of the PMLA are not statements recorded under Section 161 of the Cr. P.C; and infact, are treated as evidence. It is also pertinent to note, that the ED officers are not police officers, inasmuch as, the said proceeding before the officers is a judicial proceeding, as evident from Section 50(4).
In the facts, it is not as if the petitioner, aged 64 years had not reported to the Office of the ED on 3 earlier occasions, post the summons issued under Section 50 of the PMLA. This was the 4th summons which was issued to the petitioner. On all the earlier occasions, his statements were recorded and as such, the petitioner could have well been summoned on some other day or even on the next day, instead of keeping him waiting post-midnight, despite his alleged consent. Consent is immaterial. Recording of statement, at unearthly hours, definitely results in deprivation of a person’s sleep, a basic human right of an individual.
It is deemed appropriate to direct the ED to issue a circular/directions, as to the timings, for recording of statements, when summons under Section 50 of the PMLA are issued, having regard to what is observed - petition dismissed.
- 2024 (4) TMI 535
Seeking release on ground of arrest of petitioner being illegal and in violation of principles laid down by the Hon’ble Supreme Court in case of Pankaj Bansal v. Union of India [2023 (10) TMI 175 - SUPREME COURT] - In case of Pankaj Bansal, the Hon’ble Supreme Court has inter alia held that the grounds of arrest must be communicated in writing to the person being so arrested through exercise of powers under Section 19 of PMLA, and failure to do so would render the arrest illegal.
Challenge to arrest of the petitioner by Directorate of Enforcement on the ground that the arrest was in violation of Section 19 of Prevention of Money Laundering Act, 2002 - Article 226 and 227 of the Constitution of India read with Section 482 of the Code of Criminal Procedure, 1973 - challenge to order by which petitioner was remanded to custody of Directorate of Enforcement.
MATERIAL AGAINST THE PETITIONER COLLECTED BY THE DIRECTORATE OF ENFORCEMENT - HELD THAT:- Once there is prima-facie material regarding laundering of the kickbacks on Goa Elections and the money being already spent for the said purpose in the year 2022 itself, the recovery in the year 2024 or non-recovery of any remaining amount will become clear only once prosecution complaint is filed. The Courts in all criminal cases wait for the chargesheet/prosecution complaints to be filed and the entire evidence being placed before it against an accused before giving a finding on a prima-facie case for the purpose of cognizance, charge or final acquittal at the appropriate stages of trial and not when the investigation against an accused has begun and chargesheet/prosecution complaint is yet to be filed. A different criteria cannot be adopted in the present case for the said purpose.
The material which has been encapsulated here reveals that Sh. Arvind Kejriwal had allegedly conspired with other persons and was involved in the formulation of Delhi Excise Policy 2021-22, in the process of demanding kickbacks from the South Group, as well as in generation, use and concealment of proceeds of crime. He is allegedly involved in the offence of money laundering in two capacities. Firstly, in his personal capacity as he was involved in formulation of the Excise Policy and in demanding kickbacks. Secondly, in his capacity as the National Convenor of Aam Aadmi Party as per Section 70(1) of PMLA, for use of proceeds of crime of Rs. 45 crores in the election campaign of Aam Aadmi Party in Goa Elections 2022, which are prima facie apparent from the material relied upon by the respondent in this regard as well as the statement recorded on 08.03.2024 of one of the candidates of Aam Aadmi Party in Goa Elections 2022.
ARGUMENT REGARDING STATEMENTS OF WITNESSES AND APPROVERS BEING UNRELIABLE AND UNTRUSTWORTHY - HELD THAT:- The petitioner herein wants this Court to conduct a mini trial and give a conclusive finding regarding validity and authenticity of statement of witnesses, test the evidentiary value and intent behind statements of the approvers, which is not permissible in law - In any case, this Court has not examined and relied solely on the statements of these approvers to examine the legality of arrest of the petitioner on the anvil of Section 19 of PMLA as there is other material collected by the investigating agency also which has been placed before this Court and discussed in preceding paragraphs which reveals the role of the present petitioner in the alleged Delhi Excise Policy scam.
This Court is further of the opinion that merely because the approver has chosen to reveal some new facts at a later stage, only after initially concealing them including the role of Sh. Kejriwal, the same cannot be a ground to disregard their statements completely. This is because an accused may realise his or her mistake at a later stage and may offer to state the true facts in exchange for securing pardon as per the law - individuals may evolve in their understanding of their actions and the legal consequences thereof, and these developments even otherwise are covered within the framework of the judicial process and the law of the country.
WHETHER THE ARREST OF THE PETITIONER IS IN VIOLATION OF DIRECTIONS OF HON’BLE SUPREME COURT IN CASE OF PANKAJ BANSAL VS. UNION OF INDIA? - HELD THAT:- The cumulative effect of the material collected so far by the Directorate of Enforcement regarding the role of the petitioner, both in his personal capacity in formulation of Delhi Excise Policy 2021-22 and demanding kickbacks from the South Group, and in his capacity as National Convenor of Aam Aadmi Party in utilisation of proceeds of crime during Goa Elections 2022, reflecting the ‘reasons to believe’ that the petitioner was ‘guilty of offence of money laundering’ in terms of Section 19 of PMLA, and the need to interrogate the petitioner and confront him with the statements of witnesses, and other material as well as digital evidence, coupled with the conduct of petitioner of not joining investigation pursuant to service of nine summons for a period of six months, necessitated the arrest of petitioner Sh. Arvind Kejriwal.
Therefore, prima facie, the mandatory provisions of Section 19 of PMLA have been satisfied by the Directorate of Enforcement while arresting the petitioner Sh. Kejriwal, in compliance of judgment of Pankaj Bansal, and there is material at this stage which points out towards the guilt of the petitioner for commission of offence of money laundering.
WHETHER THE REMAND ORDER DATED 22.03.2024 HAS BEEN PASSED IN MECHANICAL AND ROUTINE MANNER? - HELD THAT:- This Court observes that the contention regarding remand order having been passed in mechanical and routine manner is without any merit, considering the observations made by the learned Special Court including ensuring due compliance of Section 19 of PMLA, taking note of material available against the petitioner and the need for his custodial interrogation - Though not argued before this Court on behalf of the petitioner, this Court still deems it crucial to note that though the present petition was filed challenging the first remand order dated 22.03.2024 passed by the learned Special Court, however, the remand of petitioner Sh. Kejriwal had thereafter been extended vide order dated 28.03.2024 wherein the petitioner himself had submitted before the learned Special Court that he was ready and willing to cooperate with the investigating agency and he had no objection if the custody remand was extended further.
Moreover, at this point of time, the petitioner is not in the custody remand of Directorate of Enforcement, rather is in judicial custody by virtue of order dated 01.04.2024 which has neither been challenged till date, nor any application has been filed seeking bail in the present case. The learned Senior counsel for the petitioner had not raised any objection to the judicial remand of the petitioner when he was remanded to judicial custody on 01.04.2024 by the learned Special Court.
TIMING OF ARREST VIS-A-VIS THE CONDUCT OF PETITIONER OF NOT JOINING INVESTIGATION FOR SIX MONTHS DESPITE SERVICE OF 09 SUMMONS - HELD THAT:- The petitioner himself was aware about the case, as many of his co-accused persons were in judicial custody in the same ECIR, and he had knowledge about the statements recorded in the ECIR. Therefore, to say that he did not attend those summons since he did not know why he was being summoned has no merit.
This Court holds that this Court would not lay down two different categories of laws, one for common citizens, and the other granting special privilege to be extended by investigating agency to a Chief Minister or any other person in power only on the basis of being in that public office since that public office is enjoyed by that public figure due to the mandate of the public.
This Court is of the opinion that to hold that the timing was chosen by the investigating agency will be accepting a misplaced argument. It was the petitioner himself who had delayed the investigation to the point of time of his arrest, when the Courts had refused to grant him relief from arrest, or from joining investigation. Therefore, there is nothing before this Court to reach a conclusion that the timing of arrest was deliberate by the Directorate of Enforcement, and that conduct of Sh. Kejriwal was not responsible for a situation in which there was no other option other than to arrest to make him join the investigation.
This Court holds that the issue of arrest has to be adjudicated as to whether it was illegal or not within the parameters of law, by application of law and not by political rhetoric.
Was there any Necessity to Arrest the Petitioner? - HELD THAT:- The observations of the Hon’ble Apex Court in case of Vijay Madanlal Choudhary [2022 (7) TMI 1316 - SUPREME COURT] were reiterated in case of V. Senthil Balaji [2023 (8) TMI 410 - SUPREME COURT], and Pankaj Bansal and it was observed that it is necessary for the officer concerned to record reasons for his belief that a person is guilty of an offence under PMLA and needs to be arrested.
The conduct of the petitioner Sh. Kejriwal of not joining investigation left little option with the Directorate of Enforcement other than his arrest for the purpose of investigation of a pending case, in which other co-accused are in judicial custody, and the investigating agency is also running against time in view of the order of the Hon’ble Supreme Court vide which it was ordered that the trial in this case should proceed expeditiously.
Considering the fact that the Directorate of Enforcement was in possession of material on the basis of which it had reasons to believe that the petitioner was guilty of offence of money laundering, it would have had no recourse available but to arrest the petitioner and to seek his remand so as to confront him with the statements of witnesses and approvers and other incriminating material collected during the course of investigation.
In the case at hand, it is important to clarify that the matter before this Court is not a conflict between the Central Government and the petitioner Sh. Arvind Kejriwal. Instead, it is a case between the petitioner Sh. Arvind Kejriwal and the Directorate of Enforcement.
This Court is only following its constitutional duty of following the Constitution and the judicial precedents mandated by the Hon’ble Supreme Court. This Court will therefore decide the case following this constitutional duty and will concentrate on the allegations and material collected by the Directorate of Enforcement placed before it and apply law, which is the only domain in which this Court can tread.
This Court is of the opinion that the arrest of petitioner Sh. Arvind Kejriwal was not in contravention with the law laid down by the Hon’ble Apex Court in case of Pankaj Bansal in respect of Section 19 of PMLA. Similarly, the impugned remand order dated 22.03.2024 passed by the learned Special Court does not suffer from any infirmity or illegality - since the arrest of the petitioner and the impugned remand order dated 22.03.2024 are held valid, the prayer seeking release of petitioner is also liable to be rejected.
The present petition stands dismissed along with pending applications.
- 2024 (4) TMI 476
Money Laundering - Seeking grant of bail - appellant has been in custody for more than five years between the period - 2011 and 2018, in the predicate offence - HELD THAT:- Keeping in view the period of custody undergone, the present appeal is accepted and the appellant - Ram Binod Prasad Sinha is directed to be released on bail during the pendency of trial in ECIR no. 03/2018 registered for the offence(s) punishable under Section 4 of the PMLA, before the Court of Additional Judicial Commissioner-XVII-cum-Special Judge, CBI, Ranchi, subject to conditions imposed.
The impugned judgment is set aside and the appeal is allowed.
- 2024 (4) TMI 375
Seeking grant of bail - Money Laundering - scheduled offence - proceeds of crime - delay in proceedings or not - HELD THAT:- The benefit of Section 436-A of the Code cannot be denied merely on the basis that allegations are serious. If the conditions are fulfilled, the Court is bound to give the benefit. Only the factors like the allegations, time required to be taken for conduct of the trial need to be considered. It is but natural for the Prosecution to take sometime for conduct of trial. At the same time, it is but natural that the Accused still remain in jail for a longer period. Ultimately, the Court has to balance in between the rights of both the contesting parties.
The word ‘joint trial’ is not defined anywhere in the Code of Criminal Procedure. In ordinary parlance, it is construed as a ‘joint trial’ of several Accused. It may be for the purpose of framing of charge. Such issue may also arise when there are counter cases against each other. Both these cases also need to be tried separately even though it may be by the same Judge. By inserting this provision, the Legislatures want to suggest that the trial of ‘scheduled offences’ and trial of PMLA offences will have to be conducted independently though by the same Judge.
As per Section 3 of the PML Act, anyone involved in the process of proceeds of crime, it is an offence. The ‘scheduled offences’ are the offences laid down as per the schedules. The scheme of the Act does not suggest that there can be an investigation for PMLA offences only when there is a conviction in a trial involving the ‘scheduled offences’. A person accused of PMLA offence may contend that unless it is proved that the proceeds alleged by the Enforcement Directorate were derived from the criminal activity is proved, they cannot be convicted.
When the trial of PMLA offences in this case will be started? - HELD THAT:- A ‘draft charge’ is already filed on behalf of the E.D. It is true that yet the Special Court has not proceeded further after framing of charge, that is to say, hearing the Prosecution and hearing the respective Accused persons. If there are discharge Applications, the Special Court is required to decide them. There are in all 38 Accused persons. One does not know when this pre-charge formalities will be completed. It is true that all these complaints consist of thousands of pages and there will be number of witnesses. So, the trial will be going to take its own time. The issue is, whether the Applicants can be detained in jail just because the allegations are serious in nature ? The answer is ‘No’.
Because it is not certain when the trial will start and it will be over. Furthermore, even if trial of both the cases will start simultaneously, still the judgement in PMLA case will not be pronounced till the time, the judgement in trial involving ‘scheduled offence’ will be pronounced.
It is true that in entire administration of Criminal Law various stake holders are involved. The responsibility on investigating agency and on the Courts is onerous. Firstly, it is the duty of investigating agency to investigate properly and to collect materials and to submit it in the Court. The responsibility of the Court starts later on. It is true that there is time limit fixed for completion of investigation. Even if the charge-sheet/complaint is filed, still depending upon the magnitude of the offence, the trial continues. There are two sides. One is prosecution and another is defence. Court has to hear both of them. And it is bound to take time - It is but natural that it will take long time for completion of the cases considering the procedure required to be followed. One cannot deny the fact that considering the statistics received by me, it is uncertain when the trial will start. Hence in such a situation a person cannot be deprived of his personal liberty.
It is no doubt true that E.D., has filed ‘draft charge’. Same time, it is also true that framing a charge is not an empty formality. The Special Judge has to satisfy himself that ingredients of an offence are prima facie satisfied. Both the parties need to be heard - In this exercise, there is also onerous responsibility on the prosecuting Agency by remaining vigilant. If their case is not progressed (due to pendency), they are not remedy-less. They can request the head of that establishment (i.e. Principal Judge) to assign the case to another Court. Ultimately, running of a system is collective responsibility. The defense Counsels have also a role to play. On one hand, they have got every right to protect the interest of their clients and at the same time, they have to come forward for early disposal of the case. Because, they are also part and parcel of the system. And the system must work. Defence Counsels are also part of the same Society for betterment of which system is created.
Bail application allowed.
- 2024 (4) TMI 374
Maintainability of writ petition - Money Laundering - proceeds of crime - Provisional Attachment Order - reasons to believe - impugned order is issued in consonance with the provisions of Section 5(1) of the Act of 2002 and more particularly the second proviso to Section 5(1) of the Act of 2002 or not - property acquired by the Petitioner No.1 vide the Deed of Sale dated 06.03.1997 could have been provisionally attached by the impugned order taking into account that the said property was acquired when the Act of 2002 had not come into force and more particularly when the provisions of the Act of 1988 was brought within the fold of the Act of 2002 only on 01.06.2009 or not.
Whether the instant writ petition is maintainable and if so whether this Court should entertain the writ petition in the present facts? - HELD THAT:- The Act of 2002 was enacted to address the urgent need to have a comprehensive legislation inter alia for preventing money-laundering, attachment of proceeds of crime, adjudication and confiscation thereof including vesting of it in the Central Government, setting up of agencies and mechanisms for coordinating measures for combating money-laundering and also to prosecute the persons indulging in the process or activity connected with the proceeds of crime. This need was felt throughout the world, owing to the serious threat to the financial systems of the countries, including their integrity and sovereignty because of money-laundering. Notably, before coming into force of the Act of 2002, various other legislations including the Act of 1988 were already invoked to deal with attachment and confiscation/forfeiture of the proceeds of crime linked to concerned offences.
The inclusion of various offences in Part-A, Part-B, Part-C of the Schedule to the Act of 2002 brings any criminal activity in relation to the Scheduled Offence or relatable to the Scheduled Offence within the fold of the Act of 2002. At the cost of repetition, it reiterated that the process or activity as clarified in the Explanation to Section 3 of the Act of 2002 includes concealment or possession or acquisition or use or projecting as untainted property or claiming as untainted property. Further to that, this process or activity would be a continuing activity and continues till such time a person is directly or indirectly enjoying the proceeds of crime by any of the activities aforementioned. Therefore, the involvement in any one of such process or activity connected with the proceeds of crime would constitute the offence of money-laundering. The offence of money-laundering in the opinion of this Court has nothing to do with the criminal activity relating to the Schedule Offence except the proceeds of crime derived or obtained as result of that crime.
The properties mentioned in the Schedule to the impugned order including the property acquired vide the Deed of Sale dated 06.03.1997 would come within the fold of proceeds of crime provided the property/properties are derived or obtained directly or indirectly by the Petitioners as a result of a criminal activity relating to or relatable to a Scheduled Offence. It is also observed that in the circumstances, the Authorized Officer treats the property/properties as proceeds of crime, the Petitioners would be at liberty before the Authorities under the Act of 2002 to establish that the crime property have been rightly owned and possessed by them and such property by no stage of imagination can be termed as crime property and ex-consequential proceeds of crime within the meaning of Section 2(1)(u) of the Act of 2002.
Whether the impugned order is issued in consonance with the provisions of Section 5(1) of the Act of 2002 and more particularly the second proviso to Section 5(1) of the Act of 2002? - HELD THAT:- This Court finds it very pertinent to observe that Section 5(1) of the Act of 2002 envisages an action of provisional attachment can be initiated only on the basis of materials in possession of the Authorized Officer indicative of any person being in possession of proceeds of crime. The precondition of being proceeds of crime is that the property has been derived or obtained, directly or indirectly by any person as a result of criminal activity relating to a Scheduled Offence. The sweep of Section 5(1) of the Act of 2002 is not limited to the accused named in the criminal activity relating to a Scheduled Offence but would also apply to any person if he is involved in any process or activity connected with proceeds of crime - the reasons to believe in the instant case having referred to the provisional attachment order makes it clear that the said reasons to believe which were recorded in writing was done subsequent to the impugned provisional attachment order. Under such circumstances, it was a clear infraction to the provision of Section 5(1) of the Act of 2002 as well as the second proviso to Section 5(1) of the Act of 2002.
The reasons to believe so recorded by the Respondent No.2 mentioned that if the properties were left unattached, they are likely to be transferred, disposed of, parted with or otherwise dealt with in any manner prejudicial to the purpose of investigation carried out under the provisions of the Act of 2002. As already stated, there was no mention of the materials in possession on the basis of which the said belief was formed. It is apposite to observe that merely reiterating the language of the statute sans without recording the basis on what materials, the belief was formed in writing, would not be in consonance with the provisions of Section 5(1) as well as the second proviso to Section 5(1) of the Act of 2002. Under such circumstances, in the opinion of this Court, the condition precedent being not satisfied, the Respondent No.2 could not have issued the impugned order under the second proviso to Section 5(1) of the Act of 2002 or even under the less stringent Section 5(1) of the Act of 2002. Consequently, the impugned order is contrary to Section 5(1) as well as also to the second proviso to Section 5(1) of the Act of 2002 for which the said impugned order is required to be interfered with.
As this Court is of the opinion that the impugned order is required to be interfered with, the consequential effect thereof would be that the adjudication proceedings so initiated on the basis of the complaint filed under Section 5(5) of the Act of 2002 has also to fail inasmuch as without there being a valid provisional attachment order, the adjudicating authority does not get jurisdiction to exercise its powers in terms with Section 8 of the Act of 2002.
Petition disposed off.
- 2024 (4) TMI 174
Seeking grant of anticipatory bail - Money Laundering - scheduled offence - Proceeds of crime - execution of Joint Venture Agreement and also a supplementary Agreement, according to which, a sum of Rs. 46 Crores was transferred to Suresh Narayan Vijaywargiya - existence of reasonable grounds to believe that applicant is guilty or not - seeking anticipatory bail on the ground that as Section 447 of the Companies Act was included in the schedule appended to the PMLA by way of amendment dated 19.4.2018 - HELD THAT:- A perusal of Explanation (ii) to Section 3, reflects that the process or activity connected with proceeds of crime is a continuing activity and continues till such time a person is directly or indirectly enjoying the proceeds of crime. The aforesaid section covers all the activities within its scope till the person is being directly or indirectly benefitted by the proceeds of crime - The Apex Court in the case of Vijay Madanlal Choudhary and others Vs. Union of India and others [2022 (7) TMI 1316 - SUPREME COURT] has also held that provision of Section 45 are applicable to the bail applications under Sections 438 and 439 of Cr.P.C.
Section 45 of the PMLA specifically provides that the offences under the Act are non-bailable and cognizable and no person accused of an offence under the Act is entitled for bail unless the Public Prosecutor is given a liberty to oppose the application and the Court is satisfied that there are reasonable grounds for believing that the accused is not guilty of such offence and he is not likely to commit any offence while on bail - In the present case, the complaint prima facie discloses commission of offence by the applicant as well as co-accused, therefore, this Court does not find any reasonable ground to believe that the present applicant is not guilty of crime.
The present applicant cannot claim parity only on the ground that the present applicant also cooperated with the Investigating Agency. This contention of the applicant is also liable to be rejected, inasmuch as, upon filing of the complaint, when the applicant was issued a bailable warrant to appear before the trial Court, the applicant did not appear before the trial Court and therefore, the trial Court rejected the application of the applicant for anticipatory bail - merely because the applicant appeared before the Investigating Agency on a singular date, the same does not entitle him to be released on anticipatory bail while claiming parity with co-accused S.N. Vijaywargiya.
As this Court is not satisfied that there is no reasonable ground to believe that the applicant is guilty, no case for grant of anticipatory bail to the applicant is made out taking into consideration the nature of accusation against the applicant - application dismissed.
- 2024 (4) TMI 163
Seeking grant of anticipatory bail - Money Laundering - bail sought on the ground that the applicant is 'sick' and 'infirm' within the meaning of proviso to Section 45 of the PMLA - HELD THAT:- In the present case, the applicant is aged about 83 years and seeking relief of anticipatory bail in terms of proviso to Section 45 of the PMLA. Proviso to Section 45 of PMLA provides that the person who is under the age of sixteen years or is a woman or is sick or infirm or is accused either on his own or along with other co-accused of money-laundering a sum of less than one crore rupees, may be released on bail, if the special Court so directs - The All India Institute of Medical Sciences, Bhopal constituted a Medical Board. The Medical Board consisting of the experts of the fields of General Medicine, Orthopedics, Opthalmology and Cardiology examined the present applicant and accordingly, the report dated 29.1.2024 was submitted. As per the said report, the applicant has been found to be suffering with Ishemic Heart Disease (IHD) since 2015 with preserved EF, Hypothyroidism since 10 years and well controlled with medication and Bilateral Knee Osteoarthritis with Lumbar Spondylosis. The conclusion as mentioned in the Medical Report dated 29.1.2024 reveals that morbidities are under control with treatment and did not require any acute or active intervention at the point of examination. The medical report suggested that the applicant requires oral medication for the above health conditions with periodic evaluation.
The aforesaid report is based on the opinion of the experts of different fields as mentioned hereinabove after subjecting the applicant to a thorough examination. Though the report does not suggest that any hospitalization is required at present, however, it has been opined that the difficulty in the movement of the present applicant is due to old age and Bilateral Osteoarthritis knee joints.
It is discernible from the record that the present applicant is a person aged about 83 years. He has been examined by the Medical Board consisting of the experts of different fields. The Medical Board found that the applicant is suffering with aforesaid morbidities, though the Board has suggested that the said disorders can be kept under control with the aid of oral medication but the Medical Report also suggests periodic evaluation of the applicant's health.
In the present case, in view of the aforesaid report of the Medical Board, it cannot be said with full proof that the applicant is hale and hearty and is in the state of suffering incarceration at the age of 83 years. Therefore, this Court is of the considered view that in terms of the proviso contained in Section 45 of the PMLA, the applicant is entitled to be enlarged on anticipatory bail under the following exceptional circumstances:- i. The applicant is aged about 83 years, ii. The applicant is suffering from Ishemic Heart Disease (IHD) since 2015 with preserved EF, Hypothyroidism and Bilateral Knee Osteoarthritis with Lumbar Spondylosis. iii. The applicant appeared before the respondent upon receiving the summons on two occasions i.e. on 5.9.2023 and 27.10.2023. iv. The complaint was filed against the applicant on 8.11.2023 i.e. within 10 days of applicant's appearance before the respondent on 27.10.2023.
Taking into consideration, the aforesaid exceptional circumstances, this Court deem it proper to enlarge the applicant on anticipatory bail - Application allowed.
- 2024 (4) TMI 117
Money Laundering - seeking grant of bail - offence of fraud and forgery of valuable securities, etc. - twin conditions u/s 45 of PMLA satisfied or not - HELD THAT:- It is not in dispute that applicant has no role in fraud, etc. committed by M/s Garvit Innovative Promoters Ltd. through BIKEBOT scheme. The applicant is neither named in 55 FIRs lodged by the investors nor charge-sheeted in those cases. After registration of ECIR by the Enforcement Directorate, the complicity of Mr. Dhirendra Pal Solanki had come at initial stage of investigation in the statement dated 22.11.2019 and 23.11.2019 of Sanjay Bhati (Chief Managing Director of M/s Garvit Innovative Promoters Ltd.) in which he has disclosed inter alia that Rs. 20 crores, out of proceed of crime was transferred in the account of Mr. Dhirendra Pal Solanki, but till date, Enforcement Directorate has neither arrested Mr. Dhirendra Pal Solanki nor made him accused - The Enforcement Directorate in compliance of order of this Court, filed an affidavit dated 15.03.2024 mentioning inter-alia that the role of Mr. Dhirendra Pal Solanki is also being investigated and efforts are being made to finalize the investigation with regard to transfer of proceeds of crime generated in this case by various entities.
So far as the twin conditions as provided in Section 45 of the PML Act, 2002 is concerned, it is well settled that Court is not required to record a positive finding that accused has not committed an offence under the PML Act, 2002 and while releasing him on bail he will not commit an offence. The Court has to maintain a balance between the subsequent judgement of conviction or acquittal and is required to record reasonable reasons of satisfaction on the basis of facts and circumstances of the each case with broad probabilities as to whether there is possibility of the accused committing a crime after grant of bail - There is no positive evidence of cash transaction also between the applicant and Mr. Dhidrena Pal Solanki except statement of Mr. Dhidrena Pal Solanki and presumption against the applicant, hence this Court is prima-facie satisfied that twin conditions provided in Section 45 of the PML Act, 2002 stand satisfied under the facts of this case in favour of the accused-applicant.
Applicant is languishing in jail since 21.07.2023 having no criminal history and maximum sentence for the alleged offence is up to seven years. It is well settled that judicial custody should be purposeful and cannot be punitive.
Keeping in view the nature of the offence, evidence, complicity of the accused, detention period, present status of trial of the applicant, submissions of the learned counsel for the parties as noted above and the fact that there is no apprehension of absconding the applicant, the applicant has made out a case for bail - Bail application allowed.
- 2024 (4) TMI 116
Money Laundering - illegal mining of granite, causing damages to human life and properties using explosives - scheduled offences - predicate offences - purchase from proceeds of crime or not - prosecution on the basis of presumption or not - HELD THAT:- Unconcluded predicate offence trial is not a bar for proceeding under the PMLA. The said grounds raised by A6 and A7 is not sustainable in view of the Supreme Court judgment in Vijay Madanlal Choudhary and others vs. Union of India and others [2022 (7) TMI 1316 - SUPREME COURT]. The Hon'ble Supreme Court after considering the object of the PMLA and the expression 'proceeds of crime' and 'money laundering' used by the legislators had held that, PMLA is a stand alone Act. The pre-requisite is a commission of a predicate offence. It is not even necessary that the person accused in the PMLA case must be an accused in the predicate offence. Law even permits joint trial of both the cases and it is not appropriate to canvass that only after the trial in predicate offence end in conviction, the proceeding in PMLA should commence.
The complainant had arrived at a conclusion that the subject landed property measuring 35 cents of land in S.No.310/2B, at Melur Village is property involved in money laundering. Whereas, the records relied by the complainant indicates that A14 is the owner of the property and A15 is the purchaser of it. This transaction was on 11.07.2017. For arriving at a prima facie satisfaction that this property possessed by A1 which he purchased out of proceeds of crime, the complainant has to show material that the said property is in possession and enjoyment of A1 - In the absence of these link material, the conclusion arrived by the complainant remains without base. There is no material to show the sale price for the sale deed executed in favour of Siddique Raja through her Power Agent Bilal Mohammed was actually paid by A1.
To attract prosecution under PMLA, there must be a predicate offence and the proceeds in that crime must have been attempted to be laundered. In this case, it is not the case of the complainant that the property of the Manimegalai which she sold to Siddique Raja, was in possession of A1after he got the Power of Attorney from A14 paying Rs. 6,60,000/- or after the sale agreement in favour of his brother Azad Mohammed (A11). In the absence of material to link the possession or enjoyment of the property with A1, the inference of the complainant is highly preposterous.
The above reasoning equally applies to Siddique Raja (A15) also, since there is no material to show he only lend his name for A1 and he is a benami for A1 or the whole or part sale consideration emanated from A1. Merely because, the conveyance deed show undervaluation than the guideline value, it may be a ground to suspect tainted money been used in the said transaction. All tainted money need not be proceeds of crime. In the absence of link that the tainted money was the proceeds of the predicate offence, in which A1 and others facing, the prosecution under PMLA has to fall to ground, since it cannot stand without the basic ingredient.
Petition dismissed.
- 2024 (4) TMI 115
Money Laundering - proceeds of crime - Provisional attachment of properties - Seeking to raise the attachment of the properties mortgaged to the petitioner bank - seeking declaration that G.Os.issued by Home Department, Government of Andhra Pradesh, to the extent of the properties mortgaged by M/s. Agri Gold Farm Estate India Private Limited to the petitioner Bank as illegal, arbitrary, unjust and violation of Article 300-A of the Constitution - HELD THAT:- In the instant case, the prime charge against the accused persons is that they have collected deposits from the depositors by making false promises of high returns by contravening Section 5 of the APPDFE Act. As rightly contended by the learned Advocate General, the said provision is not included in the schedule offence under PML Act - The prime intention of any legislation more particularly in the matters relating to economic offences would be to restore back the position or status of victim or deceived as much as possible by recovering the property illgotten from the accused. Mere confiscation of the property to the State would not serve the purpose of legislation, if it would not come to the rescue of the victim.
Though the PML Act is a central legislation having overriding effect that too subsequent in point of time to the State legislation i.e. APPDFE Act, the interest of the depositors would well be subserved if the properties of the accused firm remained attached under APPDFE Act so that there may be equitable distribution among the depositors.
The Enforcement Directorate may go on investigating the case initiated by it into the offences said to have been committed by accused. However, in view of the reasons given above that the attachment made under the provisions of the APPDFE Act would subserve the interest of the depositors, the Provisional Attachment Orders passed by the Enforcement Directorate are liable to be quashed, for the reason that the same would deter the primary objective of the APPDFE Act in mitigating the hardship of the depositors - All the depositors are natives of this State and the properties attached are situated in this State and the possible inconvenience that may be caused to the depositors, who had parted with their hard earnings with the Company by way of deposits, in approaching the Authority under PMLA Act for pursuing their claims to get back the amount, is also taken into consideration while reaching to the conclusion that proceeding with the matter before the Special Court designated under APPDFE Act would subserve the interest of the depositors.
The Enforcement Directorate is at liberty to participate in the proceedings before the Special Court, Eluru under the provisions of APPDFE Act for taking necessary action on the surplus of the amount of the sale proceeds of the auction of the attached properties in accordance with the provisions of the PLM Act. Further, the Enforcement Directorate is free to deal with the properties, which were not attached by the investigating agency of the predicate offence and are covered under Provisional Attachment Orders impugned in these writ petitions, in accordance with the provisions of the PMLA Act.
Petition disposed off.
- 2024 (4) TMI 114
Seeking grant of bail - Money Laundering - money collected through cheating - beneficiaries of the money collected by GIPL from the investors on the pretext of supplying e-bikes to them - HELD THAT:- The applicant is the Director of M/s Mars Envirotech Limited and M/s Accord Hydraulics Private Limited. Preferential shares were purchased by ITV, PTPL and PBPL the sister concern of GIPL by transferring huge amount. The applicant was also made an Investment Advisor in Pental Technologies Private Limited, sister concern of GIPL with full authority and financial powers. The properties of the applicant have been attached by the Enforcement Directorate which would go to show that there has been money laundering and a money trail was found showing his complicity and criminality. The applicant was one of the beneficiaries of the money collected by GIPL from the investors on the pretext of supplying e-bikes to them. M/s Accord Hydraulic Private Limited as per an agreement dated 01.12.2018 was to install a production and manufacturing unit for production of e-bikes but no e-bikes was supplied. The investigation in the matter has concluded and charge sheet has been submitted which also shows the implication of the applicant in the matter.
Looking to the facts and circumstances of the case, the nature of offence, the gravity of incident, the magnitude of money involved, the applicant being a beneficiary of the money collected through cheating, the criminal antecedents of the applicant and the rejection of bail of coaccused by this Court and the Apex Court, this Court does not find it to be a fit case for bail.
Bail application dismissed.
- 2024 (4) TMI 76
Money Laundering - Scheduled offences - whether the Non-Bailable Warrants (NBW) issued against the petitioner are liable to be quashed? - HELD THAT:- As recorded in order dated 05.12.2023, the petitioner had not appeared before the learned Trial Court. However, the exemption application filed on behalf of the petitioner was allowed for that day only by the link Court which was hearing the matters on the said day. An exemption application was again preferred by the petitioner on 05.01.2024, and the same was dismissed by the learned Trial Court considering his previous conduct of repeated absence from the Court and also the fact that he was not on bail in this case. The learned Trial Court had also directed the petitioner to appear physically on the next date of hearing failing which NBW would be issued against him - Despite there being clear directions for the petitioner to appear physically before the learned Trial Court, another exemption application on his behalf was filed on 02.02.2024, which was dismissed by the learned Trial Court with the observations that there was repeated physical absence of the petitioner before the Court, despite giving assurance/ undertaking to do so, on previous various dates, and thus, there were no grounds to allow the exemption application as he was not even on bail in this case, and also considering the fact that no relief had been granted to the petitioner/accused by this Court in the connected CBI case.
The learned Trial Court had dismissed the exemption application filed on behalf of petitioner and had observed that Bailable Warrants were not being issued against the petitioner, and an opportunity was being afforded to him, but with a clarification that his failure to appear physically on the next date of hearing would lead to issuance of NBW against him. On 11.08.2023, 19.09.2023, 05.12.2023, though he was allowed to appear virtually by the learned Trial Court, it was observed that the same was allowed only for one occasion and he had to appear physically before the Court - Having taken note of the orders passed by the learned Trial Court on 31.05.2023, 19.07.2023, 11.08.2023, 19.09.2023, 05.12.2023, 05.01.2024, 02.02.2024, this Court is of the opinion that despite the fact that the petitioner had not obtained bail from the learned Trial Court after cognizance had been taken and summons had been issued against him, the learned Trial Court was lenient with the petitioner on several occasions by not issuing warrants against him, though he was not appearing physically before the Court despite repeated directions in this regard by the learned Trial Court.
In this Court’s opinion, what can be readily discerned from the records of the case and the orders passed by the learned Trial Court is that the petitioner had been afforded several opportunities by the learned Trial Court, to appear before it physically and repeated warnings had been issued that his failure to appear before the Court would lead to issuance of coercive process i.e. NBW. It is only thereafter that the learned Trial Court was left with no other option but to issue NBW against the petitioner. It is also relevant to note that the learned Trial Court had also considered in its previous orders, the conduct of the petitioner during the course of investigation i.e. his non-appearance before the investigating officer despite five summons being served upon him, the fact that complaint under Section 174 of IPC had been filed already against him by the prosecuting agency, and also the fact that NBWs had been issued against him in the connected CBI case and relief had been denied to the petitioner by this Court also in the CBI case as he had failed to return to India despite giving undertakings on numerous occasions.
This Court is of the opinion that the impugned order dated 02.02.2024 suffers from no illegality or infirmity insofar as it has directed issuance of Non-Bailable Warrants against the present petitioner - the present bail application alongwith pending application stands dismissed.
- 2024 (4) TMI 75
Maintainability of petition - availability of alternative remedy of appeal - Money Laundering - scheduled offences - main contention raised by the petitioner was that he did not have a proper opportunity to place before the adjudicating authority certain documents which were at the relevant time not in his possession - HELD THAT:- If one goes through the scheme of the PMLA, sub-Section 1 of Section 26 provides for the filing of an appeal by any person aggrieved by an order made by the adjudicating authority, under the Act, before the Appellate Tribunal constituted under Section 25 therein. This appeal is to be filed within 45 days from the date of receipt of the copy of the order. The proviso to Section 3 of Section 26 empowers the Appellate Tribunal to condone the delay beyond the period of limitation of 45 days.
Thus, the scheme of the Act provides for two appeals, i.e. first to the Appellate Tribunal and the second appeal, both on law and on fact, to this Court. Looking to the scheme of the Act, where the second appeal is before the very Court where the petitioner has now chosen to invoke its power under Article 227, it would be inappropriate for this Court to exercise its writ powers under Article 227 of the Constitution, when the second appeal is to the very same Court.
Considering the fact that the petitioner has approached this Court within a period of 45 days limitation under Section 27 of the PMLA, it would be appropriate for the Appellate Tribunal before whom the petitioner may now file an appeal to consider this fact and exercise its jurisdiction to condone the delay in terms of the proviso to sub-Section 3 of Section 26 favourably. The petitioner makes a statement that he would file an appeal before the Appellate forum within the period of four weeks from today - The Appellate forum may also consider the additional documents to which reference has been made in paragraph 3 of this order whilst disposing of the appeal. Needless to state that these documents may be considered only after the respondents file their say to the application that the petitioner would move along with his appeal memo on that count.
The petition shall stand dismissed as not maintainable in view of the alternate and equally efficacious remedy available of an appeal in terms of Section 26 of the PMLA.
- 2024 (4) TMI 38
Seeking grant of bail - money laundering - proceeds of crime - misappropriation of credit facilities extended by the banks for personal gain - creation of shell companies - main allegation of the respondent is that the petitioner, in his capacity as Managing Director of Surana Power Ltd., had presented a project for construction of 25 MW electric plant at Raichur in Karnataka and in this regard had sought loan from a consortium of Banks. It is seen from the records that more than 1,300 crores had been sanctioned - HELD THAT:- It is the specific case of the respondent that towards the said project the said contracts were granted to other companies which were under the direct control of the petitioner. This allegation is denied by the petitioner. But that allegation is a matter of evidence. But it has to be noted that the allegation that those companies were under the direct control of the petitioner is a very serious allegations, since any contract issued has to be done only by a transparent policy being issued.
Shell companies - HELD THAT:- A detailed list has been given in the counter affidavit about the various shell companies which are alleged to have been incorporated by this petitioner - It is also seen that though it is contended that two forensic audits had been conducted and no irregularity had been found, third audit was conducted over the affairs of the companies and the report is not to the advantage of the petitioner. All these aspects require deep investigation.
In the instant case, the allegation against the petitioner with respect to diversion and misappropriation of funds is that SPL had borrowed funds of Rs. 1,4945.76 crores and had not even started the 2 X 210 MW power plant at Raichur in Karanataka. The account was also declared as NPA. It is also seen that for construction, SPL had awarded sub-contracts to entities which were, according to the respondent, controlled by the petitioner. Further very specifically shell companies were incorporated and there was only paper transaction reflecting the turn over. The amounts diverted back to the companies showing them as contribution of the petitioner. All these are series allegations.
It is thus seen that the petitioner will have to satisfy two conditions for grant of bail namely, that there are reasonable grounds that the petitioner would be held not guilty and that there must also be a trust that the petitioner would not indulged in similar activities in future. Unfortunately, the petitioner had not satisfied either of the two conditions.
Petition dismissed.
Case Laws - SEBI
- 2024 (3) TMI 1183
Recovery proceedings by SEBI - Maintainability of provisions of IBC over the provisions of the SEBI Act - notice was challenged by the appellants on the ground that the same cannot be enforced as the proceedings under the Insolvency and Bankruptcy Code, 2016 and the provisions of the Provincial Insolvency Act, 1920 initiated against the appellants are pending and the orders of interim moratorium have been passed - penalty imposed and sought to be recovered from the appellants by issuing the impugned certificate fall within the meaning of ‘fine’, which is excluded under clause (a) of sub-section (15) of Section 79 of IBC and therefore, the interim moratorium order issued in favour of the appellant No. 1 has no application to the penalty sought to be recovered under the impugned certificate
HELD THAT:- Once an application is admitted under Section 100, a moratorium shall commence in relation to all the debts and shall cease to have effect at the end of the period of 180 days beginning with the date of admission of the application or on the date the adjudicating authority passes an order on the repayment plan under Section 114, whichever is earlier.
In the instant case, so far as appellant No. 1 is concerned, the period of moratorium commenced on 04.02.2022 which cease to operate on expiry of 180 days i.e., 04.08.2022. Similarly, in respect of appellant No. 2, the period of moratorium commenced on 13.12.2022 and the same expired on efflux of 180 days on 13.06.2023. The writ petition was heard by the learned Single Judge on 19.09.2023. Thus, it is evident that no moratorium was in force in favour of the appellants. Therefore, respondents No. 1 and 2 were justified in issuing the impugned certificate under Section 28A of the SEBI Act. It is pertinent to note that the provisions of Chapter IV of IBC, namely Sections 121 to 124 do not apply to the facts of the case as the application under Section 122 was not filed when the Certificate under Section 28A of the SEBI Act was issued. The issue whether the impugned levy is a fine or a penalty is also not required to be decided in the facts and circumstances of the case and we keep the same open to be adjudicated in an appropriate proceeding.
- 2024 (3) TMI 1143
Jurisdiction/Validity of show-cause notice issued u/s 11(1), 11(2)(b), 11(4) and 11(B) of SEBI Act - as submitted show-cause notice is identical to what was issued to the Petitioner on the earlier occasion which came to be adjudicated and on which Petitioner was discharged and exonerated - Petitioner had earlier moved this Court by filing a Petition, however, the same was withdrawn by the Petitioner with liberty to approach the Security Appellate Tribunal and on such Interim Application came to be passed by the Tribunal ordered that in the interest of justice, the Respondent be directed to give an opportunity of a cross-examination and personal hearing and when an opportunity of a personal hearing before the WTM would be given to the Petitioner, the Petitioner could raise all issues including that of jurisdiction
Contention as urged on behalf of the Petitioner is that the impugned show-cause notice is without jurisdiction and the issue of jurisdiction is required to be decided as a preliminary issue before the show-cause notice itself is taken up for adjudication.
HELD THAT:- It appears to be not the case that the Petitioner at any point of time including in the proceedings filed before the tribunal had given up his case that the impugned show-cause notice was without jurisdiction. In fact, the Tribunal itself has observed that the Petitioner would be permitted to raise the issue of jurisdiction in the proceeding of the show-cause notice to be held on 16th February, 2024.
Thus we are of the opinion that the present Petition can be disposed of by directing the concerned Officer of the Respondent to decide the issue of jurisdiction being raised by the Petitioner as a preliminary issue and only after such issue is decided, take an appropriate call on the adjudication of the show-cause notice. All contentions of the parties in that regard are expressly kept open.
Petitioner shall be intimated the date on which the Petitioner would be heard on the issue of jurisdiction and appropriate orders in deciding such issue be passed as expeditiously as possible.
We clarify that till the issue of jurisdiction is decided, the concerned officer of the Respondent shall not adjudicate the show-cause notice on merits including recording of any evidence of the same.
- 2024 (3) TMI 988
Rejection of Petitioner’s Settlement Applications - delay on the part of the Petitioner in making compliances of submission of documents and as per the Settlement Regulations, 2018 and more particularly Regulation 6(1)(b) - Petitioner made a representation to the Respondent requesting the Respondent to consider such documents by condoning the delay, which according to the Petitioner was not attributable to the Petitioner and for reasons which where not in Petitioner’s control - HELD THAT:- Certainly there was delay on the part of the Petitioner in not complying with the time lines on submission of the documents, which according to the Petitioner were relevant in regard to the Settlement Applications and as demanded by the Respondent in the course of the proceedings. We also find that the Respondent was required to follow the provisions of the Regulations in question.
Considering the peculiar facts of the case and the reasons which are set out by the Petitioner, in our opinion in not submitting these documents within the prescribed time, the Petitioner would certainly deserve an opportunity of his Settlement Applications being considered by the Respondent and it ought not to become inconsequential on account of a delay of 15 days in submission of the documents. This would certainly cause prejudice to the Petitioner. We are thus inclined to set aside the impugned order passed by the Respondent and restore the proceedings of the Settlement Applications with the Respondent to be decided in accordance with law.
Petitioner submits that the documents are already part of the record of the Settlement Applications, hence, there would not be any impediment for the Respondent to decide the Settlement Applications as filed by the Petitioner expeditiously.
Let the decision on the Settlement Applications be taken as expeditiously as possible within period of eight weeks from the date of copy of the order is made available to the parties.
All contentions of the parties on the adjudication of the Settlement Applications are expressly kept open.
- 2024 (3) TMI 868
Attachment of Properties - Large-scale irregularities committed by some share brokers in collusion with the employees of Banks and Financial Institutions - diversion of funds from the banks/FIs to the individual accounts of certain brokers - Section 10 of the Special Court (Trial of Offences relating to transactions in Securities) Act, 1992 - HELD THAT:- The entire case of the Custodian regarding subsisting debts of the appellant towards respondent Nos. 6, 7 and 8 was based on a communication received from the Income Tax Department. The appropriate witness to prove such communication would be the official concerned from the Income Tax Department. However, as has been mentioned above, no witness from the Income Tax Department was examined in support of the recovery application. Even the communication forwarded by the Income Tax Department and relied upon by the Custodian was not proved by proper evidence.
The appellants herein took a categoric stand in their depositions that they had returned the amounts borrowed from respondent Nos. 6, 7 and 8, but the books of accounts were not available because of lapse of time. The said plea of the appellants herein could not be treated as unnatural or an afterthought because once the transactions were completed and the loans were repaid, there was no reason for the appellants to have entertained a belief that after a period of about 13 years, they would be required to present the account books pertaining to transactions. It was neither a requirement in law nor could it be expected from the appellants herein to retain the books of accounts after more than a decade of the alleged suspicious transactions.
Resultantly, the conclusions drawn and the findings recorded in the impugned judgments passed by the Special Court that the appellants herein failed to prove the fact that the amounts had been repaid to the benami companies of the notified person, namely, Pallav Sheth do not stand to scrutiny and cannot be sustained as being contrary to facts and law.
Appeal allowed.
- 2024 (2) TMI 1028
Exit Policy of SEBI - letter issued by SEBI calling upon CSE [Calcutta Stock Exchange] to apply for voluntary exit - Exit policy of SEBI in consonance with the provisions of the SCR Act [Securities Contracts (Regulation) Act] or not? - Was the CSE obliged to apply for continuance of its clearing house business in terms of the SECC Regulations, 2012 ? - Whether steps towards compulsory withdrawal of recognition of CSE suffer from a jurisdictional error and violation of the principles of natural justice
HELD THAT:- In the circular issued by the SEBI, it has been stated that the same has been issued in exercise of powers conferred under Section 11(1) and 11(2) (j) of the SEBI Act, 1992 read with Section 5 of the SCR Act to protect the interest of investors in securities and to promote the development of and to regulate the securities market. Thus, it is clear that the circular has been issued with a particular object and in exercise of the statutory power conferred on the SEBI as a statutory authority. It has a force of law and is binding to all the stock exchanges in the country. In the said conspectus, we are unable to accede to Appellants ’s argument that Exit policy of SEBI is not in consonance with the provisions of the SCR Act.
Regulations such as those which have been framed by the SECC Regulations, insofar as they define the conditions for recognition, of minimum net worth, composition of the board of directors, dispersal of ownership and norms for governance, do not infringe any legal right of the stock exchange. The challenge is, therefore, lacking in substance. Nothing has been indicated before the Court to establish that the determination of the threshold or the manner of its computation is untenable and is so disproportionately high so as to constitute the very negation of the right to carry on business.
CSE cannot be accused of any offence or wrongdoing. It is a question of existence of an institution which had operated for more than a century and thereafter it was not being able to conduct its business due to mandatory imposition of a condition towards having a turnover of Rs. 1000/- crore on continuous basis and to set up a separate clearing corporation or tie with an existing recognized clearing corporation. Such circumstances may not warrant a zero-tolerance approach moreso when the terms and conditions for compulsory derecognition are yet to be specified by SEBI.
Judiciary has a strong sense of justice and it works to maintain social justice and fairness as distinguished from misplaced sympathy. In the peculiar facts and circumstances of the case and though we are not inclined to interfere with the order impugned, we are left with an avenue to issue necessary direction on the basis of the findings of the learned Single Judge as regards the fourth issue which has been answered in the affirmative, in favour of SEBI and against CSE.
Disengaging ourselves from the logjam, we direct that CSE would be at liberty to establish a clearing corporation in compliance with the provisions of SECC Regulations, 2012 or to tie up with another clearing corporation eligible to clear trades as per SECC Regulations, 2012 to achieve the prescribed net worth within a period of six months from date. In the event CSE fails to do so, SEBI would be free to take necessary steps thereafter, in accordance with law.
With the above observations and directions, the appeals and all connected applications are disposed of.
- 2024 (1) TMI 1022
Termination of petitioner as a Depository Participant of CDSL[Central Depository Services] - Requirement of meeting the net worth and minimum turnover - petitioners being required to have a turnover of Rs. 3 crores as not adhered - According to CDSL, the termination is in lieu of SEBI-2018 Regulations and more particularly the amendment brought about to the said 2018 Regulations with effect from 23 February, 2022 to Regulation 35 by insertion of a proviso inter alia in regard to a stock broker requiring to have a net worth of Rs. 3 crores within one year from the date of notification of the 2022 amendment to the 2018 Regulations - HELD THAT:- We are of the opinion that respondent no. 1 itself was in some state of uncertainty as to whether the consequence of noncompliance of regulations of the SEBI would entail a consequence as foisted on the petitioners. CDSL in such regard, had infact approached the SEBI, however, the SEBI did not inform the CDSL on any position it should be taking on such compliances.
In such context, as informed to us by Respondent No. 2/Mr. Sancheti, learned senior counsel for SEBI that once the SEBI had prescribed the requirements under the said regulations, the compliance was an issue between the CDSL and its participants on which SEBI would not have any control.
Thus prima facie we find much substance in the contentions as urged on behalf of the petitioners that petitioners being put to a notice by the CDSL for compliance to be submitted in terms of what was recorded in the letter dated 24 February, 2023 as noted by us hereinabove, which the petitioners complied by submitting a “Net Worth Certificate” on 20 April, 2023. Such a certificate was not rejected by CDSL even on the ground that it is not based on audited accounts. On behalf of the petitioners, it is stated that in fact it was issued only after an audit.
Prima facie, we find much substance in the contentions as urged on behalf of the petitioners and wonder whether the petitioner could have been foisted with termination and more particularly considering the decision the respondent had taken in its letter dated 24 February, 2023, by which also a legitimate expectation was created in the petitioners to achieve the compliance by 24 April, 2023.
CDSL could not have turned around and then shown the rule book to the petitioners, after having granted such opportunity in its letter dated 28 February, 2023 providing time to the petitioners to achieve compliance by 24 April, 2023. In our opinion, such course of action as adopted by CDSL was in fact in consonance of its bye laws which we have noted hereinabove.
SEBI mandated such compliance but compliance of such a nature, namely of a turnover, in our prima facie opinion cannot amount to compliance of such fundamental nature that a participant needs to instantly lose its right to do business as permitted by a registration as granted by respondent no. 1, when it otherwise acts in accordance with all the legal requirements, this more particularly when about 700 participants of the petitioners would suddenly be in a limbo.
All the aforesaid issues would require examination at the final hearing of the petition. We, accordingly, feel it appropriate to admit the petition. Hence, Rule. Respondents waive service.
Pending the hearing and final disposal of the petition, the impugned order of termination dated 10 November, 2023 as confirmed by the appellate order dated 8 January, 2024 shall remain stayed.
- 2024 (1) TMI 985
Writ petitions impugning the Revocation Order within the territorial jurisdiction of Delhi High Court - Violation of SEBI’s Minimum Public Shareholding Norms (‘MPS Norms’) and disclosure requirements - SCN provided an option for settlement mechanism under the SEBI (Settlement Proceedings) Regulation, 2018 - SEBI passed a common Settlement Order as stated that certain monetary and non-monetary terms were imposed on the Appellants in the Settlement Order, and steps have been taken by the Appellants to implement the said Settlement Order - Settlement Order stood revoked and withdrawn by SEBI in terms of Regulation 28 of the Regulations of 2018 on the ground of alleged failure of the Appellants to comply with the terms of the Settlement Order.
HELD THAT:- The conclusion that the cause of the action of the Appellants to challenge the legality of the Impugned Revocation Order issued by SEBI at Mumbai has no nexus with the receipt of the said order at Delhi; as this is not the material or integral fact to the said cause of action. The Impugned Revocation Order was admittedly received by the Appellants in multiple jurisdictions and this fact if held to be determinative would enable Appellants to pick and choose jurisdictions which is the mischief that the Full Bench of Kerala High Court has opined should not be permitted and we agree with the same. Therefore, the receipt of the Impugned Revocation Order at Delhi cannot alone be held determinative of the jurisdiction of this Court.
Effect of the Impugned Revocation Order felt at Mumbai - grievance of the Appellants in the writ petitions is that the issuance of the Impugned Revocation Order of SEBI has resulted in re-initiation of the proceedings and hearing at Mumbai pursuant to the SCN dated 28.10.2020; thereby exposing the Appellants to regulatory proceedings - It is the facts pleaded in the grounds, which constitute the material and integral facts, which the Appellants will have to prove, if traversed by SEBI, to seek a judgment of the Court. The challenge to the Impugned Revocation Order has been raised on the grounds of inter-alia non-adherence to the principles of natural justice by SEBI. It has been pleaded that the SEBI failed to provide the Appellants an opportunity of hearing prior to revocation and the order is unreasoned. It is further pleaded that the impugned order is contrary to the extant law. It is the facts pleaded in these grounds which would constitute the cause of action in favour of the Appellants herein. A bare perusal of the grounds would show that each one of them allege acts and omissions by SEBI at Mumbai. Therefore, in our considered opinion as per the grounds set out in the writ petition the cause of action for challenging the impugned order against SEBI has arisen at Mumbai.
In the facts pleaded by the Appellants for invoking the writ jurisdiction of the Courts at Delhi, undoubtedly, it cannot be said that the High Court of Delhi had no territorial jurisdiction for admittedly, the Appellants reside within the jurisdiction of this Court. However, none of the facts pleaded by the Appellants for invoking the jurisdiction of this Court are integral and material fact for challenging the Impugned Revocation Order. The said facts are not sufficient for compelling this Court to hear the matter on merits. For the same reason, the contention of the situs of shares of BNL is not an integral fact.
Forum Conveniens at Mumbai - In the facts of this case, admittedly the High Court of Judicature at Bombay has the jurisdiction as the decision of SEBI to revoke the Settlement Order took place at Mumbai and all events prior thereto with respect to issuing the SCN and passing of the Settlement Order also occurred at Mumbai.
The High Court while exercising its jurisdiction under Article 226 of the Constitution of India to entertain a writ petition, in addition to examining its territorial jurisdiction also examines if the said Court is the forum conveniens to the parties. The issue of forum conveniens is seen not only from the perspective of the writ petitioner but it is to be seen from the convenience of all the parties before the Court. In the facts of this case, as is evident from the record that the forum conveniens for the both the parties is Mumbai. The Appellants since the year 2020 have been appearing in Mumbai before SEBI.
This Court is of the view that the learned Single Judge has rightly concluded that applying the principles of forum conveniens, it would not be appropriate to entertain the writ petitions and the Appellants may approach the appropriate High Court.
Summoning of the record of the SEBI would be necessary for examining the rival contentions of the parties in the writ petition.
- 2024 (1) TMI 734
Rights of the minority shareholders - Restoration of the Writ Petition - SEBI's Role and Response to Complaints
The case involves the petitioners, who are minority shareholders of Bharat Nidhi Ltd. (BNL), filing a writ petition against BNL and the Securities and Exchange Board of India (SEBI) for various alleged violations of securities laws. The petitioners claimed that SEBI had not provided them with the investigation report or relevant documents related to their complaints against BNL, despite them being shareholders. They argued that BNL, along with majority shareholders (respondent nos. 3 to 9), committed several illegalities and violations of securities laws, including the Minimum Public Sharing Norms and disclosure issues.
One key aspect of the case was SEBI's issuance of a show cause notice to BNL and others, which was later settled through the SEBI (Settlement Proceedings) Regulation 2018. The petitioners contended that the violations alleged in the show cause notice were serious and could not be settled.
During the final hearing, the petitioners requested SEBI to provide documents relevant to their complaints. Despite opposition from SEBI and other respondents, the Court ordered SEBI to provide these documents, emphasizing that minority shareholders are integral to a company and entitled to such information.
This order was challenged in the Supreme Court by both respondent nos. 2 and 9, and later by SEBI. However, the Supreme Court dismissed these challenges, upholding the High Court's order.
Subsequently, SEBI revoked the settlement order it had passed, which led to the contention that the substantive prayers in the original petition (prayers a and b) had become infructuous. However, the petitioners opposed this view, asserting that prayers c and d of the petition still required adjudication.
Ultimately, the High Court maintained its interim directions, requiring SEBI to furnish the documents and keeping open the contentions regarding prayer clauses c and d for future proceedings. The Court stressed that SEBI, as a public body, should act in public interest and comply with court orders.
The petitioners later filed an interim application to restore the writ petition for a final hearing, arguing that respondent nos. 2 to 9 had engaged in forum shopping and deceit by not informing the Court about their steps to challenge SEBI's revocation order in the Delhi High Court. This was viewed as potentially fraudulent behavior, intended to secure the disposal of the writ petition in their favor.
Respondent nos. 2 to 9 and SEBI, on the other hand, argued that the petitioners had no cause of action to seek restoration, that the reliefs in prayer clauses c and d could not be granted due to the completion of the buyback process, and that no prejudice was caused to the petitioners as these issues could still be agitated in appropriate proceedings.
In conclusion, the Court decided to keep open the issues related to prayer clauses c and d for future action.
The Court noted that the issue of the Postal Ballot Notice dated 22 September 2022, related to prayer clause (d) of the Writ Petition, became a moot point following the revocation of the Settlement Order by SEBI. The Court had previously decided to keep these matters open for future proceedings, allowing the petitioners to raise these issues at an appropriate time.
The Court further observed that the conduct of respondent nos. 2 to 9, particularly in not disclosing their intention to challenge the revocation of the Settlement Order, did not reflect a fair, just, or upright approach. However, it did not constitute fraud or deceit in the legal sense. The Court emphasized that the situation had not materially changed since its order on 1 December 2023, as the revocation of the Settlement Order was still in effect. Therefore, there was no cause for the Court to review or reverse its previous orders and directions.
In conclusion, the Court found no merit in the application to restore the writ petition and rejected it, maintaining its earlier orders and observations. The Court's decision was based on the principle that there was no material change in circumstances and that the substantive issues related to the revoked Settlement Order and subsequent actions remained open for future adjudication.
Application rejected.
- 2024 (1) TMI 588
Issue of the Non-Convertible Debentures (NCDs) without complying with the listing provisions - Liability of directors - 'officer in default' - HELD THAT:- Learned counsel for the appellants have made an attempt to distinguish the role as assigned to the appellants as Directors. But at present, we are not influenced by such submissions. In view of the above, the civil appeals stand dismissed.
Pending applications stand disposed of.
- 2024 (1) TMI 188
Violation of Rule 19A of the Securities Contracts (Regulation) Rules 1957 - failure to disclose transactions with related parties and other relevant information which concerns related parties to SEBI - Precipitate decline in investor wealth and volatility in the share market due to a fall in the share prices of the Adani Group of Companies. “Adani group” - situation was purportedly caused by a report which was published on 24 January 2023 by an “activist short seller”, Hindenburg Research about the financial transactions of the Adani group.
The Hindenburg Report and certain newspaper reports allege that some Foreign Portfolio Investments “FPIs” in Adani group stocks in the Indian stock market are owned by shell companies based outside India, which have close connections with the Adani group. Such investments in Adani stocks allow the Adani group to maintain financial health and artificially boost the value of stocks in the market, in violation of Indian law;
Adequacy of SEBI’s investigation - scope of judicial review over SEBI’s regulatory domain - transfer of investigation from SEBI to another agency or to an SIT - Whether SEBI has prime facie conducted a comprehensive investigation? - Allegations of conflict of interest against members of the Expert Committee - petitioner’s case appears to rest solely on inferences from the report by the OCCRP, a third-party organization involved in “investigative reporting”. The petitioners have made no effort to verify the authenticity of the claims.
Whether there is no apparent regulatory failure attributable to SEBI? - petitioners have submitted, based on the Hindenburg Report and other newspaper reports, that the FPIs investing in Adani group stocks in the Indian stock market are shell companies outside India owed by the brother of the Chairperson of the Adani group
HELD THAT:- In a consistent line of precedent, this Court has held that when technical questions arise particularly in the financial or economic realm; experts with domain knowledge in the field have expressed their views; and such views are duly considered by the expert regulator in designing policies and implementing them in the exercise of its power to frame subordinate legislation, the court ought not to substitute its own view by supplanting the role of the expert. Courts do not act as appellate authorities over policies framed by the statutory regulator and may interfere only when it is found that the actions are arbitrary or violative of constitutional or statutory mandates. The court cannot examine the correctness, suitability, or appropriateness of the policy, particularly when it is framed by a specialized regulatory agency in collaboration with experts. The court cannot interfere merely because in its opinion a better alternative is available.
The power of this Court to enter the regulatory domain of SEBI in framing delegated legislation is limited. The court must refrain from substituting its own wisdom over the regulatory policies of SEBI. The scope of judicial review when examining a policy framed by a specialized regulator is to scrutinise whether it violates fundamental rights, any provision of the Constitution, any statutory provision or is manifestly arbitrary.
No valid grounds have been raised for this Court to direct SEBI to revoke its amendments to the FPI Regulations and the LODR Regulations which were made in exercise of its delegated legislative power. The procedure followed in arriving at the current shape of the regulations does not suffer from irregularity or illegality. The FPI Regulations and LODR Regulations have been tightened by the amendments in question.
SEBI has completed twenty-two out of the twenty-four investigations into the allegations levelled against the Adani group. Noting the assurance given by the Solicitor General on behalf of SEBI we direct SEBI to complete the two pending investigations expeditiously preferably within three months - This Court has not interfered with the outcome of the investigations by SEBI. SEBI should take its investigations to their logical conclusion in accordance with law;
The facts of this case do not warrant a transfer of investigation from SEBI. In an appropriate case, this Court does have the power to transfer an investigation being carried out by the authorized agency to an SIT or CBI. Such a power is exercised in extraordinary circumstances when the competent authority portrays a glaring, willful and deliberate inaction in carrying out the investigation. The threshold for the transfer of investigation has not been demonstrated to exist.
The reliance placed by the petitioner on the OCCPR report to suggest that SEBI was lackadaisical in conducting the investigation is rejected. A report by a third-party organization without any attempt to verify the authenticity of its allegations cannot be regarded as conclusive proof. Further, the petitioner’s reliance on the letter by the DRI is misconceived as the issue has already been settled by concurrent findings of DRI’s Additional Director General, the CESTAT and this Court;
The allegations of conflict of interest against members of the Expert Committee are unsubstantiated and are rejected.
The Union Government and SEBI shall constructively consider the suggestions of the Expert Committee in its report detailed in Part F of the judgment. These may be treated as a non-exhaustive list of recommendations and the Government of India and SEBI will peruse the report of the Expert Committee and take any further actions as are necessary to strengthen the regulatory framework, protect investors and ensure the orderly functioning of the securities market and SEBI and the investigative agencies of the Union Government shall probe into whether the loss suffered by Indian investors due to the conduct of Hindenburg Research and any other entities in taking short positions involved any infraction of the law and if so, suitable action shall be taken.
Before concluding, we must observe that public interest jurisprudence under Article 32 of the Constitution was expanded by this Court to secure access to justice and provide ordinary citizens with the opportunity to highlight legitimate causes before this Court. It has served as a tool to secure justice and ensure accountability on many occasions, where ordinary citizens have approached the Court with well-researched petitions that highlight a clear cause of action. However, petitions that lack adequate research and rely on unverified and unrelated material tend to, in fact, be counterproductive. This word of caution must be kept in mind by lawyers and members of civil society alike.
We are grateful to all the members and the Chairperson of the Expert Committee for their time, efforts, and dedication in preparing their erudite, comprehensive, and detailed report in a time-bound manner. Subject to the consent and availability of the members and Chairperson of the Expert Committee, SEBI and the Government of India may draw upon their expertise and knowledge while taking necessary measures pursuant to the recommendations of the Committee.
- 2023 (12) TMI 915
Determination of jurisdiction of High Court for SEBI violations - Violation of SEBI’s minimum public shareholding norms and violation of SEBI’s minimum public shareholding norms - Separate and independent settlement applications were also filed by respondent nos. 2 to 8 - Whether this court is the appropriate forum for deciding the present writ petitions and granting the reliefs as prayed for? - HELD THAT:- A perusal of Clause 2 of Article 226 indicates that the writ jurisdiction can be exercised by the High Court primarily in relation to the territories within which the cause of action, wholly or in part arises. However, the location of such Government or authority or residence of such person, outside the territories of the High Court will not deter the High Court from issuing the appropriate writ.
The introduction of Clause (2) in Article 226 of the Constitution of India widened the width of the area for issuance of writs by different High Courts, however, the same cannot be construed to completely dilute the original intent of the Constitution makers which is succinctly encapsulated in Clause (1) of Article 226. Rather, Clause (2) is an enabling provision, which supplements Clause (1) to empower the High Courts to ensure an effective enforcement of fundamental rights or any other legal right. Therefore, the power of judicial review cannot be circumscribed by the location of the authority against whom the writ is issued, however, the same does not mean that the constitutional mandate enshrined under Article 226 (1) can be completely neglected or whittled down.
The ‘cause of action’ means a bundle of facts, which is necessary for the plaintiff to prove in order to succeed in the proceedings. It does not completely depend upon the character of the relief prayed for by the plaintiff. It is rather the foundation upon which the plaintiff lays his/her claim before the court to arrive at a conclusion in his/her favour. It depends on the right which the plaintiff has and its infraction.
Section 20 of the Civil Procedure Code, 1908, provides a generic definition of the term ‘cause of action’ to mean fact, which is necessary to establish to support a right to obtain a judgment.
The question whether cause of action has arisen within the territorial jurisdiction of a court, has to be answered based on the facts and circumstances of the case. The cause of action, thus, does not comprise of all the pleaded facts; rather it has to be determined on the basis of the integral, essential and material facts which have a nexus with the lis.
It is also a settled proposition of the law that the location where the tribunal/appellate authority/revisional authority is situated would not be the sole consideration to determine the situs of the accrual of cause of action, ignoring the concept of forum conveniens in toto. Hence, even if a small part of the cause of action is established, and the same is found to be non-integral or non-material to the lis, the court may invoke the doctrine of forum non-conveniens and decline to exercise its writ jurisdiction, if an alternative, more efficacious forum for the same exists.
It is, thus, unequivocally clear that the petitioners participated before SEBI’s Internal Committee on different dates at Mumbai and thereupon, a settlement had arrived at. It is, thus, seen that it is not merely the location of the respondent-SEBI’s Head Office at Mumbai, but rather the entire genesis of the dispute lies in Mumbai itself. The settlement was finalized at Mumbai. The determination of the settlement not being fulfilled was made at Mumbai. The consideration to that effect has taken place at Mumbai and the decision to revoke the settlement has also been passed at Mumbai only.
Merely because some of the writ petitions were entertained by this court relating to certain violations of norms and regulations of respondent-SEBI by the respondent companies therein and issues arising out of consequential settlement application, that in itself would not determine the integral, essential and material part of the cause of action as the pendency of the writ petition before this court has no relation with the impugned revocation order which has taken place subsequent to the said writ petition. The law relating to the doctrine of forum conveniens, as discussed above, already makes it explicitly clear that the jurisdiction has to be determined on the facts and circumstances of each case.
With respect to the averment that this court is the most convenient forum for the petitioners, it would be inappropriate and myopic to assume that while determining the jurisdiction, only the convenience of the aggrieved party approaching the court has to be looked into. In fact, with the advent of technology in contemporary times, the courts have transcended the geographical barriers and are now accessible from remote corners of the country. Therefore, the convenience of the parties cannot be the sole criterion for the determination of jurisdiction considering the broader perspective of dynamism of technology and increased access to justice. The determination of cause of action and territorial jurisdiction has to be in line with the constitutional scheme envisaged under Article 226 of the Constitution of India.
Moreover, the litigation history of the present writ petitions reveals that the parties have, in fact, agitated their concerns before the Hon’ble High Court of Judicature at Bombay. Nothing has been put before this court, that shall allow the conclusion of the Hon’ble High Court of Judicature at Bombay being a non-convenient forum. The forum, in the considered opinion of this court, is available, convenient, as also approachable.
In all fairness, the petitioners herein ought to have disclosed the said fact before the Hon’ble High Court of Bombay regarding reserving the right to challenge the settlement order. Undoubtedly, they can challenge the same without prior intimation to the Hon’ble High Court of Bombay, but the recourse must have been taken before an appropriate forum/court. The burden of a fair demeanour on the part of litigants considerably amplifies when they approach the courts under the extraordinary jurisdiction. Therefore, at times, it is the constitutional courts upon which falls the burden to prevent the abuse of jurisdiction and eliminate any susceptibility of forum shopping.
It is, thus, seen that under the facts of the instant matters, the integral, essential and material part of the cause of action had arisen with the territorial jurisdiction of the Hon’ble High Court of Judicature at Bombay and even assuming that a slender part of cause of action has arisen within the jurisdiction of this court, applying the principles of forum conveniens as has been held by the Hon’ble Supreme Court in the case of State of Goa [2023 (3) TMI 683 - SUPREME COURT], this court does not deem it appropriate to entertain the instant writ petitions. The instant writ petitions are, therefore, dismissed.
- 2023 (12) TMI 381
Power of SEBI to initiation action against Chartered Accountant (CA) / Auditor of the company - misconduct dereliction of duties and abhorrence of due diligence while conducting statutory audit - auditor as directed that the certified copy of the order be forwarded to the Institute of Chartered Accountants of India ("ICAI") and National Financial Reporting Authority ("NFRA") for appropriate action against the appellants - HELD THAT:- The scope of inquiry by SEBI is very limited and is confined only to the charge of conspiracy of involvement of the appellant in the fraud, if any, and to take consequential action if there is connivance or conspiracy with the appellant and its directors. Only then, SEBI could take action under the SEBI Act and the PFUTP Regulations otherwise it is not open to SEBI to inquire into any charge of professional negligence of the auditor since the audit firm is not dealing directly in securities.
The scope and jurisdiction of SEBI to conduct an inquiry against a Chartered Account or a Chartered Accountant Firm was considered by the Bombay High Court in Price Waterhouse & Co. & Another vs. SEBI [2010 (8) TMI 173 - HIGH COURT OF BOMBAY] it is not open to SEBI to encroach upon the powers vested with the Institute under the CA Act and if there is any material against the Chartered Accountant to the effect that he was instrumental in preparing false and fabricated accounts then SEBI has powers to take remedial or preventive measures under the SEBI Act. The Bombay High Court held that the jurisdiction of SEBI would also depend upon the evidence which is available during such inquiry and if it is found that a particular Chartered Accountant has concocted false accounts in connivance and in collusion with the Officers / Directors of the Company then SEBI could take action.
Jurisdiction of SEBI would depend upon the evidence which is available and if there was some omission without any mens rea or connivance with anyone, in any manner then SEBI cannot issue any further direction and was required to drop the proceedings.
In the instant case, the WTM has given a categorical finding that there is no evidence showing fraud or connivance by the appellants with the officers or directors of the Company. WTM has further given a finding that there is insufficient evidence to hold that the appellants had actually manipulated the books of accounts with knowledge and fraudulent intention and that there was no tangible evidence to show that the appellant had committed a fraud in collusion or connivance with the officers of the Company or its management.
Once there is a finding that the appellants have not manipulated the books of accounts with knowledge and fraudulent intention or in connivance with the officers or management of the Company then no directions could be issued by the WTM to the ICAI or NFRA to consider dereliction of duties and abhorrence of due diligence while conducting statutory audit as in our opinion it was outside the domain of the WTM to issue such directions. At best, administrative directions could have been issued by SEBI to the aforesaid institutions to consider the alleged irregularities but beyond that no adjudicatory directions could be issued by the WTM.
- 2023 (12) TMI 318
Power of SEBI to initiation action against Chartered Accountant (CA) / Auditor of the company - Charge of conspiracy and involvement in the fraud against CA firm - statutory auditor working against the fiduciary capacity - appellant is a leading firm of Chartered Accountants consisting of 14 partners and 250 accountants, article assistants and others - appellant was appointed as the joint statutory auditor - appellant had acted against the fiduciary capacity and instead of working in the interest of the shareholders of the company the appellant facilitated the scheme of cleaning up the books of account of the Company despite being aware of the irregularities and misstatements in the financial statements of the Company - investigation report alleged that on the basis of the hand written note the appellant had facilitated the scheme of cleaning up of the books of the Company and therefore recommended initiation of adjudication proceedings. Accordingly, adjudication proceedings were initiated against the appellant under Section 15HA of the SEBI Act - Whether appellant was not involved in the fudging of the books of accounts?
HELD THAT:- In Price Waterhouse Co. Vs. SEBI [2019 (9) TMI 592 - SECURITIES APPELLATE TRIBUNAL, MUMBAI] this Tribunal while considering the role of the appellant as a firm of the C.A.s found that the scope of the enquiry was only restricted to the charge of conspiracy and involvement in the fraud and not to any charge of professional negligence since the C.A. / C.A. firm were not dealing directly in the securities. This Tribunal held that in absence of inducement, fraud was not proved nor there was connivance or collusion by the C.A.s and therefore, the provision of section 12 (A) of SEBI Act and Regulation 3 & 4 of PFUTP Regulations are not applicable. This Tribunal held that gross negligence or recklessness in adhering to the accounting norms in the course of auditing can only point out to the professional negligence which would amount to a misconduct to be taken up only by ICAI.
Once an investigation or a finding in the inquiry comes that the appellant was not involved in the fudging of the books of accounts and that there was no collusion or connivance by the appellant as a statutory auditor with any employee, promoter or director of the Company then the matter has to be dropped and SEBI could not proceed any further. The scope of inquiry was only restricted to the charge of conspiracy and involvement in the fraud and not to any charge of professional negligence since the chartered accountant or chartered accountant firm were not dealing directly in the securities.
Considering the aforesaid the show cause notice only alleged that the appellant had facilitated the scheme of cleaning up of the books of accounts of the Company.
There is no finding of the appellant’s direct involvement in the cleaning up of the books of accounts or in the fudging of the books of accounts of the Company. There is also no finding of the appellant’s collusion or connivance with any director, promoter or employee of the Company and consequently the appellant cannot be charged under Section 12A of the SEBI Act read with Regulation 3 and 4 of the PFUTP Regulations.
While conducting the statutory audit of a company, one of the objectives of an auditor is to identify and assess the risks of material misstatement, whether due to fraud or error, at the financial statement and assertion levels. For this purpose, the relevant standard is the Standard of Auditing (‘SA’) 315 titled ‘identifying and Assessing the Risk of Material Misstatement Through Understanding the entity and its Environment’. As per the said standard, identification of risk of material misstatement is a matter of professional judgement.
In the context of SA-315 pertaining to identifying and assessing the risks of material misstatements in financial assessment, it is pertinent to bear in mind that any audit is subject to inherent limitations and that owing to such inherent limitations of an audit, there is an unavoidable risk that some material misstatement of the financial statements may not be detected even though the audit is properly planned and performed in accordance with the SA’s which was also stated by the appellant in the engagement letters executed with CG Power. Risk of not detecting a misstatement resulting from fraud is higher than the risk of not detecting a misstatement resulting from an error. Similarly, the risk of not detecting a material misstatement resulting from management fraud is greater than that resulting from an employee fraud.
The standard of accountancy framed by the ICAI makes a distinction between a statutory auditor and a forensic auditor. We may state here that the role of a statutory auditor is not to function like a forensic auditor. Any statutory audit unlike an internal or forensic audit is inherently carried out on a test check / sampling basis which in the instant case had been done by the appellant. As part of the audit process the appellant had duly carried out the exercise of identifying and assessing the risk of material misstatements in the financial statements in accordance with SA 315.
Accordingly, in its professional judgement and after exercising reasonable professional skepticism, ledger accounts with zero balance in the advance to suppliers / advance from customer account were not identified as those which were subject to risk of material misstatement since zero balances would not have impacted the financial statements and therefore, were not considered for further audit procedures.
Conversely, those accounts which had a closing balance in advance to suppliers / advance from customer account were considered for further audit procedures such as obtaining balance confirmation, verification of underlying service agreements and supply contracts etc. Further, any statutory audit, unlike an internal or a forensic audit, is inherently carried out on a test-check / sampling basis, which was done by the appellant in the case of CG Power also.
We are of the view that if the appellant had not carried out the statutory audit as per the accounting standards framed by the ICAI and in the event the appellant could not have resigned without filing the complete audit report or had failed to consider the netting of amount transferred as loans to Action and Avantha then it was open for SEBI to refer to the ICAI to take disciplinary action against the appellant for violation of the accounting standards. SEBI’s role was limited and confined to the conspiracy charge against the appellant with regard to fudging of the accounts of the Company.
The impugned order cannot be sustained and is quashed. The appeal is allowed.
- 2023 (12) TMI 295
Request to place on record a compilation of documents - Writ petitions by minority shareholders - HELD THAT:- This Court is apprised of the fact that the proceedings are listed tomorrow (29 November 2023) before the High Court of Judicature at Bombay. Hence, it is not necessary for this Court to entertain the Special Leave Petition at this stage, particularly bearing in mind what has been observed in paragraphs 2 and 3 of the earlier order [2023 (12) TMI 241 - SC ORDER] which read as follows:
“2 Since the impugned orders of the High Court are purely of an interlocutory nature, we are not inclined to entertain the Special Leave Petitions under Article 136 of the Constitution.
However, the parties would be at liberty to pursue their remedies in accordance with law on all counts after the final judgment of the High Court.”
Should it become necessary for SEBI to raise the issue of interpretation of Regulation 29 at a future date, that issue is kept open to be agitated. SLP dismissed.
- 2023 (12) TMI 260
Unlawful gains by fraudulent and manipulative strategy made by Reliance Company - responsibility of noticee no. 2 i.e. the Managing Director - violating Section 12A of the SEBI Act r/w Regulations 3 and 4 of the SEBI PFUTP Regulations - vicarious liability on both criminal and civil liability for contravention of the SEBI Act, Rules and Regulations - Liability against violations committed by the company - WTM issued directions to disgorge the unlawful gains of Rs. 447.27 crores along with interest @12% per annum and further prohibited the Company and the 12 entities from dealing in equity derivatives in the F&O segment of the stock exchanges directly or indirectly for a period of 1 year - Whether Section 27 of the SEBI Act prior to its amendment w.e.f. March 08, 2019 provided for vicarious liability only in respect of criminal proceedings initiated against a Company for contravention of the SEBI Act - Allegation of manipulative scheme - HELD THAT:- There is a distinction between “offence” and “contravention”. Consequently, one has to see the intention of the Parliament when it uses the word “offence” or where it uses the word “contravention”.
Section 27 prior to the amendment i.e. prior to March 08, 2019 had no application to civil liability and only after the amendment w.e.f. March 08, 2019 that Section 27 provided for vicarious liability on both criminal and civil liability for contravention of the SEBI Act, Rules and Regulations.
Finance Act, 2018 did not give retrospective effect to this amendment nor can such effect be inferred by necessary implication from the language of the amendment. The amendment, being substantive in nature can only be prospective and cannot have any retrospective application. The impugned order holding the amendment to be clarificatory in nature is thus patently erroneous.
The meaning of the term “offence” is required to be understood in the context in which it is used in the legislation. A suggestion that the term “offence” as occurring in the SEBI Act also covers civil proceedings is at odds with the range of provisions in Chapter VII of the SEBI Act which is a facet that was not even examined by the AO, much less ruled upon. We find that parliament was conscious of the usage of the two words “contravention” and “offence” in the SEBI Act and consciously chose to replace “offence” with “contravention” explicitly, in order to enlarge the scope of Section 27.
Section 27 of the SEBI Act as it stood prior to the amendment did not apply to civil liability and, therefore, the Managing Director could not be penalised by SEBI u/s 27 of the Act.
It is not necessary for us to deal with the issue as to whether the Managing Director could be made vicariously liable under Section 27 of the SEBI Act for contravention of the Section 12A and Regulations 3 and 4 of the PFUTP Regulations.
Board of Directors had specifically directed the two officers to explore, identify and implement optional avenues of funding and thereafter on 19.11.2007 the Board of Directors were informed by these two persons that the funds are being raised by disposing 5% of RPL shares through trades in RPL securities. In view of this impeccable evidence, notice No. 2 had discharged the burden under Section 27 of the Act and the onus shifted upon SEBI to prove that notice No. 2 was complicit. The finding that the appellant was complicit to the violations committed by the company and, therefore, liable under Section 27 of the Act is patently erroneous and is based on surmises and conjectures.
Specific denial was made by noticee no. 2 of his involvement in the trades executed by the two officers of the company. We also find that the AO in paragraph 64 holds that it is relevant to examine the role of the Managing Director in terms of direct involvement or knowledge with regard to the manipulative scheme or trades undertaken by the company. We find that the AO failed to establish either direct involvement or knowledge of the Managing Director with regard to the trades undertaken by the company and, therefore, the finding that the Managing Director was ‘complicit’ to the violations committed by the company through its two officers is based on surmises and conjectures and on the basis of the figment of his imagination.
The burden that the Managing Director of the Board of Directors exercised all due diligence was discharged and, therefore, the onus shifted back to SEBI to show that the Managing Director was responsible for the execution of the trades in question. In the absence of any finding being given by the AO establishing direct involvement or knowledge of the Managing Director in the execution of the trades the finding that the Managing Director was complicit in the execution of the trades with the two officers is purely based on surmises and conjectures. Thus, on this score noticee no. 2 i.e. the Managing Director cannot be held responsible for the execution of the shares in the facts and circumstances of the present case.
The limited role played by the Board was only to take note of the transactions after they had been executed by the two senior executives. Without considering the findings of the WTM the AO in the impugned order has misdirected itself in holding that the Managing Director was responsible under Section 27 of the SEBI Act merely on the ground that he was the Managing Director.
Assuming that Section 27 of the SEBI Act is applicable for civil proceedings, we find that the requirement to impute a vicarious liability is not satisfied. The law is well settled that the mere fact that a person holds a designation of Managing Director does not suffice for imputing a vicarious liability to such person. It has been repeatedly held that the proof of “active role” in the alleged contravention in issue must be demonstrated by clear and concrete evidence of his active role coupled with criminal intent as a necessary pre-condition for affixing vicarious liability.
Board of Directors in a company is supreme. The Managing Director reports to the Board. The Board has the full authority to delegate any function to any officers of the Company to the exclusion of the Managing Director. The contention of the respondent that the Managing Director is responsible for the day to day affairs of the Company and the officials report to him and, therefore, the Managing Director is responsible is deemed to be in the knowledge of the transactions is not applicable in the case in hand, especially when the Board had specifically authorised the two senior most officials to execute the trades in question. We also find that in the instant case the two officials have reported to the Board and not to the Managing Director.
AO in the impugned order does not arrive at any conclusion that the appellant was involved in the actual conceptualisation and execution of the alleged trades by RIL. We are of the opinion, that whereas the AO recognises that knowledge by the appellant was a pre-requisite for a finding that noticee no. 2 was liable for RIL’s alleged violation yet without giving a conclusive finding has travelled beyond the show cause notice to conclude in paragraph 72 of the impugned order that noticee no. 2 had implicit knowledge of the alleged trades and authorised the implementation plan. The AO further went on to hold that it is highly unlikely that noitcee no. 2 was not aware of the execution of the trades. The findings given by the AO in our opinion is purely based on surmises and conjectures.
In this regard, the word “complicit” means involvement with others in an activity which is unlawful. On the other hand, the word “implicit” is suggestive though not directly expressed.
Thus, in the absence of any specific finding by the AO on noticee no. 2 complicit involvement in the execution of the implementation plan or in the execution of the trades, the AO cannot dwell into surmises and conjectures and base its findings on presumption to hold that the noticee no. 2 was implicitly involved in the transactions on the ground of being a Managing Director and which implies a high level of accountability of knowledge of overall functioning of the Company.
The burden under Section 27 was discharged by noticee no. 2 and the AO has miserably failed to prove that noticee no. 2 was involved in the execution of the trades carried out by two senior executives.
Inordinate delay in the initiation of the proceedings against the noticees - Both noticee nos. 3 and 4 are involved inter alia in the business of construction of building, infrastructure, setting up of a Special Economic Zone (SEZ) and acquisition of properties and invested their idle funds by lending the same by way of short term inter corporate deposits to other companies in order to earn interest and, if necessary, also avail inter corporate deposits from other companies by paying interest - After 10 years the show cause notice dated 21.11.2017 was issued alleging that noticee nos. 3 and 4 were promoted by the Reliance Group and that noticee nos. 3 and 4 by financing the monies to Vinamra were complicit and aided and abetted the manipulation of the trade executed by RIL through its 11 agents - AO has rejected the contention of the appellants holding that there is no delay on the ground that SEBI had taken an internal decision to await the Section 11B proceedings against RIL and its agents before taking further action in the matter.
HELD THAT:- The Limitation starts running from the day the impugned order is passed. Limitation order does not stop on the whims and fancies of a regulator. The regulator cannot stop the clock on the ground that they would await the decision in proceedings initiated u/s 11B before taking further action in the matter. In our opinion, there is no legal bar of initiation of adjudication proceedings during pendency of Section 11B proceedings. In our opinion, adjudication proceedings and Section 11B proceedings can be held in parallel.
There has been an inordinate delay in the issuance of the show cause notice. Even though there is no period of limitation prescribed in the Act and the Regulations for issuance of a show cause notice and for completion of the adjudication proceedings, nonetheless, the authorities are required to exercise its powers within a reasonable period
Time starts to run from the date of commission of the alleged violation. The respondents being aware of this fact and having knowledge of the alleged transactions chose deliberately not to initiate proceedings and, consequently, the action of the respondents cannot be justified by initiating a belated show cause notice.
There is a violation of principles of natural justice in not supplying the documents to noticee nos. 3 and 4 which documents were relied upon in the show cause notice. We find that noticee nos. 3 and 4 had repeatedly addressed letters to SEBI on 11.06.2018 and 25.06.2018 requesting certain documents which were specifically mentioned in the show cause notice. Some of these documents were provided by SEBI vide letter dated 17.06.2019 and 08.03.2019. The documents which were not provided were specifically again asked for which also included a copy of the investigation report.
As decided in T. TAKANO VERSUS SECURITIES AND EXCHANGE BOARD OF INDIA & ANR. [2022 (2) TMI 907 - SUPREME COURT] investigation report is an intrinsic component of the Board’s satisfaction for determining whether there has been any violation of the regulations and that the investigation report forms the material on the basis of which a show cause notice is issued. Since the show cause notice is on the basis of the investigation report there was an obligation imposed upon the respondent to provide the documents asked for by the appellants which they failed to supply. Non supply of the documents was violative of the principles of natural justice. We are also of the opinion that prejudice caused because of non-disclosure of the relevant material was writ large.
On merits finding has been given by the AO that on a combined reading of the Facility Agreement and Agency Agreement it can be inferred that noticee nos. 3 and 4 had prior knowledge of the scheme of alleged manipulative trades by RIL and that noticee nos. 3 and 4 were fully aware that the funds given by them to Vinamra was meant for financing the alleged trades in question and, therefore, noticee nos. 3 and 4 aided and abetted in the manipulative scheme.
This finding in our opinion cannot be sustained as Facility Agreement was signed on August 04, 2007 and September 22, 2007. The execution of these documents is not disputed nor there is any allegation that these agreements were manufactured for the purpose of this case. The starting point for the alleged manipulative scheme by RIL was the decision taken in an around October 30, 2007 to sell RPL shares. These facts are noted in paragraph 26 of the impugned order. On or before October 30, 2007 noticee no. 3 had already advanced funds to the tune of Rs. 625 crores and noticee no. 4 had loaned an amount of Rs. 45 crores on or before October 30, 2007. We are of the opinion, that as on the date of the execution of the Facility Agreement it was not possible for noticee nos. 3 and 4 to have knowledge that RIL would sell shares in the cash segment in November 2007 and that RIL would take positions in the futures segment through its agents. There is no evidence to show that prior to October 30, 2007 the decision of RIL to sell shares of RPL and appoint 12 agents was known to noticee nos. 3 and 4.
Execution of the Facility Agreement had nothing to do with the Agency Agreement which came two months later and, therefore, the Facility Agreement and the Agency Agreement cannot be read together. The two agreements are wholly unconnected and cannot raise any kind of an inference as held by the AO in the impugned order.
The evidence that has been brought on record does not indicate that noticee nos. 3 and 4 could have known in August / September 2007, namely, at the time of execution of the Facility Agreement that RIL would decide in end of October to sell the RPL shares or that RIL would take position in the November futures through its agents or that RIL would enter into agency agreements with the 12 agents or that RIL would trade in the last 10 minutes on November 29, 2007 in such a manner so as to suppress the price of the RPL shares. Thus, in our opinion, when the Facility Agreement was executed, noticee nos. 3 and 4 could not have known that RIL would enter into the cash segment or would take positions in the November 2007 futures.
Assumption / presumption drawn by the AO that the Facility Agreement was entered into solely for the purpose of funding RIL transactions in the November 2007 futures market is wholly erroneous. Pursuant to the Facility Agreements ICDs were placed as early as on September 2007 much before the subject transactions took place and continued to be placed from time to time till March 2008. The finding given by the AO that Rs. 2,775 crores advanced by noticee nos. 3 and Rs. 550 crores advanced by noticee no. 4, to Vinamra were utilised by the 12 agents for the purpose of funding the manipulative trades of RIL is patently erroneous and cannot be sustained. The ICDs given by noticee nos. 3 and 4 were from September to March whereas the funds required by the 12 agents were from November 01, 2007 to November 06, 2007 when they took short positions in the futures segment.
AO however has considered the entire loans of Rs. 2775 crores given by noticee no. 3 and Rs. 550 crores given by noticee no. 4 from the period September 2007 to March 2008. We may note that noticee no. 4 did not lend any money to Vinamra between November 01, 2007 to November 06, 2007 and that noticee no. 3 had given a loan of Rs. 350 crores in two transactions of November 05, 2007 and November 06, 2007 to Vinamra. Thus, the finding of the AO that Rs. 2775 crores and Rs. 550 crores totalling Rs. 3325 crores were given by noticee nos. 3 and 4 that funded the 12 agents for the alleged trades is patently erroneous.
One of the basic charge against noticee nos. 3 and 4 was that noticee nos. 3 and 4 were promoted by Reliance Group. This allegation was found to be false. The AO found that Anand Jain was the Chairman of noticee nos. 3 and 4 and that noticee nos. 3 and 4 were not promoted by the Reliance Group. Once this fact became clear that noticee nos. 3 and 4 were not promoted by the Reliance Group, the AO should have dropped the matter instead of going into a tirade that Anand Jain was closely associated with Reliance Group as a strategic advisor or that Sanjay Punkhia was a common director of noticee nos. 3 and 4 and Vinamra and, therefore, there is a connection between noticee nos. 3 and 4 with Reliance Group. In our view, the reasoning adopted by the AO in coming to a conclusion that noticee nos. 3 and 4 are connected to RIL is baseless and cannot be accepted. Such indirect connection without any further evidence of their involvement cannot be a ground to hold that noticee nos. 3 and 4 were aware of the manipulative trades allegedly conducted by RIL and its agents. It is thus not necessary for us to go into the question of their connection in detail.
It is not necessary for us to go into the question as to whether noticee no. 3 and 4 by giving loans to Vinamra could be held to be dealing in securities violating the PFUTP Regulations as in our view no case is made out of any violation by noticee nos. 3 and 4. Appeal allowed.
- 2023 (12) TMI 241
Request to place on record a compilation of documents - As decided by HC [2023 (10) TMI 1173 - BOMBAY HIGH COURT] once it is the entitlement of the petitioners in law to receive such documents, they need to be furnished such documents, unless furnishing of these documents would stand prohibited in law, which is certainly not a situation in the present facts.
HELD THAT:- All material which is directed to be disclosed by the High Court shall be used only for the purpose of the proceedings pending before the High Court and shall not be disseminated to any third party.
Since the impugned orders of the High Court are purely of an interlocutory nature, we are not inclined to entertain the Special Leave Petitions under Article 136 of the Constitution.However, the parties would be at liberty to pursue their remedies in accordance with law on all counts after the final judgment of the High Court.
Special Leave Petitions are dismissed.
- 2023 (12) TMI 186
Violation of SEBI Act - validity of settlement orders, which according to the petitioners were patently illegal being beyond the authority and power of the SEBI to accept any settlement - petitioners in writ petitions are minority shareholders - case of the petitioners is to the effect that there is a severe prejudice caused to the petitioners due to several illegalities committed by BNL, at the instance of the majority shareholders who are respondent Nos. 3 to 9 - petitioners have contended that they are the victims of BNL not being listed on a recognized stock exchange, which has severely affected their interest as investors in BNL - before the show cause notice(s) could be taken to its logical conclusion, respondent No. 2 to 9 had moved an application for settlement of the show cause notice(s), by invoking the provisions of 2018 Regulations - petitioners had urged that the SEBI be directed to provide documents to the petitioners as prayed for and directed that the documents, subject matter of prayer clause (g) of the petition be provided to the petitioners.
This Court [2023 (10) TMI 1173 - BOMBAY HIGH COURT] observed, that by no stretch of imagination, could it be said that the petitioners in the present case, who were minority shareholders and in such capacity, being part owners of the company (BNL), to the extent of their shareholding, were not outsiders / alien to the company, and that they were integral to the company, having an inextricable concern and interest in the functioning and management of the company.
Special Leave Petition of respondent no. 2 - BNL and respondent No. 9-Vineet Jain was dismissed by the Supreme Court, as also a decision being taken by the SEBI to assail our order dated 23 October, 2023 before the Supreme Court, what has happened at SEBI’s end in regard to the SEBI’s proceedings against BNL, is not only interesting but quite intriguing.
HELD THAT:- On perusal of the show cause notice, a copy of which is produced for perusal of the Court on behalf of the SEBI, we find that non-compliance interalia of the Rules and Regulations of SEBI are subject matter of the show cause notice, and any plea in opposition as may be urged by BNL and respondent Nos. 3 to 9 (the majority shareholders), would fall for consideration in the adjudication of the show cause notice. This would, however, not mean that the petitioners in their capacity as shareholders, would be dis-entitled or would cease to have any locus to have information / documents in regard to such affairs of BNL and to seek compliance of the Rules and Regulations and the norms of the SEBI by respondent No. 2 and those controlling BNL.
SEBI now needs to resort to a lawful course of action, to adjudicate the show cause notice, so as to reach to a conclusion, whether respondent Nos. 2 to 9 have violated the provisions of the Act, Rules and Regulations, as alleged in the show cause notice and the complaints of the petitioners. We are thus of the opinion that in the facts and circumstances of the case, it would be appropriate that the SEBI expeditiously takes forward the show cause notice and comes to an appropriate conclusion, in accordance with law, in regard to the allegations as made in regard to respondent Nos. 2 to 9 in the show cause notice.
SEBI from 23 October 2023 has not complied our order directing that the documents be furnished to the petitioners. As pointed out on behalf of the petitioners, SEBI has resorted to all possible efforts, not to comply with the order dated 23 October, 2023. Even after the Special Leave Petitions of BNL and Vineet Jain - respondent No. 9 were dismissed by the Supreme Court, the documents were not furnished to the petitioners. SEBI thereafter assailed the orders dated 23 October 2023 before the Supreme Court resulting in dismissal of its Special Leave Petition. Now the SEBI is before the Court taking a stand that the documents need not be furnished and the petitions be disposed of as they are rendered infructuous. We wonder, as what can weigh with the SEBI, in not complying our order dated 23 October, 2023 and not furnishing the documents to the petitioners, except to benefit respondent Nos. 2 to 9. Even such plea that the SEBI would have a legal right or an entitlement, not to furnish documents to the petitioners as ordered by us, was the core issue under our orders, being urged by the SEBI before the Supreme Court, apart from the plea of interpretation of Regulation 29 of the 2018 Regulation.
Considering all these circumstances, we are of the clear opinion that the entitlement of the petitioners to our order dated 23 October 2023, would certainly subsist and the petitioners need to be provided such documents by the SEBI. Moreover, not providing such documents, merely on the ground of the subsequent development that the settlement orders now stands revoked, would completely be an untenable proposition and contrary to our orders dated 23 October 2023, as confirmed by the Supreme Court. Although respondent Nos. 2 to 9 in their business interest may overlook the solemnity of the orders passed by this Court, however, SEBI in its public character cannot take the same approach. In these circumstances, the order dated 23 October 2023 cannot be rendered nugatory. The SEBI is required to holistically consider such orders and not merely in the context of the settlement proceedings, as such order considers the substantive rights of the petitioners, who are shareholders of respondent No. 2 – BNL, having equal rights to that of respondent nos. 3 to 9. SEBI cannot have different yardstick between shareholders. We therefore, direct that our order dated 23 October 2023, which has attained finality, needs to be forthwith complied by SEBI.
On the issue whether the Court should adjudicate prayer (c) and (d) of the petitions, taking an overall view of the matter, and that, now the show cause notice is required to be taken forward, we are of the opinion that in so far as such reliefs are concerned, the same needs to be kept open to be agitated by the petitioners at the appropriate time in appropriate proceedings in the context of the decision which may be taken by the SEBI on the show cause notice. We accordingly, propose to dispose of these petitions by the following order:-
ORDER
(I) The petitioners are entitled to the benefits of the order dated 23 October 2023 as confirmed by the Supreme Court, by rejection of the Special Leave Petitions of respondent Nos. 2 and 9 and thereafter, by rejection of the Special Leave Petition filed by the SEBI.
(II) The order dated 23 October 2023 passed by this Court, be forthwith complied by SEBI.
(III) All the contentions of the petitioners and of the respondents on issues in regard to prayer clauses (c) and (d) are expressly kept open to be agitated at appropriate time in appropriate proceedings.
- 2023 (12) TMI 38
Default of appointment of additional director in the category of non-executive independent director by way of a board resolution - person above the age of 75 years as appointed by the board of directors - non-compliance of Regulation 17(1A) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (‘LODR Regulations’ for short) - whether approval is required to be taken from the shareholders of the Company through a special resolution before a person who has attained the age of 75 years can be appointed? - HELD THAT:- The board of directors can appoint any person as an additional director who shall hold office up to the date of the next Annual General Meeting.
A reading of Section 152(2) and 161(1) of the Companies Act makes it clear that a director can only be appointed by the shareholders of the Company in an Annual General Meeting. However, the board of directors can appoint any person as an additional director who will hold office up to the date of the next Annual General Meeting.
In the instant case, the board of directors appointed Mr. Swaminathan Sivaram as an additional director till the date of the next Annual General Meeting and subject to the approval given by the members of the Company through a special resolution.
From a conjoint reading of Section 149, 152(2), 161(1) of the Companies Act 2013 read with Regulation 17(1A) and 17(1C) of the LODR Regulations makes it apparently clear that the director is required to be appointed by the members of the Company. If a person is appointed as an additional director by the board of directors then his appointment is till the next annual general meeting. Regulation 17(1A) provides that if a person who has attained the age of 75 years then his appointment has to be made by a special resolution passed by the members and Regulation 17(1C) provides that appointment must be approved in the next general meeting or within three months from the date of the appointment whichever is earlier.
In the instant case, the appointment was made on May 16, 2023 by the board of directors which was approved in the next annual general meeting by the member of the Company through a special resolution and that this special resolution was passed on August 10, 2023 within three months from the date of appointment. Thus, from a conjoint reading of Regulation 17(1A) and 17(1C) of the LODR Regulations appointment of an additional director can be made by the board of directors which is required to be approved by the members of the Company through a special resolution and such approval is required to be made within three months.
In Nectar Life Sciences Ltd. vs. SEBI & Ors [2023 (5) TMI 447 - SECURITIES APPELLATE TRIBUNAL, MUMBAI] Tribunal considered the provisions of Regulations 17(1A) with other provisions and held that the word “unless” as depicted in Regulation 17(1A) does not mean “prior approval” nor the requirement of passing a special resolution was a qualificatory condition for appointment as a director.
Thus the contention of the respondent that no person can be appointed as a non-executive independent director unless prior approval of the shareholders was made by a special resolution is erroneous.
Thus Regulation 17(1A) and 17(1C) has to be read harmoniously with the provisions of Section 152(2) and 161(1) of the Companies Act which will make it clear that a person above the age of 75 years can be appointed by the board of directors. Such appointment is required to be approved subsequently within the prescribed period by a special resolution in the next general meeting by the members of the Company which in the instant case was done within the prescribed period. No penalty could have been imposed by the BSE and NSE for violation of Regulation 17(1A) of the LODR Regulations.
- 2023 (11) TMI 67
Share manipulation - unlawful gains through disguised trading - transaction pursuant to the alleged SMS - synchronized trades, self-trades and reversal of trades thereby creating a false appearance of trading and manipulation of the trading volumes in the scrip in question - violation of Section 12A of the SEBI Act r/w Regulation 3 and 4 of the SEBI “PFUTP Regulations” - combined shareholding had triggered the requirement of making an open offer under Regulations 10 and 11 of the SAST Regulations as these 5 noticees were acting in concert and had failed to make an open offer thereby violating the said regulations - orders restraining the appellant from accessing the securities market for a period of four years and from associating himself with any listed Company as a Director
HELD THAT:- The finding that the modus operandi adopted by Arvind Babulal Goyal was to accumulate the shares and thereafter dispose off such shares pursuant to circulation of SMS is patently erroneous and against the material evidence on record.
As upon perusal of the relevant documentary records, we find that the finding that the appellant was trading from the account of Abhay Javlekar is not based on proper appreciation of the documentary evidence. In the first instance, we find that the Know Your Client (“KYC”) document of Abhay Javlekar shows the email ID of Arvind Goyal and mobile number as given - WTM has presumed that the mobile no. is of Arvind Goyal. This number has been denied by the appellant. No effort was made by the investigating officer or by the WTM to find out as to who is the owner of this mobile no. quoted.
Abhay Javlekar admits before the investigating officer that his DIS slip book and cheque book was issued to one Jayesh Solanki which statement is contrary to the stand which he now takes that Arvind Babulal Goyal had taken the DIS slip and cheque book for the purpose of trading.
In our opinion, contradictory stand has been taken by Abhay Javlekar. Abhay Javlekar further admits that many trades were carried out without his knowledge by Pradeep Makhija of Yoke Securities. In the light of the aforesaid glaring evidence which is on record it is difficult to believe that Arvind Babulal Goyal was using Abhay Javlekar’s trading account. Thus, the finding given by the WTM that Arvind Babulal Goyal was using Abhay Javlekar’s account for trading purpose is not based on sound evidence.
Similarly, the finding that Arvind Goyal was involved in manipulative and unfair trade practice by employing self-trades, synchronized and reversal trades thereby creating an artificial volume in the scrip in question is again erroneous and against the evidence in as much as no trades were carried out by Arvind Goyal or Pooja Goyal after the issuance of SMS.
Since no trades were carried out by Arvind Goyal and Pooja Goyal pursuant to the alleged SMS the question of their trades being manipulative and adopting unfair trade practice does not arise. For the same reason, the violation of Regulations 3 and 4 of the PFUTP Regulations cannot be sustained as a result the order of disgorgement towards unlawful gain or loss averted cannot be sustained since we do not find any violation of the PFUTP Regulations.
Order of disgorgement - We are of the opinion that the disgorgement amount has been crystalized under the show cause notice and therefore the said amount could only be considered by the WTM and the WTM could not consider the figures mentioned in the impounding order. We further find that the direction to pay 12% interest per annum on the disgorged amount could not have been issued as we find from a perusal of table 17 that the disgorged amount included the component of interest and, therefore, double interest cannot be charged.
Since we have already held that Arvind Goyal had not traded from the trading accounts of Abhay Javlekar, the allegation that they were acting in concert is thus not proved.
Arvind Babulal Goyal, Pooja Goyal and Abhay Javlekar in their own capacity had acquired the shares. Whether they individually crossed the trigger of 15% / 5% under Regulations 10 and 11 of the SAST Regulations is required to be considered afresh. The AO is required to see whether or not Arvind Babulal Goyal and Pooja Goyal collectively as husband and wife and Abhay Javlekar in his individual capacity had triggered the obligation to make an open offer under Regulations 10 and 11 of the SAST Regulations respectively and if they had triggered the requirement of making an open offer under Regulations 10 and 11 of the SAST Regulations then appropriate penalty commensurate with the acquisition should be levied. Appeal allowed.
- 2023 (11) TMI 66
Front running trading activity by certain entities - fraud’ for the purposes of the PFUTP Regulations - Offence under SEBI - investigation found that the appellant Manish Chaturvedi was the key person who perpetrated the front running activity with the aid and assistance of other noticees including his parents (Laxmi Chaturvedi and Manohar Chaturvedi) - HELD THAT:- WTM and the AO correctly held that the trades of Anandilal Chanda and Anandilal Chanda HUF were based on the specific information obtained by Anandilal Chanda from Madhu Chanda, and more so in the absence of any plausible explanation by the appellants (the Chandas) of the peculiar and unusual manner in which their trades were executed ahead of the trades of the clients of Sharekhan and matched with the trades of the Sterling group.
We further find that the nature, volume and value of trades of Anandilal Chanda and Anandilal Chanda HUF further corroborate the fact that they were carrying out front running activity in order to front run the clients of Sharekhan based on the information that was being passed on by Madhu Chanda to Anandilal Chanda.
WTM order and the AO order have correctly held that due to the trading based on prior information of trades of the aforesaid 7 noticees and of the Sterling group, Madhu Chanda, Anandilal Chanda and Anandilal Chanda HUF defrauded investors in the securities market and caused loss to other investors / deprived the investors from profits, and made unlawful gains in their respective trading accounts.
The front runners viz. Viraj Mercantile, Josh Trading, Pinky Auto, E-Ally, Shree Jaisal and Bhavesh Gadhavi respectively have also admitted their role in lending the trading accounts to Praveen Jain and in fact couched their submissions before this Hon'ble Tribunal as a 'mercy petition' whereby they have restricted their submissions only to reduction of penalty and period of debarment imposed against them. In this regard, it is submitted that lending of trading accounts is an offence of grave nature as the same may lead to misuse of trading accounts for activities in the securities market that may not be for genuine transactions as has happened in the present case and the same amounts to ‘fraud’ for the purposes of the PFUTP Regulations.
Case Laws - FEMA
- 2024 (4) TMI 660
Validity of SAFEMA proceedings - petitioners submitted that the detention order have been quashed - HELD THAT:- As respondent No. 1 does not dispute the fact, that the detention order quashed by the Delhi High Court has attained finality, inasmuch as, the Apex Court has confirmed the quashing of the detention order passed by the Delhi High Court. Also does not dispute that in view of the aforesaid, the attachment of the properties under SAFEMA, will not survive.
ORDER - The impugned order passed by the Competent Authority under Sections 7 and 19 of the SAFEMA as well as the order passed by the ATFP, are quashed and set aside - SAFEMA authorities to release the attachments and handover the monies attached by them to the petitioners, at the earliest and in any event within four weeks from today.
- 2024 (4) TMI 237
Adjudicating Authority under FEMA - Case of the appellants that the show cause notice having been issued by the Special Director, Directorate of Enforcement, he is “the Adjudicating Authority” and the further proceedings are required to be conducted by him alone and not by the Additional Director - Single Judge dismissed the writ petitions holding that the case was transferred from the Special Director to the Additional Director in view of the enhancement of pecuniary jurisdiction and the same is well within the provisions of the Act of 1999.
HELD THAT:- The persona designata is a person who is described as an individual, as opposed to a person ascertained as a member of a class. At the first instance, the show cause notice was issued by the Adjudicating Authority. Adjudicating Authority referred to in Rule 4 of the Rules of 2000 does not refer to a designation of an authority or a person. Rules of 2000 do not suggest that the Adjudicating Authority shall only be the Special Director or the Principal Special Director or the Additional Director. It only says “the Adjudicating Authority” and, as such, by no stretch of imagination it can be inferred that the Adjudicating Authority is a persona designata.
Adjudicating Authorities exercise their jurisdictions and power according to the pecuniary limits as enumerated in the notification appointing them as Adjudicating Authorities. The notification issued by the Central Government empowers the Adjudicating Authority to decide the case within his/her pecuniary limits.
Albeit the notice is issued by the Special Director, who at the relevant and material time was the Adjudicating Authority, subsequently, because of the fresh notification issued on 27.9.2018, the Adjudicating Authority notified by the Central Government is the Additional Director and the Additional Director is empowered to conduct the adjudication proceedings. The inquiry and the adjudication proceedings has to proceed on the basis of the evidence produced. The evidence produced by the person would be considered by the Adjudicating Authority for forming an opinion to proceed further with the show cause notice.
The contention of the appellants that the person who issues the show cause notice under Rule 4(1) of the Rules of 2000 would alone be the Adjudicating Authority till the culmination of the proceedings cannot be comprehended and needs to be rejected.
According to learned Senior Counsel, the same is a saving clause. Referring to the said phraseology, it is submitted that the show cause notice having already been issued to the appellants, the appellants are covered under the said saving clause and, as such, the appellants' case cannot be transferred from the second respondent to the third respondent.
In our opinion, the said arguments does not hold water. The phrase “except as respects things done or omitted to be done before such supersession...” would mean that whatever acts are done till the date of issuance of the notification superseding the earlier notification are saved. The show cause notice issued under Rule 4(1) of the Rules of 2000 before issuance of the said notification dated 27.9.2018 is saved. The further proceedings cannot proceed before the person who was an Adjudicating Authority under the notification already superseded. The inquiry will have to be continued by the Adjudicating Authority as per the notification in vogue and not the Adjudicating Authority under the superseded notification.
We are of the firm view that the learned Single Judge has not committed any error while dismissing the writ petitions.
- 2024 (3) TMI 600
Offence under FEMA/FERA - Levy of penalty - Review petition - proceedings against matter had gone up to the Hon’ble Apex Court and the SLP had been dismissed - taking or refraining from taking action which had the effect of securing receipt of the full export value of the goods exported from the country of final destination had been delayed beyond the prescribed period in contravention of Section 18 (2) of the FERA read with notification dated 01.01.1974 issued by the Central Government - penalty imposed upon the appellants and the proforma respondent vide order dated 14.07.2009 (Annexure A-4), they were directed to make a pre-deposit of 10% of the amount of penalty within a period of 30 days
HELD THAT:- Section 19 of FEMA deals with appeals to the Appellate Tribunal and provides that any person appealing against the order of the Adjudicating Authority levying any penalty shall, while filing the appeal, deposit the amount of such penalty with such authority as may be notified by the Central Government. The proviso lays down that where in any particular case, the Appellate Tribunal is of the opinion that the deposit of such penalty would cause undue hardship, the Appellate Tribunal may dispense with such deposits, subject to such conditions as it may deem fit to impose so as to safeguard the realization of penalty.
Strangely enough, after the dismissal of the SLP, instead of complying with the order and depositing the 10% amount, the appellants and the proforma respondent filed a review petition before the Appellate Tribunal. It was pleaded before the Appellate Tribunal that the appellant company was willing to tender the amount and that in case the order was not reviewed, the delay in depositing the amount be condoned. The review petition was, however, dismissed vide order dated 24.06.2015 (Annexure A-6).
Thereafter, the proforma respondent filed CWP before this Court, which was decided [2017 (8) TMI 1723 - PUNJAB AND HARYANA HIGH COURT] and the condition of pre-deposit of the 10% of the penalty amount was set aside. The stand taken before the Co-ordinate Bench in the writ petition (IBID) was that the proforma respondent had never been the Director of the company and that she was only a Director in M/s Sachdeva and Sons Rice Mills Ltd. which was a separate legal entity. This stand was accepted and the writ petition was allowed. It would be essential to notice that all this while, the matter having gone up to the Apex Court was concealed.
After the aforesaid decision, the appellants filed a review petition before the Appellate Tribunal which was dismissed by way of order dated 06.06.2019, leading to the filing of the present appeal. The Appellate Tribunal dismissed the review petition by observing that repeated petitions were being filed and one such review petition had already been dismissed on 24.06.2015 - Here also, it appears that the Tribunal was not apprised that the matter had already been decided by the Apex Court.
Undeterred by all proceedings which had gone against the appellants, the appellants preferred the present appeal. In the considered opinion of this Court, the present appeal is nothing but a gross abuse of the process of law. The appellants have misled the Courts at every step and despite the matter having been finalized by the Apex Court, the appellants have raked up the same in subsequent petitions. The conduct of the appellants is highly deprecated. Once the matter had gone up to the Hon’ble Apex Court and the SLP had been dismissed, no further proceeding would lie. In the present appeal, the appellants have selectively filed documents and have also made attempts to mislead this court
- 2024 (3) TMI 502
Violation under FERA - export proceeds were not realized - as alleged transactions A1 to A3 have contravened the provisions of Section 18(2) and 18(3) of FERA Act, 1973 for failing to take steps to realize bill value of export proceeds and A2 and A3 abetted A1 in sending said consignments towards exports and the export proceeds were not realized, which is in violation of the said provisions of FERA - According to A1, the signatures on G.R.Forms were forged by A2, as such, she cannot be held responsible for the said exports. Export transactions are apparent and they were done on behalf of A1’s firm with the involvement of A2. A3 as the Customs House Agent had helped in the documentation for exports and received huge amounts for his services.
HELD THAT:- Learned Sessions Judge in appeal found that A2 was using cell phone of A3 and he has made payments to A3 by way of cheques. The said cheques are Exs.P18 to P21 in the name of A3 issued by A1 on behalf of M/s.Sai International. Since the cheques were encashed, the complicity of A3 in the transactions cannot be doubted. Such huge amounts cannot be towards services of a custom house agent.
The fact remains that the acts of A1 to A3 failing to realize the default value of the export proceeds, having availed duty draw back amount from the Customs Authorities in the name of M/s.Sai International is in violation of provisions of FERA.
Both the Courts below have adjudicated the case on the basis of oral and documentary evidence. The grounds raised by the accused cannot form basis to set aside the well reasoned judgment of Courts below and the findings regarding the culpability of the petitioners. Both the Criminal Revision Cases are dismissed.
- 2024 (3) TMI 19
Adjudication made under FEMA Act - Non issuance of show cause notice as well as non giving of an opportunity of being heard within the meaning of Section 16 of the Act r/w Rule 4(1) and 4(3) of the Rules certainly would amount to violation of principles of natural justice - as decided by HC [2023 (12) TMI 914 - MADRAS HIGH COURT] notice as contemplated under the Act as well as the Rules as discussed herein above have been served on these noticees and Merely because at the time of serving the notice, these noticees were not available at the address at Bengaluru would not ipso facto entile them to claim immunity that the notices served on them at the Bengaluru address cannot be construed as a notice within the meaning of Section 16 r/w Rule 4(1) and Rule 14(b) or (c) of the Rules.
HELD THAT:- We are not inclined to interfere with the impugned judgment, but observe that the petitioners have a right to file an appeal under Section 19 of the Foreign Exchange Management Act, 1999.
However, we clarify that the observations and findings recorded in the impugned judgment are tentative and prima facie.The appellate tribunal will be entitled to go into all issues and contentions in accordance with law.
Recording the aforesaid, the special leave petitions are dismissed.Pending application(s), if any, shall stand disposed of.
- 2024 (2) TMI 1257
Violation under FERA - charge u/s. 56 of FERA - Company being in Liquidation - Offences by companies u/s 68 of FERA - As submitted Company being in Liquidation and a Provisional Liquidator having been appointed for it, only the Provisional Liquidator can represent the Company in the proceedings pending before the learned ACMM and not the petitioner herein.
Whether the charge against the Company can be framed through the petitioner? - HELD THAT:- As per Section 305 CrPC Procedure when corporation or registered society is an accused would show that where the accused person is a company, it may appoint a representative for the purpose of the trial, and where such representative appears, any requirement of the CrPC that anything shall be done in the presence of the accused or shall be read or stated or explained to the accused, shall be construed as a requirement that that thing shall be done in the presence of the representative or read or stated or explained to such representative. Sub-Section (4) of Section 305 CrPC states that where the representative of a company does not appear, any such requirement as is referred to in sub-Section (3) of Section 305 CrPC shall not apply.
In the present case, there is no authorization of the petitioner to represent the Company in the trial. In fact, the Company is in liquidation and a Provisional Liquidator already stands appointed for the Company.
In terms of Section 457 of the Companies Act, 1956 (as was then applicable), it is only the Provisional Liquidator or person authorized by the Provisional Liquidator, who could represent the Company in the trial. The petitioner, therefore, cannot be said to be representing the Company. It is another thing to say that he would face the trial in his individual capacity as an accused, but another thing to say that he would also face the trial as a representative of the Company.
Though the above issue was flagged before the learned Trial Court, as is reflected in the Orders the learned Trial Court proceeded to frame the charge against the Company taking the petitioner herein to be representing the Company. The same cannot, therefore, be sustained.
Conclusion & Directions - Trial Court has clearly erred in framing the charge against the Company through the petitioner. The charge against the Company has to be through the Provisional Liquidator appointed for the Company. The impugned order dated 03.08.2007 shall stand modified to this limited extent. It is clarified that the charges framed against the petitioner in his individual capacity have not been interfered with by this Court.
- 2024 (1) TMI 337
Power of search and seizure conferred on the Directorate of Enforcement as per FEMA - validity of seizure/confiscation made by the respondents - seeking a direction to return/release the money, currency illegally confiscated/seized - HELD THAT:- The provisions of Section 132B of the Income Tax Act, 1961 inter alia provides for application of seized and requisitioned assets which provides that the assets seized may be dealt with in the manner provided therein, whereby, the amount of any existing liability and the amount of liability determined on completion of the assessment may be recovered out of such assets, however, such power is, thereafter, governed by two provisos
A bare look at the first proviso would reveal that on an application made for release of the assets while indicating the source of acquisition of such assets, after adjusting the liability, remaining portion of the assets has to be released. The second proviso indicates that such asset or any portion thereof shall be released within a period of 120 days from the date on which the last of the authorizations for search was executed.
The proviso are not without reason inasmuch as the same have been incorporated only with a view that to ensure that determination of liability has to take place expeditiously and in case the same does not take place the assets have to be released.
In the present case, search took place on 14/3/2019 and despite repeated representations made in the year 2019 and 2020, neither the assets have been released nor the representations have been rejected indicating any reason. Further, even when a show cause notice was issued on 16/10/2020 and a response was filed on 19/3/2021, despite passage of over 02 years and 09 months, no determination has taken place.
So far as the source of acquisition is concerned, as required by the first proviso (supra), a specific submission has been made that the books of account have been seized along with currency and everything is recorded therein and, therefore, the source is very much reflected and available with the respondents.
Thus plea raised by respondents pertaining to attempt to challenge the show cause notice is concerned, the adjudication/determination of the show cause notice is well within the powers of the respondents and none prevented them from determining the same expeditiously, however, the respondents have chosen not to make the determination and continue to sit over the various representations made for release of assets, which action cannot be countenanced.
Respondents despite release of the seized currency are free to make the determination of the show cause notice, qua which no relief has been claimed presently.
Action of the respondents in not releasing the seized assets of the petitioners is essentially in violation of Section 132B of the Act, 1961, which is applicable in terms of Section 37(3) of the FEMA, 1999 and, therefore, the inaction of the respondents in this regard cannot be sustained. Petition is partly allowed. The respondents are directed to pass appropriate orders for release of the seized assets pursuant to the search conducted on 14/3/2019 within a period of four weeks from today.
- 2023 (12) TMI 914
Adjudication made under FEMA Act - Non issuance of show cause notice as well as non giving of an opportunity of being heard within the meaning of Section 16 of the Act r/w Rule 4(1) and 4(3) of the Rules certainly would amount to violation of principles of natural justice - HELD THAT:- The mode of service of notice has been clearly demonstrated at Rule 14, i.e., 3 methods, namely 14(a), 14(b) and 14(c). At least Rule 14(b) and 14(c), the notices have been served on these noticees in their last known address or the address where they carried on business last.
Merely because at the time of serving the notice, these noticees were not available at the address at Bengaluru would not ipso facto entile them to claim immunity that the notices served on them at the Bengaluru address cannot be construed as a notice within the meaning of Section 16 r/w Rule 4(1) and Rule 14(b) or (c) of the Rules.
Therefore, this Court have no hesitation to hold that, notice as contemplated under the Act as well as the Rules as discussed herein above have been served on these noticees.
Under Section 42(1), if a person committing a contravention who is a company, every person who at the time of contravention was committed was incharge of and 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 contravention and shall be liable to be proceed against and punished accordingly.
Insofar as the application of Section 42(1) against these noticees are concerned, it was the vehement contention of Mr.Shah, that the two Noticee namely Noticee No.17 and 20 were the nominee Directors, i.e., Non-executive Directors of the first Noticee company on behalf of the fourth Noticee company. When their very appointment as a Director itself is a mere nominee on behalf of the fourth noticee company as a Non-Executive Directors, therefore they are not incharge of and was responsible to the conduct of the business of the company as well as the company.
Therefore assuming that, any contravention that has been made by the first Noticee company, for which these noticees namely Noticee No.17 and 20 cannot be found fault with. Therefore u/s 42(1) no contravention cannot be attributable against these Noticees. Insofar as this contention of the learned counsel appearing for the petitioners are concerned, whether they were the Non-Executive Directors or nominee Directors and during the relevant point of time whether they were in the helm of affairs or the company or not, whether the contravention that has been made by the first Noticee company would amount to the contraventions of the persons like Noticee No.17 and 20 also, for which, they are also to be proceeded against and be punished by imposing penalty or not, are all the matters for adjudication which have been adjudicated and decided by the Adjudicating Authority through the impugned order.
As against the impugned order, an appeal has been provided before the Appellate Tribunal under Section 19 of the Act. Even if there is any failure before the Appellate Tribunal and it goes against the interest of these noticees, again a further appeal is provided under Section 35 of the FEMA Act, where Second Appeal can be preferred before this Court (High Court).
When such a hierarchy of appellate forum is provided under the Act itself, whether the jurisdiction that has been conferred under the Act, especially u/s 35 of the Act to the appellate side of this Court, whether can be taken away by entertaining these writ petition is a question, for which the answer is in the negative. The reason being that, the law which has been held by law courts with regard to the exhaustion of alternative remedy is well settled. Though it is not a hard and fast rule that each and every case, the exhaustion of alternative remedy shall stand in the way in entertaining the case under the extraordinary jurisdiction of this Court under Article 226 of the Constitution, still limitations are there for the High Courts who are empowered to issue prerogative writs under Article 226 of the Constitution of India.
While exercising such extraordinary jurisdiction under Article 226, the High Court on the one side cannot take away or absolve the appellate jurisdiction being exercised by the same High Court under the provisions of the statute which is special in nature.
Here in the case in hand, ultimately the aggrieved party can approach this Court by filing the Second Appeal under Section 35 of the Act, instead, if these writ petitions are entertained and the impugned order of adjudication is challenged and a decision is made on the merits of the issue, certainly that will amount to interfering or transgressing the appellate jurisdiction of this Court, which normally the court would not do in exercising the extraordinary jurisdiction under Article 226 of the Constitution.
We do hold that, absolutely there has been no quarrel on the said principle stated by the learned Judge in the said Judgment. However in the facts of the present case, what is the uncurable defect, that has been committed by the original authority in the present case is the question. As we held above, the notice, i.e., show cause notice had already been served properly under the mode as contemplated under the Act as well as the Rule. Therefore, first of all it cannot be construed that the principles of natural justice has been violated. Assuming that, because of the enquiry notice that has not been served on the noticees as claimed by them, whether any injury is caused by virtue of passing of adjudication order, certainly those issues can be canvassed before the Appellate Tribunal challenging the order of adjudication. Hence, we do not find that any uncurable defect or injustice caused to the noticees at the adjudication stage and therefore, that cannot be stated that such a defect, if any, cannot be cured by the appellate forum.
We have held that, as contemplated under Section 16 r/w Rule 4 and 14 of the Rules, show cause notice since have been served on all the petitioners herein, i.e., Noticee No.4,17 and 20, on the alleged ground of violation of principles of natural justice, these writ petitions cannot be entertained especially in applying the principle as laid down by the Hon’ble Supreme Court in the Radha Krishan Industries case cited supra.
Despite the above, it is open to the petitioners to raise these point of the violation of principles of natural justice before the Appellate Tribunal in case still the petitioners feel that the issue also can be adjudicated as one of the issue before the Appellate Tribunal. That apart, insofar as the merits of the case is concerned, as we held above, we do not want to hold anything on the merits of the case, because that will have a bearing on the cause of the petitioners, when they approach the Tribunal by filing the appeal. WP dismissed. However it is open to the petitioners to approach the Appellate Tribunal by filing appropriate appeal against the impugned order of adjudication u/s 19 of the FEMA Act.
- 2023 (12) TMI 787
Offence under FEMA - petitioner had made foreign remittances to different foreign companies under the guise of payments against the bogus import of services and that these amounts are held outside India by the related foreign companies of the petitioner - petitioner is engaged in the business of providing unsecured short-term loans to its customers/borrowers in India via its Digital Application based platform called the ‘CashBean’ - As contended that the petitioner had engaged a Hong Kong based Company, for procurement of an IP licence and had entered into a Software Licence Agreement with it for providing IP and Digital Lending Software Licence, that is, the CashBean App to the petitioner for the Indian digital micro-lending market.
As alleged petitioner had made foreign remittances to different foreign companies under the guise of payments against the bogus import of services and that these amounts are held outside India by the related foreign companies of the petitioner
HELD THAT:- Section 37A(1) of the Act states that if the Authorised Officer prescribed by the Central Government has reason to believe that any Foreign Exchange, Foreign Security, or any Immovable Property, situated outside India, is suspected to have been held in contravention of Section 4 of the Act, he may, after recording the reasons in writing, by an order, seize value equivalent thereto situated within India.
It need not be emphasised that the power of seizure is of far-reaching consequences and, therefore, the pre-conditions stipulated in Section 37A(1) of the Act must be scrupulously complied with. The ‘reason to believe’ must be based on tangible material, and as held by the Supreme Court in Radha Krishan Industries [2021 (4) TMI 837 - SUPREME COURT] should not be based on the ‘imaginary grounds, wishful thinking, howsoever laudable that may be’
The foreign exchange transactions can be bifurcated into ‘Current Account Transactions’ and ‘Capital Account Transactions’, as defined in Section 2(j) and 2(e) of the Act respectively.
The transactions in question, which have been made the basis of the seizure order, can be categorised as ‘Current Account Transactions’.
As alleged petitioner has contravened the provisions of Section 4 of the Act, inasmuch as it holds foreign exchange outside India through its group entities and such foreign exchange has been transferred to such accounts by way of bogus transactions with its group companies - Violation of Section 10(6) of the Act cannot be alleged merely because, according to the respondents, the commercial arrangement entered into by the declarant under Section 10(5) of the Act does not appear to be commercially prudent to the respondents, but at the same time, the respondents in the present case are using the above assertions in support of their conclusion that the amount of foreign currency has been clandestinely transferred by the petitioner in the name of licence fees and other charges to the foreign entities and are, in fact, being held by the petitioner itself in the bank accounts of such foreign companies which are related to the Opera Group. In this manner, the respondents alleged violation of Section 4 r.w.s.10(6) of the Act and claim to satisfy the condition set out in Section 37A of the Act, which requires the foreign exchange to be held outside India and which is suspected to have been so held in contravention of Section 4 of the Act.
The Impugned Order is to be based merely on ‘reason to believe’ that any foreign exchange situated outside India is suspected to have been held in contravention of Section 4 of the Act by the person against whom the order under Section 37A of the Act is being passed. At the stage of passing the order under Section 37A(3) of the Act, the Competent Authority is not to arrive at a conclusive finding on the above. Though it may be true that the ‘reason to believe’ must also be based on certain tangible material and should be reasonable and not be arbitrary or whimsical, at the same time, the Court in the exercise of its powers under Article 226 of the Constitution of India cannot act as an appellate authority and substitute its own opinion for that of the Competent Authority.
In the present case petitioner has been unable to make out such a case which would warrant an interference of this Court with the Impugned Order. The allegations of the respondents and the defence of the petitioner would need to be tested by the Adjudicatory Authority. On facts, it cannot be said that the action of the respondents is ultra vires the Act or so whimsical as to warrant an interference of this Court at this stage, when the proceedings are pending before the Adjudicatory Authority.
This Court is also cognizant of the fact that pursuant to the Impugned Order, the respondents have also filed a complaint before the Adjudicating Authority. This Court has been informed that substantial hearings have already taken place before the Adjudicating Authority on such complaint, and the same is likely to be disposed of in near future. This adds as a further reason for this Court not to exercise its discretionary powers under Article 226 of the Constitution of India. Petition dismissed.
- 2023 (12) TMI 786
Offence under FEMA - bidding process for the IPL franchise organised by the BCCI - arrangement of the flow of funds by Respondents was made to route the investments through Mauritius as the funds flowing into India from UK was not permissible - maximum penalty imposed - Special Director indicates that although satisfaction in respect of contravention of the provisions of the FEMA has been recorded, there is no explanation or any discussion in respect of the basis on which maximum penalty has been imposed - Tribunal has recorded a that an exorbitant penalty has been imposed upon the individuals arrayed without recording any findings on the specific roles of said individuals - Whether interference by the Tribunal in the order of the Special Director is justified on the touchstone of the doctrine of proportionality?
HELD THAT:- Overall, the Tribunal has found that firstly, no loss has been caused to exchequer; secondly, the remittances have come into India and remained in India. This is not a case where any foreign exchange has gone out of India; thirdly, the remittances were utilised for the purposes for which they were intended and there is not even an allegation of utilization of the money for extraneous purposes; fourthly the entities have not gained any benefit whatsoever and in fact suffered considerable financial detriment as shares having beneficial transferable interest have not been issued against remittances to the said entities for the past 11 years; and fifthly, 'Rajasthan Royals' franchise has participated in the IPL since 2008 with no other allegation of contravening any FEMA provisions or regulations made thereunder. Thus, the Tribunal found no justification in the order passed by the Special Director for imposing maximum penalty on Respondents and contraventions are categorized at best as technical and venial.
In the instant case, there is a finding of fact by the Tribunal and all the relevant facts have been considered in a proper light. The Tribunal has arrived at its conclusion on the basis of evidence to support and after analysing the said evidence. The findings are far from being perverse. Thus, no question of law arises in the case. The question raised by Appellant relating to justification of the reduction of penalty imposed by the Special Director is purely based on facts and no question of law even remotely, arises from the same.
We find that in fact no justification has been recorded by the Special Director to impose maximum penalty as opposed to the Tribunal having considered relevant material has interfered and reduced the penalty. We do not find it proper to transgress the limits of this Court's jurisdiction, preferring the view of the Tribunal or that of the Special Director, one way or the other, in regard to factual appreciation of the finding of facts in the matter.
We find that the Special Director has completely failed to apply the doctrine of proportionality as interpreted and elucidated by the Apex Court in its various decisions, while choosing to impose maximum penalty on Respondents. Having gone through the impugned order, this Court does not find anything perverse in the findings, reasoning and conclusion of the Tribunal. We are in agreement with the finding of the Tribunal that in the absence of any discussion or justification pertaining to the basis for imposing the maximum penalty and juxtaposing this with the alleged acts attributed to each individual, the order of the Special Director is unsustainable. No error in the impugned judgment of the Tribunal.
- 2023 (12) TMI 442
Validity of enquiry / investigation proceedings - taking cognizance of the complaint - Investment in foreign companies - violation of Sec.4 of FEMA - Competent Authority passed orders not to seize the assets of the petitioners - as alleged assessee subscribed to 70.0 lakhs shares in certain M/s. Silver Park, a Singapore based company, registered as per the laws of Singapore, and that he had later transferred those shares to his wife and two children outside India.
Adjudicatory Authority in his show cause notice has indicated that they would be proceeded against u/s 13(2) and enquiry into this is underway - Adjudicating Authority had issued a corrigendum dated 13.03.2023, altering the provision from Sec.13(2) to Sec.13(1A) - Competent Authority constituted under the Act had vide his proceedings dated 03.02.2021, had decided not to seize the assets of the petitioners on a finding that these petitioners did not violate Sec.4 of the Act.
HELD THAT:- Sec. 13 of the Act merely spells out the consequence of the violation of any of the provision of the Act, which includes Sec.4 embargo on a resident Indian, which mandates that no one who is resident in India shall hold foreign exchange or foreign securities outside India. The accusation which the petitioners herein now face is that they, as citizens and residents of India, are holding shares of a foreign company, and thus they have over stepped the line of prohibition under Sec.4. If the scheme of the statute is observed, Sec.13 comes into play only in the eventuality of the Adjudicating Authority entering a finding that the petitioners are guilty of the accusation which is now under enquiry.
Set in the context, the corrigendum does not introduce any new set of allegations midway through an enquiry, but only put the petitioners on notice, that in the eventuality of they being found guilty of violating Sec.4, that the Adjudicating Authority might proceed against them under Sec.13(1A) consequence. Therefore, any alteration of provision regarding the consequence that may visit the petitioners will not, and cannot, prejudice the petitioners visa- vis the nature of accusation that they are now facing. Secondly, a close analysis of Sec.13 shows, it only provides a buffet of options to the Adjudicating Authority to choose from, on the course of action that the Authority may adopt when the stage is set for deciding the penal consequence of entering a finding of guilt. This situation is more akin to a Criminal Court altering a charge under Sec.216 Cr.P.C, without altering the facts constituting the accusation.
The basic elements of principles of natural justice requires that the petitioners are put on notice on the possible course of action in the contemplation of the Adjudicatory Authority, if the petitioners are found guilty of the violation of Sec.4 On facts, the petitioners have entered appearance for a hearing on the notice of corrigendum, and that they have began participating in the proceedings. They are now given an opportunity to raise their objection before the Adjudicatory Authority. In a circumstance such as this what is the prejudice that has visited the petitioners which warrants an interference by this court? None.
Here it is significant to note that in Raj Kumar Shivhare [2010 (4) TMI 432 - SUPREME COURT] has held that FEMA is a self-contained code and remedial fora, the Act as created should not be bye-passed.
Its now time to consider the merit of the arguments of the petitioners' counsel on the effect of the order of the Competent Authority passed under Sec.37-A of Act, releasing the properties of the petitioners from seizure. The reason which has formed the ground for the decision of the Competent Authority is that there are no materials to suggest that any money or foreign exchange has flown out of India to support the purchase of the shares in the Singapore based company.
The fact that the Statute has created two independent authorities, one for adjudicating on the accusation under Sec.16 read with Sec.13, and the other for deciding on the seizure of assets of those who face the accusation, does not enable telescoping the effect of the what latter may do into the power vested in the former. What if the statute had vested both the powers in the same authority? Then the power of seizure will be construed as an interim arrangement in aid of final adjudication. And, the law is settled that the reasoning of an interim order will have zero potency to impact the reasoning for a final decision. The fact, that both these powers are vested in different Authorities, does not make the order passed by the Competent Authority vis-a-vis the seizure of assets any superior as to interfere with the power of adjudication of the Adjudicatory Authority. It is plainly a question on jurisdiction, and it cannot be expanded interpretatively.
Secondly, if the reasoning of the Competent Authority in refusing to seize the property is considered, it focuses essentially on whether payment has been made by the petitioners for the purchase of shares in the Singapore based company, which is forbidden under Sec.3(b) of the Act.
. The way statute has presented Sec.3 and Sec.4, it appears to create independent class of prohibitions. Now, if the reasoning of the Competent Authority is required to be transmitted into the adjudicatory process contemplated under Sec.16, as was canvassed by the petitioners, then it may involve a need to read Sec.3 into Sec.4. The permissibility of reading Sec.3 into Sec.4 requires to be considered independently, and the present stage is too premature for considering it. At any rate it cannot be considered in this proceedings, for, it was held in Raj Kumar Shivhare case [supra] FEMA is a complete Code, and it must be allowed its free space to work itself.
The foregoing discussion leads this Court to the only conclusion: That these petitions are not entertainable. Now it is time to resume the enquiry by the Adjudicating Authority. The petitioners will be entitled to take all such defences which they are entitled to take under law.
- 2023 (11) TMI 480
Validity of order of forfeiture of properties u/s 7 of SAFEMA consequent to revocation of the detention order passed under COFEPOSA - as argued that as detention order passed u/s 3 of the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 [COFEPOSA] has been subsequently revoked/withdrawn as such SAFEMA proceedings would become non est and untenable
HELD THAT:- SAFEMA was enacted to provide for the forfeiture of illegally acquired properties of smugglers and foreign exchange manipulators and for matters connected therewith or incidental thereto as such activities were having a deleterious effect on the national economy. Section 2 provided for the application of the provisions of the Act only to the persons specified in sub-section (2) thereof. According to sub-section (2)(b) every person in respect of whom an order of detention has been made under COFEPOSA, the Act would be applicable subject to four clauses mentioned under the proviso thereto.
A perusal of the above quoted provision makes it clear that apart from the four contingencies given in clauses (i) to (iv) above, every person against whom an order of detention has been passed under COFEPOSA, the provisions of SAFEMA would apply. In the present case, it is an admitted position that an order of detention under COFEPOSA was made against the appellants.
The order of detention had not been revoked on the report of the Advisory Board or before the receipt of the report of Advisory Board or before making a reference to the Advisory Board. Further, it was an order of detention passed under Section 3 of COFEPOSA. Section 9 and Section 12 A of COFEPOSA had no application to the detention order. As such, clause (i) would not be applicable.
Clause (ii) would also not be applicable in as much as neither the detention order was made to which provisions of Section 9 of COFEPOSA would apply nor had it been revoked before the expiry of the time on the basis of review on the report of the Advisory Board.
Further, clause (iii) would also not be applicable as Section 12A of COFEPOSA had no application to the detention order.Lastly, the detention order had not been set aside by the Court of competent jurisdiction. Therefore, clause (iv) would have no application.
To the contrary, in the present case against the detention order, the appellant had made a representation which had been rejected. Thereafter the said order was challenged before the High Court by way of a writ petition which had also been dismissed on merits by a detailed order upholding the detention order.
The revocation however had been made on a statement given on behalf of the Union of India before this Court in order to institute a complaint under the relevant statute. The said revocation is not contemplated under Section 2(2)(b) and its proviso, and, therefore, no benefit can be extended to the appellant(s) on the said count. Therefore, in our view, the impugned judgment does not suffer from any infirmity warranting interference. The appeals lack merit and are, accordingly dismissed.
Dismissal of the complaint and the withdrawal of the penalty under the Act 1962 and Act 1968 - This argument has no relevance to the applicability or non-applicability of the impugned proceedings and forfeiture under SAFEMA. They were independent proceedings under the provisions of the Act 1962 and the Act 1968.
- 2023 (11) TMI 315
Recovery of penalty imposed on the respondent - Validity of insolvency notice issued to the respondent - interpretation of statute - words creditor, debt and debtor as defined under Section 2A and 2B of the Presidency Town Insolvency Act should be given a restricted conventional meaning - term decree or order appearing in Section 9(2) of the Presidency Towns Insolvency Act 1909 would mean only a decree or order of a civil Court or would it include any order for payment of money passed after an adjudicatory process? - maintainability of application under Section 9(5) - Enforcement Directorate is competent to initiate proceedings in insolvency for failure in payment of penalty imposed or not - invocation of Section 9(2) before the decree or order becoming final.
Definition of the terms creditor, debt and debtor - Section 2(a) of the Presidency Towns Insolvency Act 1909 - HELD THAT:- As could be seen from the definitions, both the definitions are inclusive definitions. In REGIONAL DIRECTOR EMPLOYEES' STATE INSURANCE CORPN. VERSUS HIGH LAND COFFEE WORKS OF PFX. SALDANHA & SONS [1991 (7) TMI 367 - SUPREME COURT], the Hon'ble Supreme Court had considered the import of the term 'includes' used in a definition clause, the Hon'ble Supreme Court had held The word 'include' is very generally used in interpretation clauses in order to enlarge the meaning of words or phrases occur- ring in the body of the statute; and when it is so used, these words or phrases must be construed as comprehending, not only such things as they signify according to their natural import but also those things which the interpretation clause declares that they shall include.
The word “includes” as pointed out by the Hon'ble Supreme Court has been used with a intent to impart wider meaning to the terms defined. We should also be alive to the various developments in law since the enactment of the Presidency Towns Insolvency Act, 1909, more than a century ago. Various other Forums, Tribunals and alternative Dispute resolution mechanism have been put in place and those Forums and Tribunals have been empowered to decide legal disputes and have been empowered to pass orders for payment of money. Therefore, at this distant point of time, the meaning of the words appearing in Sections 2(a) and 2(b) of the Presidency Towns Insolvency Act, 1909 should not be restricted and the other creditors not to be deprived from invoking the provisions of the Act - thus, in view of the inclusive definition adopted in Section 2(a) and 2(b) of the Presidency Towns Insolvency Act, 1909, the terms creditor, debt and debtor defined thereunder should be given a wider meaning and it cannot be restricted to a decreed debt or a debt payable under order of a Court.
Whether the term decree or order appearing in Section 9(2) of the Presidency Towns Insolvency Act 1909 would mean only a decree or order of a civil Court or would it include any order for payment of money passed after an adjudicatory process? - HELD THAT:- While considering this definition the Hon'ble Supreme Court after referring to the inclusive definition, held that the judgment in PARAMJIT SINGH PATHEJA VERSUS ICDS LTD. [2006 (10) TMI 419 - SUPREME COURT] being one with regard to legal fiction provided under Section 36 of the Arbitration and Conciliation Act cannot be taken as a precedent for having decided on the effect of various orders that may be passed by various Tribunals or Authorities who are empowered to pass orders imposing financial liability.
Sections 50 and 51 of the Foreign Exchange Regulation Act, 1973 provides for a mechanism for determination of the penalty payable by a person who violates the provisions of the said Act. Section 56 of the said Act enables prosecution and that is without prejudice to the power to levy penalty - Though the word penalty is used in Section 50 it is not a fine levied on the basis of conviction or a penalty as used under Article 20(1) of the Constitution of India. The provisions of Sections 50 and 51 of the Foreign Exchange Regulation Act, 1973 are more in the nature of recovery of loss that is caused to the exchequer because of the violation of the provisions of the Foreign Exchange Regulation Act and the Act also provides for criminal prosecution without prejudice to the power to levy penalty.
The conclusion of the learned Single Judge cannot be agreed upon where he held that an order of the Adjudicating Authority imposing penalty would not create a debt within the meaning of Section 2(b) and the person in whose favour the order is passed could not be creditor within the meaning of Section 2(a), in order to enable them to invoke Section 9(2) of the Presidency Towns Insolvency Act, 1909.
Whether the application under Section 9(5) on the grounds mentioned in it is maintainable? - Whether Section 9(2) can be invoked before the decree or order becoming final? - HELD THAT:- The failure to pay, on being served with the notice under Section 9(2) of the Presidency Towns Insolvency Act, 1909, would amount to an act of insolvency to enable the creditor to initiate insolvency proceeding. This is a reason why the grounds set out in Section 9(5) of the Presidency Towns Insolvency Act, 1909 are very relevant. Section 9(5) of the Presidency Towns Insolvency Act, 1909 extracted above would show that the specific grounds have been set out. The question as to whether a debt existed or not is not a ground that is postulated in the said provision - No doubt, the words “being a decree or order which has become final and the execution thereof has not been stayed” would definitely provide a ground under Section 9(5) of the Presidency Towns Insolvency Act, 1909. The very jurisdiction to issue an insolvency notice would be in doubt, since the appeal in CMA.No.914 of 2001 was pending on the date when the insolvency notice was sought to be issued.
The reference to the provisions of Section 138 of the Negotiable Instruments Act and the judgment of the Hon'ble Supreme Court concluding that a complaint filed under Section 138 of the Negotiable Instruments Act before the expiry of 15 days time could still be sustained, if the drawer had not paid the money due under the cheque within 15 days from the date of receipt of summons cannot be applied to the instant case, inasmuch as it is the non-payment of money ordered to be paid within a particular time that constitutes the act of insolvency - the very act of insolvency would occur only if the debtor fails to pay within 31 days from the date of issuance of a notice, the money payable under an order which has already become final.
The question Whether Section 9(2) can be invoked before the decree or order becoming final is not answered.
Application is dismissed upholding the order of the Hon'ble Single Judge only on the ground that the insolvency notice issued on 28.02.2001 is unsustainable, in view of the fact that it has been issued when the Civil Miscellaneous Appeal was pending and the order has not become final.
- 2023 (10) TMI 1118
Proceedings initiated u/s 56 of FERA - non issue of SCN - Violation of principle of natural justice - HELD THAT:- No complaint can be filed unless the person accused of such offence has been given an opportunity of showing that he has such requisite permission. It is clear that from the facts of this case and also not disputed by Respondent that there is no such show cause notice which was issued and served on the fresh address of the petitioner at Gurugram. That apart, it is pertinent to note that though the notice issued under proviso to Clause (ii) of sub section (2) of Section 61 FERA was not served upon the petitioner, the demand notice dated 28.08.2020 was served upon the correct address. There is no explanation as to how and from where the ED obtained this correct address of the petitioner while issuing the demand notice.
So far as the judgments of State Bank of India [2023 (3) TMI 1205 - SUPREME COURT] and Oil and Natural Gas Corporation Limited [2014 (10) TMI 589 - SUPREME COURT] relied upon are concerned, they laid down the law in respect of what is trite by now that rule of Audi Alteram Partem is fundamental to the policy of Indian law and as such any order by any quasi-judicial authority or any administrative authority entailing drastic civil consequences cannot be sustained except after affording an opportunity to the person who would have to face such civil consequences. There is no doubt in the mind of this Court that there has been clear violation of principles of natural justice in the present case.
Since the respondent therein had failed to comply with the mandatory requirement of Section 61(2) of FERA, the Trial Court in that case clearly had erred in taking cognizance and on that basis, quashed and set aside the impugned order on charge.
This Court respectfully concurs with the observations and the ratio laid down in the case United India Airways Ltd. & Anr. [2018 (4) TMI 421 - DELHI HIGH COURT]
Proceedings being separate and not intertwined in respect of violation u/s 18(2) and (3) and Section 56 of the FERA - This Court is of the considered opinion that the substratum of violation of under Section 18(2) for becoming an offence u/s 56 has to be tested first by issuing show cause notice/opportunity notice so as to permit the petitioner to explain as to whether it got the requisite permission in accordance with law or not.
Since the show cause notice or opportunity notice was never served upon the petitioner, the consequent proceedings initiated u/s 56 FERA cannot be continued. It is for violation of Section 18(2) and Section 18(3) of the FERA that would entail action u/s 56 FERA, but the intervening threshold of issuance of show cause notice/opportunity notice and hearing the notice before passing the decision upon such mandatory application of principles of natural justice alone that the action u/s 56 could, at all, have been initiated. As such the submission of Respondent on that count are found to be untenable.
Present writ petition is allowed and as a consequence thereof, a writ of certiorari is issued quashing the exparte proceedings issued by the ED.
- 2023 (10) TMI 891
Foreign contribution utilized for undesirable purposes - Suspension of certificate - seeking Release/permit the Petitioner to utilize 25% of the total foreign contribution amount/funds held by the Petitioner u/s 13(2)(b) of the Foreign Contribution (Regulation) Act - HELD THAT:- Section 13(2) of the FCRA permits utilization of foreign contribution which is in custody of the person whose certificate has been suspended. There is no occasion to restrict the term “his custody” only to the current account. The amounts which are held in fixed deposits or in government bonds etc. are also unutilized foreign contributions which can be made available to the person whose account has been suspended pending the inquiry u/s 14 of the FCRA.
There is no reason for this Court to disbelieve the statement that the Petitioner has already utilized the figures given by it regarding the expenses to be incurred for its survival pending consideration of the cancellation of registration u/s 14 of the FCRR.
There is nothing in the said Section which restricts that only the amounts lying in the current account can be permitted to be utilized, this Court is inclined to allow the Petitioner to utilize the 25% of the total FCRA funds held it in fixed deposits, government bonds etc. pending consideration of the cancellation of registration under Section 14 of the FCRR.
The outward disbursement of the amounts shall only be for the purpose of carrying out the day-to-day activities and for no other expenses.
A complete statement of the Petitioner’s FCRA account and the amounts deposited in fixed deposits and government bonds etc. along with expenses incurred from the date of suspension shall be submitted to the Respondent periodically.
- 2023 (10) TMI 377
Offence under FEMA - gold bullion of 3773.52 gm. was seized along-with other articles like electronic devices mobile phones, hard disk etc during search operations - HELD THAT:- The provisions of Section 37 of the FEMA read with Sections 132 and 132B of the Act of 1961 including its proviso clauses clearly speak that bullion, jewellery or other valuable article or thing, being stock-in-trade of the business, found as a result of such search shall not be seized but the authorized officer shall make a note or inventory of such stock-in-trade of the business. Further, where the person concerned makes an application to the AO within thirty days from the end of the month in which the asset was seized, for release of asset and the nature and source of acquisition of any such asset is explained, to the satisfaction of the AO, the amount of any existing liability referred to in this clause may be recovered out of such asset and the remaining portion, if any, of the asset may be released with the prior approval of the certain authorities, as mentioned in the provisions, to the person from whose custody the asset was seized.
The proviso clause further provides that such asset or any portion thereof is referred to in the first proviso shall be released within a period of one hundred and twenty days from the date on which the last date of the authorizations for search under Section 132 or for requisition under Section 132A, as the may be, was executed.
Recently in Mangilal Agarwal vs. Deputy Director of Income Tax (Investigation-1) [2023 (8) TMI 1358 - RAJASTHAN HIGH COURT] this Court considering the statement made by the counsel appearing for the respondents upon instructions from the respondent authorities submitted that no order has been passed by the competent authority under section 132B of the Income Tax Act. On the basis of such statement, the Court observed that the goods including gold bullion, which were taken in possession, have to be released and the respondents counsel therein informed that in case the petitioner approaches the competent authority for release of the Gold Bullion, the same shall be accordingly released.
Finally the writ petition was disposed of as having become infructuous in view of the fact that the gold bullion was released to the petitioner therein. The judgments cited by the counsel for the petitioners as a whole speak that the respondent authorities are under an obligation to consider the representation of the petitioners including all the relevant documents submitted along-with the same explaining that the gold bullion seized during the search is stock in trade and are duly accounted in the books of accounts. The aforesaid inaction on the part of respondents in failing to consider and decide the representation of the petitioners in not releasing the seized gold bullion, is illegal and contrary to the provisions of Section 132(1) and 132B of the Act of 1961.
The provision of Section 132B of the Act of 1961 mandates the respondent authorities to take a call on the application/ representation submitted by a person and after consideration such asset or any portion thereof seized during the search of which nature and source of acquisition is explained, the same should have been released within one twenty days.
The respondent authorities are under an obligation to abide by the law in force but in the present case the respondent authorities have failed to act upon the representation submitted by the petitioners on 19.02.2020 which led to miscarriage of justice.
Respondent authorities in view of the mandate of Section 132B were under an obligation to consider the application/ representation of the petitioners submitted on 19.02.2020 showing the credentials and explaining that the gold bullion seized during the search was stock-in-trade and are duly accounted in the books of accounts which were based on the documents enclosed along-with the representation which have been placed on record before this Court also. The respondent authorities have not cared to consider the representation and the documents submitted by the petitioners and to hold that the gold bullion seized during the search was not stock-in-trade. Therefore, this Court on consideration of the documents submitted along-with the petition without there being otherwise decision of the respondent authorities, does not hesitate to hold that the gold bullion seized during the search was stock-in-trade and are duly accounts in the books of accounts and accordingly the petitioners are entitled to retain the same.
Writ petition deserves to be allowed and is therefore allowed. The respondent authorities are directed to return the gold bullion 3773.52 gm. seized by them in the course of search on 15/16.02.2020 forthwith to the petitioners after complying with the requirement provided i.e. making a note of inventory.
- 2023 (10) TMI 292
Stay of demand / waiver of pre-deposit - Levy of penalty - Contravention of Section 18(2) of FERA - failure to realize export proceeds to the tune of US $ 2,03,925/- - Penalties Levied - Tribunal has waived 60% of the total penalty calling upon the appellant to deposit only 40% thereof, for which a period of 30 days was granted - plea for full waiver of mandatory, statutory pre-deposit and non-compliance with an interim order of the Tribunal - HELD THAT:- Tribunal has, in waiving 60% of the penalty, and directing deposit of only 40%, taken note of all contentions of the Appellant, including the hardship projected. In fine, a balance has been struck and the Appellant directed to remit only 40% of the penalty, bearing in mind the interest of the State as well.
Taking a cue from the order in the case of Monotosh Saha [2008 (8) TMI 9 - SUPREME COURT]we made a similar offer to the appellant to remit at least a portion of the amount in order that we may consider directing the Tribunal to hear the appeal. Learned counsel, upon instructions, is categoric that no amount of the penalty can be remitted, as the appellant has absolutely no available resources.
In Nimesh Suchde Prop.Siddharth Polymers, the Delhi High Court [2009 (7) TMI 1328 - DELHI HIGH COURT] on the facts of that case, and taking note of judgment in Monothosh Saha felt, prima facie, that the appellant had satisfied the condition of undue hardship. The question that arose related to the valuation of a consignment for the purpose of levy of import duty.The appellant had sought waiver of pre deposit and that request had been dismissed directing deposit within 30 days, premised upon the finding that the goods imported, were higher in value than disclosed. A Single Judge of the Delhi High Court confirmed the order of the Tribunal as against which, an appeal had been filed.
The Division Bench considered the plea of waiver in light of Sections 8(3) and 8(4) of the FERA, that imposed restrictions on dealing with foreign exchange. The Adjudicating Officer while invoking Sections 8(3) and 8(4) of the FERA was expected to examine the matter independently and arrive at a conclusion in the matter. In that case, the Officer had merely relied on the order passed by the Customs Authority which, in turn, had been based on the premise that the import was without a valid import license. The Bench noted that no independent finding had been rendered by the Authority in regard to the finding of undervaluation rendered by the Customs Officer which was a pre-requisite while invoking Sections 8(3) and 8(4) of the FERA.
Mere reference to an order passed by the Customs Authority would not suffice. It was on the above facts that the Bench concluded that the dismissal of request of dispensation of pre deposit had not been decided in proper light by the Tribunal. The facts of this case are not analogous to the case of Siddharth Polymers and hence do not advance the case of the Appellant.
We do not find any extenuating circumstances warranting interference in the discretionary order passed by the Tribunal. In fact, the Tribunal has itself waived 60% of the penalty based on the plea of financial stringency put forth by the petitioner. We find very little justification to interfere in the discretion exercised by the Tribunal as it not shown to be perverse in any way.
The order of the Tribunal is confirmed and this Civil Miscellaneous Appeal is dismissed. Since the appeal is stated to be listed on 05.10.2023, the appellant is permitted to remit the amount by then, to condition of which the Tribunal will proceed with the appeal.
- 2023 (10) TMI 118
Detention order - whether the inordinate delay of thirty years in the execution of the detention order is explained by the concerned authorities? - detention order indicates that the detaining authority has relied upon the search and seizure proceedings u/s 34 of the Foreign Exchange Act 1973 (“FERA”) - HELD THAT:- The detention under the COFEPOSA Act is for the purpose of preventing persons from acting in any manner prejudicial to the conservation or augmentation of foreign exchange or preventing from smuggling goods, or abetting smuggling goods, or engaging in transporting or concealing or keeping smuggled goods or dealing with the same or harbouring person engaged in such activities. Hence, there must be conduct relevant to the formation of the satisfaction having reasonable nexus with the petitioner's action, which is prejudicial to make an order for detaining him.
The unexplained and inordinate delay of thirty years in the present case does not justify the preventive custody of the petitioner. As held in the case of Shafiq Ahmad [1989 (9) TMI 381 - SUPREME COURT] the satisfaction of the authorities based on conduct must precede action for prevention based on subjective satisfaction.
In the present case, the action based on satisfaction is not commensurate with the situation after thirty years of the detention order. It is not even the case of the authorities that in the last thirty years, the petitioner was engaged in any prejudicial activity or has indulged in any objectionable activity.
Petitioner is right in submitting that there was no material adduced indicating that the petitioner was “absconding” or that the petitioner was evading arrest. Thus, by relying on the principle of law laid down by the Hon’ble Supreme Court in the case of Shafiq Ahmad, we find that the action under Section 7 of the COFEPOSA Act would not be decisive or determinative of the question of whether there was undue delay in serving the order of detention in the present case.
In the facts of this case, no attempts had been made to contact or arrest the petitioner. There is no explanation forthcoming for not taking any action to trace the whereabouts of the petitioner, and also, after the gazette publication in the year 1995 under section 7(1)(b) of the COFEPOSA Act, there is no action taken to serve the detention order.
Thus, there is no merit in the submissions supporting the detention order. We find substance in the ground of challenge raised on behalf of the petitioner that the detaining authority has not meticulously followed the procedure to serve the detention order, making it invalid due to the passage of time.
- 2023 (9) TMI 1102
Offences committed under the repealed FERA Act - prosecution for the offences punishable as committed prior to the repeal of FERA - purposes of the prosecution of offences punishable under Sections 56 and 57 of FERA - HELD THAT:- What is material here is sub-section (4) of Section 49 of FEMA, which provides that subject to the provisions of sub-section (3), all offences committed under the repealed Act shall continue to be governed by the provisions of the repealed Act as if that Act had not been repealed. Sub-section (3) of Section 49 saves the prosecution for the offences punishable under Sections 56 and 57, which have been committed prior to the repeal of FERA, provided the competent Court takes its cognizance within two years from the date of coming into force of FEMA. In view of sub-section (4) of Section 49, for the purposes of the prosecution of offences punishable under Sections 56 and 57 of FERA, by a legal fiction, the provisions of the repealed Act will continue to apply. However, the same will continue to apply only for the purposes of prosecution of the offences which are saved by sub-section (3) of Section 49 of FEMA.
That is how the complaint filed by the Enforcement Officer, duly authorised under clause (ii) of sub-section (2) of Section 61 of FEMA, will continue to be valid, inasmuch as by virtue of the legal fiction incorporated in sub-section (4) of Section 49, the prosecution will continue to be governed by the provisions of FERA as if the same had not been repealed. Therefore, during the sunset period, the authorisation of the Enforcement Officers to file the complaints continues to be valid for the limited purposes of sub-section (3) of Section 49 of FEMA.
If the arguments of the appellants are accepted, the officer nominated under sub-clause (b) of clause (ii) of sub-section (2) of Section 61 of FERA will not be empowered to file complaints for the offences punishable under FERA even within the sunset period of two years. Such interpretation will prevent the Court from taking cognizance after the repeal of FERA on a complaint filed after the repeal of FERA by an officer authorised under sub-clause (b) of clause (ii) of sub-section (2) of Section 61 of FERA. Thus, no complaint can be filed during the sunset period of two years provided in sub-section (3) of Section 49 of FEMA. A Statute cannot be interpreted in such a manner that any provision thereof is rendered otiose. Therefore, we are unable to accept the submissions made by the learned senior counsel appearing for the appellants. Any construction which will defeat the plain intention of the legislature must be rejected. The Court must adopt the interpretation which makes the provisions of a Statute workable.
By FERA, the Foreign Exchange Regulation Act, 1947 (for short, ‘FERA, 1947’) was repealed. The repealing provision is provided under sub-section (1) of Section 81 of FERA. This Court, in the case of M/s. P.V. Mohammad Barmay Sons v. Director of Enforcement [1992 (8) TMI 225 - SUPREME COURT] interpreted clause (a) of sub-section (2) of Section 81 of FERA as held despite repeal of Act 7 of 1947 by operation of Section 6 of the General Clauses Act read with Section 81(2), the penalty incurred by the appellant continued to subsist and the respondents are entitled to institute the proceedings, conduct investigation or enquiry and impose such penalty.
The appeal fails, and the same is, accordingly, dismissed. As the complaint remained stayed from 7th January 2011, we direct the Trial Court to give necessary out of turn priority to the disposal of the complaint which is the subject matter of this appeal.
- 2023 (8) TMI 60
Proceedings under FEMA - receiving foreign exchange in lieu of issuance of equity shares/share warrants - whether no approval has been granted by FIPB? - HELD THAT:- As clearly transpires without any semblance of doubt that the custodian general of foreign exchange is the Reserve Bank of India and any permission with regard to inflow of foreign exchange would definitely have to have the permission of the Reserve Bank of India.
In the case on hand, the permission is for receiving foreign exchange in lieu of issuance of equity shares and for the said purpose, the appropriate authority to grant permission is FIPB. Newbridge, the foreign investor, intended to invest in equity shares in the petitioner-company, with further downstream investment in the sister concern of the petitioner company for which necessary approval was granted by FIPB. In fact, the 1st respondent is also not disputing the approval granted to the petitioners for issuance of equity shares. However, the show cause notice was issued only on account of the petitioner company issuing share warrants, which was later converted into equity shares.
The sequence of events for obtaining approval have already been extracted above. In this regard, the initial approval was granted by FIPB on 27.12.2005. Thereafter, as there was certain errors in the number of equity shares, further approval was solicited, which was also granted by FIPB on 31.01.2006. There is no quarrel that equity shares were issued by the petitioner company in favour of Newbridge. However, for an amount of about Rs.243 Crores, share warrants were issued, which was subsequently converted into equity shares.
It has been the ratio of the Supreme Court even in LIC case [1985 (12) TMI 289 - SUPREME COURT] that RBI is the custodian general of foreign exchange. In the present case, the foreign investment was approved by FIPB.
Communication reveals that FIPB had nowhere said that the issuance of warrants at the point of time when it was issued by the petitioner company required permission. In fact, the order clearly spells out that there was no explicit policy at the material point of time with regard to issuance of warrants. The above stand of FIPB unequivocally speaks to the effect that there was no explicit policy with regard to warrants, which effectively could only mean that there was no prohibition on issuance of warrants.
The further stand of FIPB that no post facto approval is required as the warrants have since been converted into equity shares should not be read in isolation and it should be read in conjunction with the earlier part of the order, where FIPB has intimated that there was no explicit policy with regard to issuance of warrants at the relevant point of time.
Omission to spell out warrants to be included in the term ‘security’ as defined u/s 2 (za) of FEMA cannot be taken mean that issuance of warrants is prohibited. Prohibition should be clearly spelt out either explicitly or even impliedly. There is neither an implicit nor an explicit prohibition. The mere omission of warrants, therefore, cannot be construed that it is a prohibited instrument and, therefore, it is a contravention of Section 6 (3) (b) of FEMA, 1999.
As on the relevant date when the share warrants were issued, there was no regulations bny the 2nd respondent prohibiting the issue of share warrants, which was the only reason the 2nd respondent had directed the petitioners to approach FIPB to obtain post facto approval. If really there were any regulations, or even implied prohibition in the issuance of share warrants, RBI being the custodian general of foreign exchange, would definitely have called upon the explanation of the petitioners.
When the 2nd respondent itself has accepted that there was no contravention of Section 6 (3) (b) of FEMA, 1999, the show cause notice issued by the 1st respondent to the petitioners alleging that there is no permission for issuance of share warrants is not only uncalled for, but is also an act usurping the powers of the 2nd respondent.
When FIPB, the authority, who is vested with power to grant approval has held that no post facto approval is required, interpreting the order in any other fashion, that too by an authority, who is not empowered to decide on the manner in which the said order has been passed, it does not lie in the mouth of the 1st respondent to claim that approval has not been obtained and such a finding is not only perverse, but arbitrary, illegal and unreasonable and, therefore, the impugned order passed as a consequence of the said finding deserves to be interfered with.
This Court is of the considered view that the writ petitions deserve to be allowed by setting aside the orders impugned herein. Accordingly, the impugned order passed by the 1st respondent is set aside and all the writ petitions are allowed. Consequently, connected miscellaneous petitions are closed.
Case Laws - Service Tax
- 2024 (4) TMI 726
Levy of service tax - Intellectual Property Services - license fees and other incidental expenses paid to the Russian Company i.e. M/s. Rosboronexport, Moscow, Russia towards transfer of technical knowhow and technical assistance for manufacture of aircraft & engines - amount received from the Malaysian company i.e. M/s. Setia Technologi SDN, BHD, Malaysia against repair/rectification of MIG Engines - Reverse Charge Mechanism - suppression of facts - Extended period of Limitation.
Service tax on license fees and other incidental expenses paid to the Russian Company i.e. M/s. Rosboronexport, Moscow, Russia towards transfer of technical knowhow and technical assistance for manufacture of aircraft & engines - HELD THAT:- This Tribunal in the case of M/S. SICPA INDIA PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, CUSTOMS & SERVICE TAX, SILIGURI [2017 (9) TMI 1325 - CESTAT KOLKATA] held that technical knowhow provided by a foreign company to an Indian company under a licence for manufacture of goods for consideration of Royalty equal to a percentage of net sale price of the goods, was nowhere registered / patented in India as an IPR service and therefore, the recipient of such service was not liable to pay Service Tax under RCM as IPR service - the transfer of technology by M/s. Rosboron export would not qualify as “intellectual property right” within the meaning of Section 65(55a) of the Act for the various aspects as listed in paragraph 3.1 of this Order and therefore, would not be covered under the definition of “intellectual property service” within the scope of Section 65(55b).
Amount received from the Malaysian company i.e. M/s. Setia Technologi SDN, BHD, Malaysia against repair/rectification of MIG Engines - HELD THAT:- The activity of repairs and maintenance was carried out within the jurisdiction of India and therefore was liable for tax under Section 65(105)(zzg) as “management, maintenance or repair” service and was liable for payment of duty in terms of Rule 3(1)(ii) of the Export of Services Rules, 2005. The Ld. Commissioner vide the impugned order has categorically held that the provision of service having took place in India, there is a breach of Rule 6A of the Service Tax Rules, 1994 and Rule 3(1)(ii) of the Export of Services Rules, 2005. To this extent, the findings of the Ld. Commissioner on the aspect agreed upon.
Extended period of limitation - Suppression of facts or not - HELD THAT:- There are no merit to impute the charge of suppression to a government organization owned by the Ministry of Defence, for the non-payment of duty / tax with intent to evade the same by suppressing the material information, more so when it is depicted inappropriately and construed accordingly - the demand for the extended period cannot be sustained as there is nothing on record to establish mala-fides on the part of the appellant - the extended period of limitation is not invokable in the circumstances.
The impugned order is set aside - appeal allowed.
- 2024 (4) TMI 725
Point of Taxation rules - service received from associate enterprises on the taxable value as determined in terms of section 67 of the Finance Act, 1994 - demand made in the present case on the basis of certain provisional entries made by the appellant in their book of accounts, as expenses towards the payments to be made to their associate enterprises, for the services of professionals visiting them - Extended period of Limitation - Penalty - HELD THAT:- By not paying the service tax at the time of making the expense entries in their book of accounts, appellant has failed to pay the service tax at the relevant time, as per Rule 6 (1) of the Service Tax Rules, 1994. Even if it is concluded that appellant have correctly discharged the service tax liability subsequently they are required to pay interest on the delayed payment of the tax as per Section 75 of the Finance Act, 1994.
Extended period of Limitation - HELD THAT:- The submissions made by the appellant to effect that the demand is barred by limitation for the reason that the audit was conducted on various dates between 24.09.2012 to 06.05.2013, so the fact was in the knowledge of the department within the normal limitation period and the show cause has been issued only on 05.10.2015, not agreed upon. Proviso to Section 73 (1) of the Finance Act,1994 provides that extended period of limitation can be invoked if the necessary ingredients as prescribed therein exist. The fact that appellant was making the expense entries in the book of accounts, in case of the receipt of services from the associated enterprises was well in knowledge of the appellant and the provisions of the Section 67 read with Rule 6(1) and Rule 7 of the Point of Taxation Rules, 2011 clearly laid down the manner in which the service tax liability was to be discharged in respect of these entries. By not following the said procedure appellant have sought to short pay the service tax, by suppressing the fact of the said entries in their book of accounts with intent to evade payment of tax at time and in the manner prescribed as per law.
In case of COMMISSIONER OF C. EX., SURAT-I VERSUS NEMINATH FABRICS PVT. LTD. [2010 (4) TMI 631 - GUJARAT HIGH COURT] Hon’ble Gujarat High Court has held The language employed in the proviso to sub-section (1) of Section 11A, is, clear and unambiguous and makes it abundantly clear that moment there is non-levy or short levy etc. of central excise duty with intention to evade payment of duty for any of the reasons specified thereunder, the proviso would come into operation and the period of limitation would stand extended from one year to five years. This is the only requirement of the provision. Once it is found that the ingredients of the proviso are satisfied, all that has to be seen as to what is the relevant date and as to whether the show cause notice has been served within a period of five years therefrom.
Penalty - HELD THAT:- As the invocation of the extended period of limitation as per Section 73 of the Finance Act, 1994 is upheld, the penalty as per Section 78 becomes mandatory as has been held by Hon’ble Apex Court in case of UNION OF INDIA VERSUS M/S RAJASTHAN SPINNING & WEAVING MILLS AND COMMISSIONER OF CUSTOMS AND CENTRAL EXCISE VERSUS M/S. LANCO INDUSTRIES LTD. [2009 (5) TMI 15 - SUPREME COURT].
For re-computation of the demand of tax and interest, and the penalties imposable the matter need to be remanded back to the original authority - appeal allowed in part.
- 2024 (4) TMI 724
Levy of service tax - Business Auxiliary Services (BAS) - expenses reimbursed to the foreign distributors under reverse charge mechanism - Extended period of limitation - HELD THAT:- Hon’ble Apex Court held in the case of COLLECTOR OF CENTRAL EXCISE, CALCUTTA VERSUS PRADYUMNA STEEL LTD. [1996 (1) TMI 127 - SUPREME COURT] that mere mention of wrong provision of law, when the power exercised is available even though under a different provision is by itself not sufficient to invalidate the exercise of that power. It is found that the show-cause notice was issued alleging that the appellants have not paid the service tax for the various services received by them from their overseas dealers/ distributors and that such services fall under “Business Auxiliary Service”.
It is found that the show-cause notice mentions at Para 7 that the appellants are incurred an expense on account of advertisement for sale promotion which appear to be covered under BAS. Thus, it is seen that in the instant case, the purport of the show-cause notice is to put the appellants on notice that they have received services from their foreign dealers and have not discharged due service tax under the BAS.
Whether the appellants have received services under “Business Auxiliary Services” from their overseas distributor/ dealers and if so whether they are liable to discharge duty on Reverse Charge Mechanism? - HELD THAT:- It is pertinent to note that though, the free repairs during the warranty period are undertaken by the dealer, the customer perceives that the same are provided by the manufacturer of the car. The dealers/ distributors are always associated with the manufacturer. To that extent, it is understood that the dealer/ distributor is performing his work on behalf of or as an agent of the manufacturer in this case, the appellants. Similarly, in advertising, promotion of good-will, overseeing the network of dealers/ distributors, business interest of the manufacturer of the motors is taken care even though the activity aids for his own business promotion. Therefore, the submission of the appellant not agreed upon that the relationship between the appellant and the overseas dealers is on a principal-to-principal basis. As long as the overseas dealers/ distributors are rendering some service on behalf of/ on account of/ in connection with the business of the appellant, they take the role of the manufacturer/ appellant. The overseas dealer/ distributor is receiving a consideration for this purpose. Therefore, there is a force in the argument of the Department that the services rendered are in the nature of BAS.
The Chennai Bench of the Tribunal has gone into an identical issue concerning a similarly placed manufacturer of motor cars, i.e M/S. HYUNDAI MOTOR INDIA PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE & SERVICE TAX [2019 (6) TMI 856 - CESTAT CHENNAI], having similar arrangements with the overseas dealers has decided that the overseas dealers/ distributors are rendering services classifiable under BAS to the appellants therein.
It is found that as contended by the learned Authorized Representative for the Department, the exemption under Notification No.12/2003-ST dated 20.06.2003 is admissible only when goods are sold during the course of provision of service; there is documentary evidence in relation to the sale of said goods and if the appellants have not availed CENVAT credit - in the instant case, the gross value of taxable service for the purpose of computation of service tax shall be the gross amount paid by the recipient of such service.
Time Limitation - suppression of facts - HELD THAT:- It is found no case has been made by the Department to show any positive act with an intent to evade payment of duty. It is found that it was held in the case of SUNSHINE STEEL INDUSTRIES VERSUS COMMISSIONER OF CGST, CUSTOMS & CENTRAL EXCISE JODHPUR (RAJ.) [2023 (1) TMI 638 - CESTAT NEW DELHI] upheld by Supreme Court in COMMISSIONER OF CGST CUSTOMS AND CENTRAL EXCISE VERSUS SUNSHINE STEEL INDUSTRIES [2023 (7) TMI 479 - SC ORDER] that extended period cannot be invoked for a demand raised on the basis of audit. Therefore, the extended period cannot be invoked and the demand needs to be sustained only for the normal period. Looking into this background, the imposition of penalties is also not justified in the instant case.
The impugned order is modified to the extent of confirming the demand for the normal period; penalties imposed are set aside; the appeal is partially allowed.
- 2024 (4) TMI 723
Recovery of service tax alongwith interest and penalties - Business Auxiliary Service - Business Support Service - agreements with M/s Rathipriya Trading Pvt. Ltd. [presently known as M/s Indiawin Sports Pvt. Ltd., Mumbai (ISPL)] for playing in Indian Premiere League - HELD THAT:- The Tribunal in its judgment, in the case of SOURAV GANGULY VERSUS COMMISSIONER OF SERVICE TAX, KOLKATA (NOW COMMISSIONER OF CENTRAL GOODS & SERVICE TAX & CENTRAL EXCISE, KOLKATA SOUTH) [2020 (12) TMI 534 - CESTAT KOLKATA] has relied on the case of CST, DELHI VERSUS MS. SHRIYA SARAN [2014 (7) TMI 78 - CESTAT NEW DELHI] and the Hon’ble Calcutta High Court’s decision in the case of COMMISSIONER OF SERVICE TAX AND ANR. VERSUS SOURAV GANGULY AND ORS. [2019 (10) TMI 221 - CALCUTTA HIGH COURT] and this judgment has been followed in many other cases.
The Hon’ble High Court of Calcutta held that the remuneration received by the petitioner from the IPL franchisee could not be taxed under business support service.
The issue is no longer res integra - Appeal allowed.
- 2024 (4) TMI 685
Condonation of delay of 1776 days in filing the Civil Appeal - Rectification of mistake - mistake apparent of the face of record or not - Refund claim - export of services or not - it was held by High Court that The Tribunal’s order rejecting application of the petitioner to rectify mistake apparent from record in its order cannot be faulted - HELD THAT:- Issue notice on the application for condonation of delay as well as on the Special Leave Petition and the Civil Appeal.
- 2024 (4) TMI 684
Maintainability of petition - availability of alternate remedy before the appellate Commissioner under Section 85 of the Finance Act, 1994 - marginal delay in filing the present Writ Petition - HELD THAT:- Since the petitioner has an alternate remedy before the appellate Commissioner under Section 85 of the Finance Act, 1994, I am inclined to dispose of this Writ Petition by giving liberty to the petitioner to file statutory appeal before the appellate Commissioner within a period of 30 days from the date of receipt of a copy of this order subject to the petitioner depositing 20% of the disputed tax considering the delay involved. If such an appeal is filed by the petitioner within 30 days from the date of receipt of a copy of this order together with pre-deposit of 20% i.e., 10% over and above what is contemplated under Section 35-F of the Central Excise Act, 1944, the appeal shall be entertained and disposed by the Commissioner on merits and in accordance with law.
Since the Deputy Commissioner of GST & Central Excise, Madurai I Division, has been arrayed as the sole respondent in this Writ Petition, the Commissioner of CGST & Central Excise, Madurai – I Division, No.5, V.P. Rathinasamy Nadar Road, Bibikulam, Madurai – 625 002, is suo motu impleaded as second respondent in the Writ Petition.
Petition disposed off.
- 2024 (4) TMI 683
Scope of SCN - Classification of service - Club or Association services or not - services of licencing the copyrights in musical works to its members who had only paid subscription fee of meager amount and licensing of copyright in musical work - HELD THAT:- The Show-cause cum demand notice lacks clarity about the recipient of the service and the nature of services provided to it allegedly by the appellant.
The nature of service provided by the appellant was stated to be administration of copyrights owned by its members and it is in the nature of facilities or advantages extended to its members. However, going by the factual background, it is noticed that appellant is a company and not a Society registered under Society Registration Act but it collects monthly subscription fee from its members. Apart from this amount no other consideration flows from the members/ copyright owners to the appellant and there is no denial of the fact that entire collection from the membership had never exceeded the threshold prescribed for registration of a Company under Service Tax.
Clause 29A of Article 366 of Constitution of India defines all services associated with sale of goods or lease of the kind as deemed sale and as because Intellectual Property, which in the present case is copyright and other related rights in the nature of performance, play etc. that is not in tangible form, the same may not be included under the definition of services under Section 65B (44 read with Section 66E) but the very fact that Section 65 (55b) that defines “Intellectual Property Services” expressly excludes copyright from the category of Intellectual Property services and there is also no demand against such licence fee/ royalty collected by the appellant from the customers/ users, the order of the Commissioner is unsustainable in both law and facts. Further demand being confirmed against administrative expenditure that was deducted from the membership fee and royalty/ licence fee by a non-profit organization namely assesse, consideration should also be treated as ‘Nil’ for the purpose of taxation.
The order passed by the Commissioner of Service Tax-VI, Mumbai is hereby set aside - Appeal allowed.
- 2024 (4) TMI 682
Time limitation - Levy of service tax - Manpower Supply Service - secondment of employees by the Appellant to its associated Foreign Counterpart at Germany on reverse charge mechanism - suppression of facts or not - HELD THAT:- In the present case it could be noticed that show-cause notice was issued on 16.10.2015 up to the end of financial year 2013-2014 during the relevant period and in view of clear provision contained in Section 73(1) read with 73(6), the normal period for making demand through show-cause notice was 18 months from the relevant date and if any fraud, collusion, wilful misstatement, suppression of facts, contravention of any of the provisions of this Chapter or the Rules made thereunder with intent to evade payment of Service Tax is noticed in view of proviso to Section 73(1), Central Excise Officer can served notice for demand that could be extended up to 5 years. This being the statutory provision, the notice of demand being signed on 16.10.2015 and dispatched thereafter cannot be considered to have been sent within 18 months of the end of financial years, up to which demand is made i.e. up to 31st March 2014 - the show-cause notice is not issued in conformity to the law and, therefore, it was required to be quashed before initiation of adjudication proceeding.
Appellant having filed its return for the said period on 25.10.2013, in view of clear provision contained in Section 73(6)(i)(a) wherein it has been mentioned that for the purpose of determination of “relevant date”, periodical return filed on the date showing particulars of Service Tax paid during the period to which return relates would be taken for the purpose of calculation of period of limitation of 18 months, which would end on 25.01.2015 the entire demand is barred by limitation.
The contention made by the Appellant that this appeal is hopelessly barred by the period of limitation, agreed upon, as the entire proceeding is carried out in gross violation of the position of law and deviation in any form from the statutory provision is impermissible.
The order passed by the Principal Commissioner of Central Excise & Service Tax, Pune-I is hereby set aside - Appeal allowed.
- 2024 (4) TMI 681
Non-payment of service tax - commercial and industrial construction service - rendering of service even before registering with the department on 11.6.2007, but it had not paid any service tax on such services - non-payment of service tax on some projects/contracts on the ground that they were charitable/educational hospitals or projects - non-payment of service tax on certain residential construction on the ground that they were residential units - collection of some amounts as ‘service tax’ in some of the running bills on these projects, but did not deposit these amounts in the exchequer - non-inclusion of value of materials supplied free of cost by its clients in the value of taxable services - non-payment of service tax at all in respect of the services rendered by it from April 2009 to June 2010.
Demand for the services provided prior to 1.6.2007 are concerned, the demand is under the head ‘commercial and industrial construction service’ - HELD THAT:- During this period, the appellant was not registered with the service tax. From 1.6.2007, the appellant is registered under the head ‘Works Contract Service’ and paid service tax on the service. There is no dispute that the nature of the service was the same both before and after 01.06.2007 - ‘Works Contract Service’ is a contract which involves rendering of service along with transfer or deemed transfer of property in goods. For instance, if a builder constructs a building under a contract including the cost of materials, not only does he render the service but he also transfers the property in the material used such as bricks, steel, cement, etc. while rendering the service. Such services are distinct from contracts for sale of goods or contracts for rendering services and are known to commerce as a separate species of contracts. Such contracts became chargeable to service tax as ‘works contracts service’ w.e.f 1.6.2007 and there was no charge of service tax on such services prior to 01.06.2007 as held by the Supreme Court in COMMISSIONER, CENTRAL EXCISE & CUSTOMS VERSUS M/S LARSEN & TOUBRO LTD. AND OTHERS [2015 (8) TMI 749 - SUPREME COURT] - the demand of service tax on works contracts executed prior to 1.6.2007 under the head ‘commercial or industrial construction service’ cannot be sustained.
Demand for the period after 1.6.2007 - suppression of facts or not - time limitation - HELD THAT:- The appellant cannot claim exemption from service tax on the ground that its client was exempted under some provision of income tax. If it wants to claim exemption from service tax, it is its responsibility to show how it was covered by an exemption notification or exemption clause under the provisions of the service tax. Similarly, if it wants to claim exemption from income tax, it has to show how it is exempted under the laws of income tax. However, it is found from Annexure B(1) of the SCN that the amounts which it had received from these three organisations were received clearly beyond the normal period of limitation and hence any demand on this count is hit by limitation.
Construction of residential complexes - HELD THAT:- It is found that the demand for the normal period of limitation was not under “construction of residential complexes” but only under the head of ‘Works Contract Service’ and hence this submission is also irrelevant.
Composition scheme - demand raised on the gross amounts received without any abatement towards the value of the goods - HELD THAT:- The reason for not allowing abatement as recorded in paragraphs 44 and 45 of the impugned order is that the appellant had not opted for payment of service tax under Works Contract Composition scheme. In this factual matrix, when it is undisputed that goods were used in execution of the contracts and the value of the goods is not available, it will not be open to the department to charge service tax on the entire gross amounts received including the value of the good transferred. Service tax cannot be charged on the value of the goods sold or otherwise transferred as a part of the contract. It is found that even if the appellant had not opted for the composition scheme by submitting a letter in writing as required during the relevant period, if it is otherwise eligible for the benefit of the composition, it cannot be denied for the technical fault of not submitting a letter within time. Accordingly, the demand for the normal period of limitation under this head is confirmed allowing abatement under the Composition scheme.
The last submission on merits of the case is that the impugned order confirmed demands on the value of the free materials supplied by the clients of the appellant - HELD THAT:- It is found from the SCN that demands have been made on this account. It has been decided by the larger bench of this Tribunal in M/S BHAYANA BUILDERS (P) LTD. & OTHERS VERSUS CST, DELHI & OTHERS [2013 (9) TMI 294 - CESTAT NEW DELHI-LB] that the value of supplies made free of cost by the service recipient cannot be included in the taxable value for calculating service tax. This decision was upheld by the Supreme Court in COMMISSIONER OF SERVICE TAX ETC. VERSUS M/S. BHAYANA BUILDERS (P) LTD. ETC. [2018 (2) TMI 1325 - SUPREME COURT]. Therefore, the demand on this account needs to be set aside.
Appeal allowed in part.
- 2024 (4) TMI 680
Levy of service tax - works contract service - construction of a new building or a civil structure or a part thereof or a pipeline primarily for the purpose of commerce and industry - Boundary wall is a part of the building or is it a civil structure or a part of the building or civil structure? - Extended period of limitation - penalties - HELD THAT:- Admittedly, service tax was payable on the construction of a new building or a civil structure or a part thereof. The appellant’s contention is that boundary wall is not a part of the building nor is it a civil structure. This submission cannot be accepted. A boundary wall is invariably a part of the building or a civil structure. It needs to be noted that service tax was payable not only when the entire building or a civil structure is built but it was also payable when a part of it is built - the submission of the appellant that the boundary wall is not a part of the building and is also not a civil structure, cannot be agreed upon. Therefore, regarding the demand on merits, the issue is decided against appellant.
Extended period of Limitation - Suppression of facts or not - HELD THAT:- During investigation itself, the appellant agreed and paid the service tax. Had the appellant been discharging its obligations and filing ST 3 returns, it would have been the responsibility of the department to scrutinise them with the records and raise a demand. The appellant in this case neither disclosed the rendering of this service nor paid service tax on it nor filed the returns. This qualifies as suppression of facts with intent to evade payment. Therefore, the extended period of limitation was correctly invoked in this case.
Imposition of penalties under section 77 and 78 of the Finance Act - HELD THAT:- Whenever any service tax is not paid by reason of fraud or collusion or wilful misstatement or suppression of facts or violation of the provisions of the Act or Rules with an intent to evade payment of service tax, penalty under section 78 can be imposed. In other words, the same elements which make the extended period of limitation invokable also make the assessee liable to penalty under section 78 - Since it is already held against the appellant on the question of extended period of limitation, there are no reason to take a different view with respect to penalty under section 78. Section 77 is a general penalty for offences. Since the appellant had failed to pay self assess service tax correctly and pay it and file returns, we find the penalty of Rs. 10,000 on the appellant under section 77 is also just and fair.
The impugned order is upheld - Appeal dismissed.
- 2024 (4) TMI 679
Classification of service - Business Support Service or Renting of immovable property - appellant is an operator of individual or multiple cinemas screen at multiple complexes as owner/lessee having ownership/lease hold rights - HELD THAT:- There is no service as such which has been provided by the appellant to the distributors. The appellant has agreed for exhibiting the distributor’s film without any interference of the said distributors. The distributors had actually granted licence to exhibit the theatrical exihibition rights of the film in the lincesed theatre.
As far as the time and number of shows are concerned, the distributor has agreed for getting share in the Revenue collected from the sale of the tickets that to within 10 days of completion of every week to which it pertains. The agreement clarifies that it is the transfer of copyright by the distributor in favour of the appellant to the exclusion of all including the owner of the said copyright.
The issue is otherwise no more res-integra. Various decisions have clarified that Revenue sharing arrangement in itself does not necessarily imply provision of service, unless service provider and service recipient relationship is established - reliance can be placed in DELHI INTERNATIONAL AIRPORT P. LTD. & MUMBAI INTERNATIONAL AIRPORT P. LTD. VERSUS UNION OF INDIA & ORS. [2017 (2) TMI 775 - DELHI HIGH COURT] - there is otherwise nothing on record to establish the said relationship.
There are no reason to differ with the findings arrived at in the Order-in-Appeal, the same is accordingly upheld - appeal of Revenue dismissed.
- 2024 (4) TMI 678
Classification of service - Business Auxiliary Services or not - process of washing of coal - period 16.06.2005 to 31.03.2007 - HELD THAT:- The decision of the Tribunal in ARYAN ENERGY (P) LTD. VERSUS COMMR. OF CUS. & C. EX., HYDERABAD-I [2008 (5) TMI 248 - CESTAT BANGALORE], M/S SPECTRUM COAL AND POWER LTD VERSUS COMMISSIONER OF CENTRAL EXCISE, RAIPUR [2012 (9) TMI 24 - CESTAT, NEW DELHI] and M/S. ARYAN COAL BENEFICATIONS PVT. LTD. VERSUS COMMISSIONER OF SERVICE TAX NEW DELHI [2012 (9) TMI 205 - CESTAT, NEW DELHI] have consistently held that the activity of beneficiation of coal by the assessee is part of mining activity and, therefore, would be liable to service tax only w.e.f. 1.6.2007 and once it is established that the activity is mining, it cannot be taxed under the “Business Auxiliary Service” for the period prior to 1.6.2007.
It is found that it is settled by the judicial pronouncements that the activity of beneficiation/washing of coal is a taxable service in relation to mining of minerals only w.e.f. 1.6.2007 and, therefore, the Commissioner rightly decided that no demand can be made by the Department for the period prior to 01.06.2007 under the category of “Business Auxiliary Service”.
There are no reasons to differ from the settled law and which is squarely applicable in the facts of the present case - The impugned order is accordingly affirmed - appeal filed by the Revenue stands dismissed.
- 2024 (4) TMI 677
Classification of services - mining services or not - hiring pay loader and tipper/dumper for loading - HELD THAT:- The findings of Bombay High Court in the case of INDIAN NATIONAL SHIPOWNERS' ASSOCIATION VERSUS UNION OF INDIA [2009 (3) TMI 29 - BOMBAY HIGH COURT] have been quoted by the Adjudicating Authority and it has been held that the transportation of coal as performed by the Assessee herein on tippers/trucks upto siding has no direct/indirect nor any proximate relation with the mining of coal (mining activity).
The issue is no more res-integra, the authorities have rightly followed the judicial discipline while applying the ratio of the Hon’ble Supreme Court’s decision in COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, RAIPUR VERSUS SINGH TRANSPORTERS [2017 (7) TMI 494 - SUPREME COURT]. Hence, there are no infirmity in the order under challenge.
The order under challenge is hereby upheld - the appeal filed by the department is dismissed.
- 2024 (4) TMI 676
Recovery of service tax alongwith interest and penalty - Business Auxiliary Service - the facts and the law and binding judicial precedents on the identical issue not properly appreciated - violation of principles of natural justice - Extended period of limitation - HELD THAT:- The identical issue has been considered by the Tribunal in the case of M/S S.R. MEDICAL AGENCIES VERSUS COMMISSIONER OF CENTRAL EXCISE, CHANDIGARH-II [2023 (8) TMI 1150 - CESTAT CHANDIGARH] and this Tribunal after considering all the submissions of both the parties has held This issue has been considered by various benches of the Tribunal and has consistently been held that the assessee is not liable to pay service tax under the category of ‘Business Auxiliary Service’.
The impugned order is not sustainable in law and therefore, the same is set aside - appeal allowed.
- 2024 (4) TMI 675
Levy of penalty upon both the appellants, being the Director/ Authorized Signatory in terms of Section 78A of Finance Act, 1994 - benefit of Section 124 (1) (b) of SVLDRS - HELD THAT:- Apparently and admittedly, it was the main co-noticee i.e Wisdom Guards Pvt. Ltd. who has been issued the discharge certificate (SVLDRS Form No. IV) under the SVLDRS, Scheme, 2019. There are no such provision in the scheme which may extend immunity to the other co-noticees because of the discharge certificate in favour of the one of the co-noticee. Hence, the said contentions of the appellant not agreed upon.
Coming to the another aspect of Section 78A of Finance Act to have been introduced only w.e.f. 10.05.2013, we hold, based upon the settled position of law, that all provisions of statute have to be given prospective effect unless and until, they are expressly made to apply retrospectively. Section 78A of the Act is perused. There is nothing in the Section to reflect that the section has to be applied retrospectively - the section can be invoked w.e.f. 10.05.2013. The period involved in the present appeal is 2011-2012 to 2013-2014. Hence, it is clear that the periods is pre as well as post the insertion of Section 78A in the impugned Act - there are no reason to extend any benefit of said provisions to the appellant.
Appeal allowed in part.
- 2024 (4) TMI 674
CENVAT Credit - non-payment of amount equivalent to 6% on the value of exempted services as required under Rule 6 (3) (i) of Cenvat Credit Rules, 2004 - HELD THAT:- In the present case, it is observed that, undisputedly entire Cenvat credit taken/availed by the appellant during the period under dispute, whether in respect of taxable service or exempted service, have been deposited along with interest well before the issuance of the show cause notices and got appropriated by the adjudicating authorities vide the impugned order. The law in this respect is settled that if credit originally availed is reversed subsequently it would amount to as if not credit has been awaited.
Support drawn from the decision of Hon’ble Supreme Court in the case of CHANDRAPUR MAGNET WIRES (P) LTD. VERSUS COLLECTOR OF C. EXCISE, NAGPUR [1995 (12) TMI 72 - SUPREME COURT]. It is observed that the Commissioner (Appeals) has considered the decision of this Tribunal as well as of Hon’ble Madras High Court which are based on the aforesaid decision of Hon’ble Supreme Court.
There is no infirmity in the order under challenge, the same is accordingly upheld - Appeal of Revenue is dismissed.
- 2024 (4) TMI 673
Recovery of short paid service tax alongwith interest and penalty - Valuation of Security Agency Service - inclusion of various charges like, accommodation, vehicle running and maintenance, Telephone, Stationary and other expenses, in the gross value for calculation of service tax liability - HELD THAT:- The principal Bench of the Tribunal recently in the case of SR. COMMANDANT CENTRAL INDUSTRIAL SECURITY FORCE (BHEL UNIT) BHARAT HEAVY ELECTRICALS LTD. VERSUS COMMISSIONER OF CUSTOMS, & CENTRAL EXCISE [2023 (4) TMI 608 - CESTAT NEW DELHI] while relying upon the another decision of the Tribunal in the case of M/S BHARAT COKING COAL LTD. VERSUS COMMR. OF CENTRAL EXCISE & S. TAX, DHANBAD [2021 (9) TMI 23 - CESTAT KOLKATA] held that Allahabad Bench of the Tribunal in the case of CENTRAL INDUSTRIAL SECURITY FORCE VERSUS COMMISSIONER OF CUSTOMS, C.E. & S.T., ALLAHABAD [2019 (1) TMI 1661 - CESTAT ALLAHABAD], has already settled the issue in favour of the appellant to hold that expenses incurred towards medical Services, vehicles, expenditure on Dog Squad, stationery expenses, telephone charges, expenditure incurred by the service recipient for accommodation provided to CISF etc are not includible.
There are no reason to differ from those findings. Findings otherwise stands acknowledged by the Department itself. Resultantly, the order under challenge has been wrongly confirmed the impugned demand in total ignorance of the above said decisions - the impugned order set aside - appeal allowed.
- 2024 (4) TMI 628
Valuation of service - works contract service - inclusion of cost of material (for which separate bill raised) in providing the service - inclusion on the ground that the service is classifiable under ‘works contract service’ and accordingly all the goods used for providing such ‘works contract service’ should be included in the gross value of the service under the composition scheme - HELD THAT:- As per the facts of the present case there are clear contracts between the appellant and the service recipient separately for sale of goods and for Erections, Commissioning and Installation services. Since there is a clear contract for supply of material and supply of services and in respect of the goods sale bills were issued by the appellant and VAT on the sale of goods were paid the transection of supply of goods is clearly and independently a transection of sale of goods which has no connection with the provision of service.
In the present case the contract of the service namely erection, commissioning, installation service being a pure service the same is not exigible to Sales Tax, VAT/CST etc. as per the law therefore the condition Number 2 above is also not applicable therefore in the present case being a service simpliciter as per the separate contract the same is not classifiable under works contract service. The appellant have admittedly paid the service tax on the erection, commissioning, and installation at the applicable rate of service tax therefore the allegation of the department that the appellant have not included the value of goods in the works contact service is incorrect.
This issue has been considered by the Hon'ble Supreme Court, in BSNL v. Union of India [2006 (3) TMI 1 - SUPREME COURT], wherein it has held that works contracts involved a kind of service and sale at the same time. In such a case, the splitting of the service and supply was constitutionally permitted. Further, it has been held that if there is an instrument of contract which may be composite in form in any case and if the transaction in truth represents two distinct and separate contracts and is discernible as such, in that case it has become permissible to separate agreement to sale from the agreement to render service.
The Hon’ble Supreme Court in the case of Imagic Creative Pvt. Ltd. v. Commissioner of Commercial Taxes [2008 (1) TMI 2 - SUPREME COURT] has categorically held that payments of VAT and service tax are mutually exclusive. Further, it was observed that even in case of indivisible contracts, it would be difficult to hold that the entire contract value be subjected to service tax or VAT.
Similarly in the case of Commissioner of Service Tax-V, Mumbai v. UFO Moviez India Ltd. [2022 (7) TMI 1064 - SUPREME COURT], the Hon'ble Supreme Court has held that where a person has regularly paid sales tax on a particular transaction, there is no question of levying service tax on the same transaction.
In the present case undisputedly the appellant had manufactured and also purchased the goods from the independent supplier and sold to its customers therefore irrespective of whether the said goods were sold in transit or by way of high seas sale, when the provisions itself prescribes non-taxability of trading of goods, no service tax can be levied on the profit margin arising from such trading of goods.
Thus, no service tax can be demanded on the sale of goods or by way of including the value of goods in the service. Further as per the contract and the transaction made thereunder there is clear distinction between the provision of service and transaction of sale of goods therefore the service has been correctly classified under erection commissioning and installation service and paid the service tax correctly.
The impugned orders are set aside - appeal allowed.
- 2024 (4) TMI 627
Classification of service - Business Support services or not - service of delivery provided to some customers - Arranging transportation - The revenue contended that GTPL collected excess freight charges from customers compared to the amount paid to transporters, suggesting it as additional consideration for the goods sold - HELD THAT:- An identical issue has been decided in the case of PUSHPAK STEEL INDUSTRIES PVT LTD VERSUS COMMISSIONER OF CENTRAL EXCISE & SERVICE TAX PUNE - III [2018 (10) TMI 84 - CESTAT MUMBAI] wherein it was held that Since transportation cost, incurred was in context with delivery of goods at the buyers premises, it cannot be said that such facility extended by the appellant should be considered as a taxable service, leviable to Service Tax under the category of 'business support service'. Further, the appellant, in the present case, had not supported the business of the buyers in any manner and arrangement of transportation was just to facilitate delivery of the duty paid excisable goods at the buyer's premises. Thus, the activities undertaken by the appellant, in our considered view, do not confirm to the definition of taxable service, for the purpose of levy of Service Tax thereon.
It is noticed that no specific case of the service being provided under the head of business support service has been made out. As observed in Order In Original there is no contract for provision of the business support service between GTPL and their buyers. Even the notice does not show that GTPL were engaged in other than simply organizing transportation of goods.
Relying on the decision of Tribunal in the case of Pushpak Steel Industry Private Limited, there are no merit in the appeal filed by revenue.
Appeal allowed.
- 2024 (4) TMI 561
SVLDRS - Benefit of the Amnesty Scheme opted - non-payment of service tax in respect of services rendered under the head of commercial training and coaching services - failure to make payment on account of technical glitch or not - HELD THAT:- Taking note of the report issued by the Assistant Director attached to the office of the Principal Additional Director General of Systems and Data Management GST and Central Excise, GST Bhavan, Chennai, the contention of the appellant regarding technical glitches of the system cannot be accepted - this is a case where the appellant who had applied for the benefit of the Amnesty Scheme was well aware of the strict time schedule that had to be adhered to for making payments under the Scheme. It clearly comes out through the affidavit of the appellant himself that he came to know of the SVLDRS-3 intimation only on 15.06.2020, which was well after the last date of 31.03.2020 for making payments as originally envisaged under the Scheme.
While the appellant apparently accessed the web portal of the SVLDRS on 29.06.2020, he does not appear to have attempted to make the payment envisaged since such details have not been captured by the system.
The terms of the Amnesty Scheme being of the nature of an exemption from the requirement to pay the actual tax due to the government, have to be considered strictly in favour of the revenue and against the assessee, and hence the appellant cannot be permitted to avail the benefit of the Scheme on the facts of the instant case - Appeal dismissed.
Case Laws - Central Excise
- 2024 (4) TMI 722
Invocation of Extended period of limitation - contravention of provision of rule 9(1)(f) of CCR - Levy of penalty u/r 15(3) of CCR - HELD THAT:- The Commissioner (Appeals) has also not recorded any specific reasons of invoking the extended period of limitation - only reason given in the show cause notice for invoking extended period of limitation is that the appellant had contravened the provision of rule 9(1)(f) of CCR.
It has been presumed that CENVAT credit was availed by the appellant with intention to increase its CENVAT balance with the logical consequence of non-payment of duty in cash and with intent to evade payment of duty. It is a well settled legal position that all show cause notices can be issued only within the normal period of limitation. To invoke extended period one of the aggravating factors necessary must be established. In this case, the only reason for invoking extended period of limitation given in the show cause notice was that the appellant had availed CENVAT credit on the strength of ineligible documents in violation of Rule 9(1)(f) of CCR. The intention to evade payment has been presumed. The impugned orders and the OIO also do not indicate, let alone establish, the existence of any of the five aggravating factors.
As the show cause notice was time barred and consequently the impugned orders which affirm the proposals in the show cause notice cannot be sustained and need to be set aside - Appeal allowed.
- 2024 (4) TMI 721
Clandestine Removal - corroborative evidences or not - entire demand has been raised on the basis of three private unauthenticated seized documents from the office of M/s. EFPL - penalty - HELD THAT:- Although it is the claim of the Revenue that truck numbers are mentioned on the said documents which were involved in clandestine removal of goods, no investigation was conducted with regard to the truck owners or drivers to find out as to whether those vehicles were used by the appellant for clandestine removal of the goods, in support of the allegation of clandestine clearance.
Further, no evidence has been produced by the Revenue with regard to excess purchase and payment thereof. No evidence in the form of excess consumption of electricity was brought on record. Moreover, no payment for clandestine removal of the goods by illicit means has been brought on record. Mere documents recovered from the premises of a third party cannot be the basis to allege clandestine removal of goods - Moreover, it has not been ascertained as to who was maintaining those documents and who had kept these documents in the premises of M/s. EFPL.
Therefore, the Revenue has failed to establish their case of clandestine removal of the goods in question, particularly in view of the decision in the case of M/S. CONTINENTAL CEMENT COMPANY VERSUS UNION OF INDIA & OTHERS [2014 (9) TMI 243 - ALLAHABAD HIGH COURT] wherein the Hon’ble High Court of Allahabad has observed we are of the opinion that when there is no extra consumption of electricity, purchase of raw materials and transportation payment, then manufacturing of extra goods is not possible. No purchase of raw material out side the books have been proved.
Penalty - HELD THAT:- As there is no corroborative evidence available on record in support of the charge of clandestine removal of the goods, the demand of Central Excise Duty is not sustainable against the appellant. As the demand of duty is not sustainable, consequently, no penalty can be imposed on the appellants.
The impugned order is set aside - appeal allowed.
- 2024 (4) TMI 672
Appropriate forum - Maintainability of appeal u/s 35(H) of the Central Excise Act, 1944 - determination of question relating to rate of duty or excise or to the value of goods for the purpose of assessment - HELD THAT:- The appeal would not be maintainable before this Court. However, the appellant would be at liberty to assail the order by filing an appeal u/s 35(L) of the Act of 1944 before the Apex Court. However, on filing of the photocopy of the original documents, the certified copy of the original documents, if any, be returned to the learned counsel for the appellant.
Appeal disposed off.
- 2024 (4) TMI 671
Recovery of CENVAT Credit alongwith interest and penalty - input - goods used in the fabrication of various machineries, support structures, platforms for machineries and equipments etc. used in the factory - HELD THAT:- Undisputedly, the appellants during the relevant period used the aforesaid inputs in their factory in the fabrication / manufacture of various equipments, machineries, plants etc. and support structures holding the capital goods. The learned Commissioner in the impugned order following the judgment of the Larger Bench of this Tribunal in VANDANA GLOBAL LTD. VERSUS CCE [2010 (4) TMI 133 - CESTAT, NEW DELHI (LB)] decided the issue against the appellants holding that credit is not admissible on the aforesaid inputs used in the fabrication of various capital items.
The impugned orders are devoid of merit and accordingly the same are set aside - Appeal allowed.
- 2024 (4) TMI 670
CENVAT Credit - input service - hiring of aircraft - services were used for furtherance of cost of the business of manufacture of the goods or not - HELD THAT:- The definition of the input service is wide enough to cover all the services received by the appellant as input services without being directly used in the process of manufacture. If it is establish that the services were used by the manufacturer for the production of the finished goods which is one of the criteria to credit could not have been denied. In the present case, Commissioner (Appeals) have concluded that charter services were raised for transportation of the senior executive officials of the company for attending the business meeting in relation of the manufacture and sale of finished goods.
In case of MANGALORE REFINERY AND PETROCHEMICALS LTD VERSUS COMMISSIONER OF CENTRAL EXCISE & CENTRAL TAX, MANGALORE COMMISSIONERATE [2021 (6) TMI 715 - CESTAT BANGALORE], the Bangalore bench has held as far as air travel charges are concerned, the same has been used for the purpose of business trips undertaken by the company officials/guests for business related purposes and the same has been held to be input service.
There are no reason to differ with the findings recorded in the impugned order by Appellate Authority and the same is upheld - appeal dismissed.
- 2024 (4) TMI 626
CENVAT Credit - capital goods - Immovable Property or not - fabrication and setting up of entire paint shop - entire demand has been quantified on the basis of the figures taken from the books of accounts maintained by the appellant - suppression of facts or not - Extended period of Limitation- HELD THAT:- The department instead of analyzing whether these items fall under the category of capital goods and eligible for credit has analysed whether the paint shop as assembled at site is an excisable goods. The appellant has not availed credit on ‘paint shop’. They have availed credit on various machinery, parts, and components which have been used to set up paint shop. Some structural items falling under Chapter 73 have also been used for the fabrication and setting up of entire paint shop which is integral to carry out the activity of painting of cars. The department does not have a case that the items do not fall under 84, 85 of Central Excise Tariff Act 1985.
In the case of M/s. HYUNDAI MOTOR INDIA LTD. VERSUS CCE & ST LTU CHENNAI AND VICA-VERSA [2015 (12) TMI 940 - CESTAT CHENNAI] the Tribunal considered the issue of availment of cenvat credit on items used for setting up paint shop and held that credit is eligible. In the case of M/S OMAX AUTO LIMITED VERSUS CCE, DELHI-III [2013 (8) TMI 301 - CESTAT NEW DELHI] it was held that structures used in paint complex which is an integral part of the manufacture of motor vehicles used in the fabrication of paint complex is eligible for credit.
The denial of credit is on the basis of erroneous appreciation of facts and law. The issue on merits is answered in favor of assessee.
Extended period of limitation - Suppression of facts or not - HELD THAT:- The demand has been raised on the basis of figures as reflected in the books of accounts maintained by the appellant. There is no positive act of suppression established by the department against the appellant. In the case of PUSHPAM PHARMACEUTICALS COMPANY VERSUS COLLECTOR OF C. EX., BOMBAY [1995 (3) TMI 100 - SUPREME COURT] the Hon’ble Supreme Court while considering the issue of invocation of extended period observed that when facts are known to both sides there is no ground to invoke the extended period - there is no ground to invoke the extended period. The SCN is time barred. The issue on limitation is answered in favour of the appellant.
The impugned order is set aside - appeal allowed.
- 2024 (4) TMI 625
Recovery of duty with interest and penalty - wrongfully claiming benefit of exemption under Sl.No.84 of N/N. 6/2006-CE dt. 01/03/2006 (for the period December 2009 to 15/03/2012) and under Sl.No.332 of N/N. 12/2012-CE dt. 17/03/2012 - case of Revenue is that since pole shoe is a part of rotor being not used inside the factory for manufacture of WOEG, benefit of notification is not admissible - Extended period of Limitation - HELD THAT:- Analysing the relevant entries finally the learned Commissioner has observed that rotor and controller are items which are distinctly different from the generator being located outside the generator which are essential for generation of electricity; hence covered under Sl.No.13 of List 5/8 whereas ‘pole shoe’ on the other hand is a part of the generator rotor assembly which rotates inside the generator stator assembly and converts mechanical energy into electrical energy resulting into generation of electricity.
There are merit in the observation of the learned Commissioner which is based on technical opinion and also the detailed study of the manufacturing process of ‘pole shoe’ and its ultimate use in the generator which has not been contradicted in any manner by the Revenue in the grounds of appeal. The Revenue in the grounds of appeal has simply stated the pole sole is part of rotor which in turn parts of the WOEG, implies that any part of the parts of the WOEG is covered under Sl.No.21 of the said list and not sr. no. 13 of the said List 5/8 of the Notification.
There is a fallacy in the approach of the Revenue in appreciating the facts, inasmuch as the ‘rotor assembly’ used inside the WOEG is different from the ‘rotors’ which is placed outside the generator, but an essential part of the wind mill and accordingly allowed exemption - ‘pole shoe’ being part of the rotor assembly which in turn used in the generator and a part of the WOEG, hence squarely covered by the N/N. 6/2006CE dated 01.3.2006 and No.12/2012CE dt 17.3.2012.
The Judgement cited by the learned AR for the Revenue viz. Raydean Industries case [2022 (4) TMI 1155 - CESTAT NEW DELHI] is on different set of facts and hence not applicable to the present case. In the said case, the issue involved was whether module mounting structures be part of the Sl.No.10 i.e. “Solar power generating system” of List 8 of the said Notification 12/2012CE dt. 17.3.2012. After analysing the facts, the Tribunal concluded that there is a difference between device and system and upholding the finding of the Commissioner, held that module mounting structure is a part of solar power generating system, hence not covered under the said entry.
There are no merit in the appeal filed by the Revenue. Consequently, the impugned order is upheld and the Revenue’s appeal being devoid of merit is liable for dismissal - appeal of Revenue dismissed.
- 2024 (4) TMI 624
Requirement of reversal of CENVAT Credit - inputs used in the manufacture of dutiable and exempted goods exported - non-maintenance of separate records of receipt and consumption of inputs of dutiable and exempted goods - Rule (6) of Cenvat Credit Rules - HELD THAT:- This issue has already been considered by the jurisdictional High Court of Himachal Pradesh in the case of COMMISSIONER OF CENTRAL EXCISE VERSUS DRISH SHOES LTD. [2010 (5) TMI 334 - HIMACHAL PRADESH HIGH COURT] wherein also the Hon’ble High Court after relying upon the decisions of the Bombay High Court in the case of REPRO INDIA LTD. VERSUS UNION OF INDIA [2007 (12) TMI 209 - BOMBAY HIGH COURT] has held an assessee, manufacturing goods chargeable to nil duty, is eligible to avail CENVAT credit paid on the inputs under the exception clause to Rule 6(1), as contained in Rule 6(5) of CENVAT Credit Rules, 2002 and Rule 6(6) of CENVAT Credit Rules, 2004, used in the manufacture of such goods, if the goods are exported.
There is no infirmity in the impugned order passed by the Ld. Commissioner which is upheld by dismissing the appeal filed by the Revenue - appeal is dismissed.
- 2024 (4) TMI 623
CENVAT Credit - capital goods or not - various items, used for fabrication / erection of various plants as a part of the Phase III expansion project on lumpsum key basis - invocation of Extended Period of Limitation - HELD THAT:- The issue in question has been considered by Chandigarh Bench of this Tribunal in the case of INDIAN OIL CORPORATION LTD. VERSUS COMMISSIONER OF C. EX. & S.T, PANCHKULA [2020 (1) TMI 373 - CESTAT CHANDIGARH]. The facts are more or less similar to the present one inasmuch as the assesse therein are manufacturers of petroleum products falling under Chapter 27 of CETA, 1985. They have availed cenvat credit during July 2007 to March 2012 in respect of various items of capital goods received by them for erection, installation and commissioning of Nephtha Cracker Plant by entering into composite lumpsum turnkey contract with different contractors. Alleging that the assessee is not eligible to avail credit on capital goods in respect of various items of machinery and equipments, instruments falling under Chapter 84, 89 and 90 CETA, 1985 since after fixing of these capital items to the plants fixed become immovable and accordingly non-excisable. The Tribunal had observed that For capital goods Cenvat credit, the items must be among those mentioned in this Rule and should have been used in the factory of the manufacturer and how the items are not used relevant. The words used in Rule 2(a) are “used in the factory of manufacturer of the final product” not “used in the manufacture of final product”. Therefore, once any item received in the factory is “capital goods” in terms of Rule 2(a) of the Cenvat Credit Rules, and is used in the factory, the manufacturer would be entitled to Cenvat credit of excise duty paid in respect of the same.
In the appellant’s own case MANGALORE REFINERY AND PETROCHEMICALS LIMITED VERSUS C.C.E. & S.T., MANGALORE [2023 (8) TMI 696 - CESTAT BANGALORE], this Tribunal has already taken a view that merely because the items are used for fabrication in the erection of storage tank which affixed to earth and become immovable property, cenvat credit availed on individual items cannot be denied being capital goods as defined under Rule 2(a) of the CCR, 2004 following the judgment of the jurisdictional High Court in the case of COMMISSIONER OF C. EX., MYSORE VERSUS ICL SUGARS LTD. [2011 (4) TMI 1065 - KARNATAKA HIGH COURT] and other judgments on the subject including the judgment of the Hon’ble Chhattisgarh High Court in the case of M/S VANDANA GLOBAL LIMITED AND OTHERS VERSUS COMMISSIONER, CENTRAL EXCISE AND CUSTOMS, CENTRAL EXCISE [2018 (5) TMI 305 - CHHATTISGARH, HIGH COURT].
There are no merits in the impugned order - appeal allowed.
- 2024 (4) TMI 531
Valuation - inclusion of incentive/industrial subsidy of 75% of Sales Tax/VAT/CST paid on the sale of goods, received from the Government of Madhya Pradesh under the Industrial Promotion Policy, 2010 in the transaction value under section 4 of the Central Excise Act, 1944 or not - it was held by CESTAT that the contention of the learned counsel for the appellant that incentive/capital subsidy received from the State Government cannot be included in the transaction value has to be accepted - HELD THAT:- There are no merit in this appeal.
The civil appeal stands dismissed.
- 2024 (4) TMI 470
Amendment in cause title - Valuation - whether or not the amounts collected by the appellants as Sales Tax from the customers but not paid to the State Sales Tax authorities should be included in the assessable value for the purpose of levy of Central Excise duty - HELD THAT:- M/s.Tata Steel Limited does not have any objection in respect of the application moved for amendment of cause title registered as I.A. No. 39029/2024 and therefore, the said application is allowed.
Application allowed.
- 2024 (4) TMI 469
Process amounting to manufacture or not - re-packing of various excisable goods (herbal and cosmetic products), affixing the brand names owned by them in their premises - Illegality of duty liability under Section 4 of the Excise Act - HELD THAT:- This Tribunal in M/S WWS SKY SHOP (P) LTD. VERSUS CCE, INDORE [2018 (1) TMI 1734 - CESTAT NEW DELHI], while relying upon Board’s Circular No. 354/285/2011-TRU dated 08.12.2011 has already held that since there is no value addition made by the appellant after receiving the goods from the respective manufacturers till the time these are sold to the consumers that the activity done by the appellant does no amount to manufacture.
The bare perusal makes it clear that as per Section 4, the duty of excise on excisable goods has to be assessed including the price actually paid to the manufacturer for the goods sold and the money value of additional consideration, if any, following directly or indirectly from the buyer to the assessee in connection with the sale of such goods. Thus, this section is applicable only qua the person who is the manufacturer of the goods and charges something extra for some additional activity done prior the sale of the goods manufactured by him. It is already confirmed on record that the activity done by the appellant does not amount to manufacture. It has also been held and confirmed that appellant is not the manufacturer of the goods sold by him - irrespective the method of how those products are manufactured by the manufacturer, the activity done by the appellant before putting those products to the actual consumers are not held to be the activity of manufacture. The question of the activity of the appellant to be excisable does not at all arise. Nothing additional is brought on record to have the different opinion. Hence, these findings are affirmed. Hence, even for sake of Section 4, the value for the appellant’s activity cannot be included in the value of the excisable goods.
Otherwise also, the duty liability on excisable goods is that of the manufacturer. It is an admitted fact on record that the manufacturer i.e. M/s. Davo Laboratories nor M/s. Balchem Laboratories are authorized have discharged their respective eligible liability. No question for sustaining the demand even under Section 4 at all arises.
Though the department has relied upon the decision in M/s. Davo Laboratories own case in a departmental appeal titled as Commissioner of Central Excise, Bhopal Vs. Davo Laboratories [2016 (11) TMI 7 - CESTAT NEW DELHI], wherein the Ayurvedic Preparations Roop amrit and Complete Solutions are denied to be considered as Ayurvedic medicines on the ground that both the products are most commonly used for enhancing personal appearance and beauty i.e. cosmetic. The said decision is not applicable as far as duty liability on these products qua the appellant under Section 4 of Central Excise Act is concerned.
The demand confirmed even under Section 4 of Central excise Act, 1944 set aside - appeal allowed.
- 2024 (4) TMI 468
CENVAT Credit - inputs or not - MS angles, shapes, sections and channels etc., used for erection of “Unipoles”/hoardings which are fixed to the earth and on which the appellant/assessee displays advertisement - HELD THAT:- The issue herein is squarely covered by the precedent order in appellant’s own case of this Tribunal in M/S UNI ADS LTD VERSUS COMMISSIONER OF CUSTOMS, CENTRAL EXCISE & SERVICE TAX, HYDERABAD – II (VICE-VERSA) [2019 (8) TMI 70 - CESTAT HYDERABAD], wherein similar dispute has been held in favour of the appellant and against the Revenue. It is further found that the exclusion clause in Explanation (2) of Rule 2(k) of CCR was introduced w.e.f. 07.07.2009, vide Notification No. 16/2009- CE.
From plain reading of the exclusion clause, it is evident that exclusion is applicable in case of a manufacturer having a factory and such exclusion is not applicable in the case of the appellant who is a provider of output services.
The impugned order is set aside - appeal allowed.
- 2024 (4) TMI 428
Quantum of computation/the cum-duty price - Interpretation of Notification No.02/2006 dated 01.03.2006, as amended by the Notification No.16/2006 dated 11.07.2006, thereby superseding notification no. 13/2002 dated 01.03.2002 - HELD THAT:- Parties are directed to appear before the CESTAT, Ahmedabad on 02.05.2024, when a date of hearing will be fixed.
The review petitions are allowed and disposed of.
- 2024 (4) TMI 427
Clandestine Removal - requirement of cross-examination of witnesses - entire case was made out on the basis of the printout taken from the computer lying in the factory premises and the statements of the various persons - Section 36B of the Central Excise Act - HELD THAT:- From the plain reading of the Section 9D, it can be seen that it is not the whims of the Adjudicating authority to allow or reject the request of cross-examination.
As per the above statutory provision, if the appellant dispute the statements which are relied upon for adjudication it is incumbent on the adjudicating authority to allow the cross-examination of the witnesses and thereafter if the outcome of cross-examination is in consistence with the statement given by the witnesses, the same can be admitted as evidence. Therefore, the cross-examination is necessary for arriving at a fair trial of the case.
The impugned order set aside - appeals are allowed by way of remand to the adjudicating authority, for passing a fresh order, after allowing the cross-examination of the witnesses and considering the further submission to be made by the appellant.
- 2024 (4) TMI 372
Reversal of CENVAT Credit - inputs consumed/utilized for production, at the work-in-progress stage, were destroyed in fire in the factory - HELD THAT:- Under the Cenvat Credit Rules, Rule 3(5) provides – when inputs or capital goods on which credit has been taken are removed as such from the factory or premises of the provider of output service, the manufacturer of the final products or provider of output service, as the case may be, shall pay an amount equal to the credit availed in respect of such inputs or capital goods and such removal shall be made under the cover of an invoice. Further rule 3(5C) of CCR provides – where any goods manufactured or produced by the assessee, the payment of duty is ordered to be remitted under Rule 21 of Central Excise Rules 2002, the Cenvat credit taken on inputs used in the manufacture or production of said goods and the Cenvat credit taken on input services used in or in relation to the manufacture or production of said goods, shall be reversed.
Under the facts and circumstances, it is an admitted fact that the work in progress or semi-finished goods are no longer inputs. Thus, no case is made out of inputs removed as such from the factory on the destruction of WIP or semi-finished goods. In case of destruction of goods/inputs, the liability is restricted to reversal of Cenvat credit on such inputs only. The appellant is not required to reverse Cenvat credit on the inputs already issued for production forming part of WIP or semi-finished goods.
The impugned order set aside - It is clarified that the appellant is not required to reverse the Cenvat credit of Rs.76,88,124/- with respect to inputs forming part of work in progress/semi-finished goods destroyed in fire - appeal allowed.
- 2024 (4) TMI 371
Process amounting to manufacture - buying tubes (stainless steel pipes) and then undertaking certain processes thereon, such as, upsetting, heat treatment, inspection, testing, threading and external coating, so that the pipes can be used for the purposes of oil drilling - period April 2007 to March 2012 - Change of opinion - Extended period of limitation - HELD THAT:- The present SCN has been issued by the Revenue due to change of opinion and/or interpretation after introduction of the 8 digit tariff. The only case of Revenue is that under the 8 digit tariff, due to processes undertaken by the appellant, the green pipe also falls under Chapter 73 and the processed pipe also falls under Chapter 73, although under different sub-headings and thus, it amounts to manufacture, due to change of the sub-heading. This issue is no longer res integra.
Under similar facts and circumstances, the Hon’ble Supreme Court in COMMISSIONER OF CENTRAL EXCISE, NEW DELHI-I VERSUS S.R. TISSUES PVT. LTD. [2005 (8) TMI 111 - SUPREME COURT], on the issue of whether the process of unwinding, cutting and slitting to sizes of jumbo rolls of tissue paper would amount to manufacture on the first principles or under Sec 2(f) of the Act, it was held that the activity of slitting and cutting of jumbo rolls of plain tissue paper/aluminium foil into smaller size does not amount to manufacture as character and end-use did not undergo any change on account of winding, cutting/slitting and packing - The aforementioned ruling of the Apex Court covers the issue herein on all fours.
Extended period of Limitation - HELD THAT:- The SCN is bad as extended period of limitation is not available to Revenue under the admitted fact that all the facts were in the knowledge of the Revenue, as is evident from the earlier SCNs issued either for demand of Excise duty or for demand of service tax. Admittedly, appellant had maintained proper books of accounts and records and have been regularly filing their statutory returns. Even from the list of relied upon documents, these facts are evident as relied upon documents are nothing but the documents maintained by the appellant in the ordinary course of business.
The impugned order set aside - appeal allowed.
- 2024 (4) TMI 370
SSI Exemption - value of clearances - error in calculation in SCN - clubbing of clearances - submission of appellant is that after excluding the value of clearances for export and the value of traded goods the value of clearances will be only Rs 1.41 crores which is well within the exemption limit as provided by the N/N. 8/2003-CE.
HELD THAT:- The appellant-I is engaged in the manufacture and clearance of plastics caps & closures for bottles falling under Chapter No. 39235010 and trading of plastic bottles falling under Chapter sub-heading 39233090 of first schedule to the Central Excise Tariff Act, 1985. Undisputedly the issue involved in the matter is for the financial year 2013-14 and 2014-15 (upto November 2014). It is also not in dispute that the M/s L S Plastics started the production in the year 2014-15 only and hence the issue of the clubbing of clearances of the Appellant – I with the clearances of M/s L S Plastics is only relevant for that period.
Value of Clearances - HELD THAT:- Appellants have before Commissioner (Appeals), not challenged the basis of demand as per para 14.4 of the Show Cause Notice they have only stated that they have submitted the copy the ledgers duly certified by the Chartered Accountant. Appellant could have pointed out from sale invoice wise chart, made in Annexure A1, Annexure A2 & Annexure A3 as to which were the export sales included in the value of clearances for making this demand. Even, except for referring to the table in para 14.1, there is no other submission made by the appellant. As we find that the basis of demand is para 14.4 read with Annexure A1, Annexure A2 & Annexure A3, which has not been challenged there are no merits in the submissions made by the appellant in this regards.
Clubbing of Clearances - HELD THAT:- There is no dispute that the beneficiary of all the activities undertaken by Appellant-I and M/s L S plastic is same family. Appellant 3 who is proprietor of M/s L S plastics is drawing remuneration of Rs 2,00,000/- and partnership interest to the extent of 10% in the partnership firm. It is also well established and not disputed appellant-II who enjoys partnership interest of 70% in the partnership firm and remuneration of Rs 4,00,000/- actually controls all the operation of M/s L S Plastic.
In MCDOWELL AND CO. LIMITED VERSUS COMMERCIAL TAX OFFICER [1985 (4) TMI 64 - SUPREME COURT], this Court examined the concept of tax avoidance or rather the legitimacy of the art of dodging tax without breaking the law. This Court stressed upon the need to make a departure from the Westminster principle based upon the observations of Lord Tomlin in the case of IRC v. Duke of Westminster that every assessee is entitled to arrange his affairs as to not attract taxes. The Court said that tax planning may be legitimate provided it is within the framework of law. Colourable devices, however, cannot be part of tax planning. Dubious methods resorting to artifice or subterfuge to avoid payment of taxes on what really is income can today no longer be applauded and legitimised as a splendid work by a wise man but has to be condemned and punished with severest of penalties.
As appellant-II and appellant-III were the persons responsible for planning for evasion of duty, penalties imposable under Rule 26 of the Central Excise Rules 2002. The fact is noted that penalty equivalent to the duty evaded has been imposed on the partnership firm in which appellant-II and appellant-III are partners. Penalty on appellant-II may be reduced to Rs. 50,000/- only and on appellant-III it reduced to Rs. 75,000/-. With above modification impugned order is upheld.
Appeal of appellant-I is dismissed and the appeals by appellant-II and appellant-III are partly allowed to the extent of reducing penalties imposed on them - appeal allowed in part.
- 2024 (4) TMI 325
Valuation - inclusion of freight/insurance charges for delivery at buyer's place in the transaction value - HELD THAT:- It is found that freight/insurance have been charged separately and received separately. It is also noticed that the buyers of the goods Indian Oil Corporation Ltd. and Hindustan Petroleum Corp. Ltd. have issued purchase order specifying the price for the goods separately and also specifying the transportation cost for the supply of goods. Accordingly, appellant have supplied the goods and raised invoices for the price of goods and the transportation. Thus, it amounts to showing the cost of transport separately in the invoices.
On perusal of copies of the purchase contract placed by the Indian Oil Corporation Ltd and Hindustan Petroleum Corp. Ltd. and invoices issued by the Appellant. From the invoices, it is seen that the freight/insurance shown in the invoices is in addition to basic price of the goods. It is clear from the terms of the purchase contract that basic price and other components have to be indicated separately. Therefore, there is no dispute that basic price and the freight/insurance components are clearly indicated separately in the invoices and therefore criterion i.e. cost of transportation should be in addition to the basic price of the goods stand fulfilled.
There are no valid reason for disallowing the deduction for the freight/insurance paid inasmuch as the sales are FOR destination. It is also found that a coordinate Bench of CESTAT in the case of STERLITE OPTICAL TECHNOLOGIES LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE & CUSTOMS AURANGABAD [2015 (9) TMI 1023 - CESTAT MUMBAI] has taken a view in identical facts that freight/insurance will be allowable as a deduction from the composite price. Thus, the contention of the Department to include the freight/insurance amount in the assessable value does not meet the test of law and hence not legally sustainable. Hence, there are no merit in order passed by the appellate authority.
Thus, freight/insurance amount is not includable in the assessable value of the goods for charging excise duty.
The impugned order is set aside - appeal allowed.
- 2024 (4) TMI 324
Denial of CENVAT Credit - recovery of the differential central excise duty - appellant has discharged appropriate duty on the body building activity on the duty paid chassis supplied free of cost by M/s ALL during the period 2006-07 & 2007-08 or not - entitlement to avail cenvat credit of the duty paid on the chassis supplied free by M/s ALL - Sl.No.41(1)(ii) of N/N. 6/2006-CE - Extended period of Limitation - HELD THAT:- It is found that from the very beginning of the proceeding, in their reply to the internal audit, the appellants have categorically submitted that they have not opted for the exemption under Notification No.6/2006-CE dated 01.3.2006, hence, not required to comply with the conditions prescribed under the said notification. They have informed that by availing cenvat credit on the duty paid chassis and after undertaking the activity of body building on the Chassis, which amounts to manufacture, they had cleared the Vehicle applying the normal tariff rate as applicable from time to time.
The approach of the Department is fallacious from the very beginning. Assuming that the conditions of the notification 06/2006-CE have not been complied with, by availing CENVAT credit on the duty paid chassis, the appellant would not have been eligible to the benefit of the notification and the manufactured goods would be assessed in accordance with the normal provisions. Secondly, Explanation appended Sl.No.41(1)(ii) provides that the value of the manufactured vehicle shall be the value of the vehicle excluding the value of the chassis used in such vehicle, whereas, in the present case, the appellant has added the body building charges and the value of the chassis supplied free of cost in computing the assessable value for the purpose of payment of duty for the year 2006-07 and 2007-08; hence it is incorrect to allege that the appellant had availed the benefit of the said Notification - the appellants are entitled to avail cenvat credit on the duty paid chassis supplied free of cost by M/s. ALL to the appellant.
Valuation and differential duty - HELD THAT:- The period involved in the present demand notice involves 2006-07 to 2007-08. Rule 10A has been inserted to the Central Excise Valuation Rules, 2000 w.e.f. 01/04/2007. Consequently, the valuation of the body built vehicles has to be arrived at following Rule 10A from 01/04/2007 by adopting the price at which the body built vehicles are sold by the supplier M/s. ALL. For the period prior to that, the valuation has to be carried out by adopting the formula laid down by the Hon’ble Supreme Court in UJAGAR PRINTS, ETC. ETC. VERSUS UNION OF INDIA AND OTHERS [1988 (11) TMI 106 - SUPREME COURT].
Time Limitation - HELD THAT:- The present demand is relating to differential duty on the recalculated assessable value as alleged by the Revenue. There are force in the contention of the learned advocate for the appellant as the appellant was following the method of computation of assessable value adopting the principle in Ujagar Print’s case and discharging duty by disclosing all the facts; hence invocation of extended period demanding differential duty on the redetermined value by the Revenue, in absence of suppression of facts or mis-declaration, cannot be sustained. Accordingly, the differential duty of Rs.9,51,837/- demanded for the period 2006-07 and 2007-08 is barred by limitation.
The impugned order is set aside - Appeal allowed.
Case Laws - Vat / CST
- 2024 (4) TMI 720
Seeking to remove the encumbrance of the attachment in the petitioner's property - specific case of the petitioner is that the petitioner is a bona fide purchaser of the property from the fifth respondent and is therefore entitled to immunity under proviso to Section 43 of TNVAT Act, 2006 - HELD THAT:- In the facts and circumstances of the case, it is evident that the petitioner and the fifth respondent are known to each other and are in the same business. The petitioner ought to have obtained the certificate or for prior permission from the Commercial Tax Department before purchasing the property as to whether the property was fully free from any encumbrance. Instead, the petitioner has blindly purchased the property perhaps colluding with the fifth respondent to defraud the revenue. Therefore, the challenge to the impugned communications dated 05.02.2021, 01.09.2020 and 22.02.2022 issued by the third respondent cannot be quashed. The petitioner will have to establish his bona fide before the trial Court by filing a suit establishing that the purchase of the property from the fifth respondent was bona fide.
The writ petition is dismissed.
- 2024 (4) TMI 622
Violation of principles of natural justice - validity of impugned order dated 23.11.2020, confirming the demand for the Assessment Year 2013-14 - HELD THAT:- In view of the materials on record, the impugned order is unsustainable as the impugned order fails to note the decision of this Court in the case of M/S. JKM GRAPHICS SOLUTIONS PRIVATE LIMITED VERSUS THE COMMERCIAL TAX OFFICER [2017 (3) TMI 536 - MADRAS HIGH COURT]. In somewhat similar circumstances, this Court in the case of M/S. ANNALAKSHI TRADERS VERSUS THE ASSISTANT COMMISSIONER (ST) , POLLACHI (EAST) ASSESSMENT CIRCLE, POLLACHI. [2022 (1) TMI 806 - MADRAS HIGH COURT] held Admittedly, in this case the respondent has not followed the procedure prescribed therein. Considering the same, I am inclined to interfere by quashing the impugned Assessment Order by remitting back the case to the respondent to pass a speaking order in terms of the above-said circular/guidelines of the Principal Secretary/Commissioner of Commercial Taxes.
That apart, it is not in dispute that the information has been gathered by the respondent from MIS report generated with intranet web domain. The fact that the petitioner has closed down the business and surrendered the VAT registration as early as 31.03.2011 is also not in dispute - The authorities ought to have investigated and produced the dealers for cross-examination by the petitioner, as otherwise, it is quite possible, liability is being fastened on the petitioner based on the information gathered from the intranet domain based on the fictitious and bogus invoices. The duty cannot be fastened on the petitioner if indeed the petitioner had closed down the business as early as 31.03.2011.
The impugned order is set aside and the case is remitted back to the respondent to pass a fresh order on merits and in accordance with law - petition allowed by way of remand.
- 2024 (4) TMI 621
Time limitation for availing Input Tax Credit - Validity of reassessment order and demand notices - Availment of Input Tax Credit by filing belated returns - HELD THAT:- In BEML's case [2023 (1) TMI 341 - KARNATAKA HIGH COURT], the Division Bench held A plain reading of provision of Section 10(3) of the KVAT Act, 2003, shows that no time limit or restriction is prescribed for availing the input tax credit.
Apart from setting aside the impugned orders passed by the Joint Commissioner of Commercial Taxes, the impugned reassessment orders at Annexures-'H1' to 'H3' and consequent demand notices at Annexures- 'J1' to 'J3' also deserves to be set aside.
Petition allowed.
- 2024 (4) TMI 467
Rejection of branch transfer / Stock transfer of Goods - movement of the goods from the manufacturing unit of the respondent at Navi Mumbai in the State of Maharashtra to the branch offices in other States - sale taking place during the course of inter-State trade or commerce or whether it was a case of branch transfer by the respondent to its branches at Ahmedabad, Delhi, Coimbatore, Bangalore, Chennai, Cochin, Hyderabad and Visakhapatnam? - burden of proof - HELD THAT:- What transpires from the decision of the Supreme Court in Hyderabad Engineering [2011 (3) TMI 1427 - SUPREME COURT] is that for a sale to be in the course of inter-State trade or commerce under section 3(a), there must be a sale of goods and such sale should occasion the movement of the goods from one State to another. To find out whether a particular transaction is a inter-State sale or not, it is essential to see whether the movement of the goods from one State to another is a result of a prior contract of sale. Under section 6A, if the dealer claims that the movement of such goods from one State to another was occasioned by reason of transfer of such goods by him to any other place of his business and not by reason of sale, then the burden of proving that the movement of goods was so occasioned shall be on the dealer. The mode of discharge of this burden of proof has also been provided in the form of a declaration in form ‘F’. However, if the department does not take advantage of the presumption under section 3(a), but shows a positive case of sale in the course of trade or commerce to make it liable to tax under section 6, the declaration in form ‘F’ under section 6A would be of no avail.
When the ‘sale’ or ‘agreement to sell’ causes or has the effect of occasioning the movement of goods from one State to another, irrespective of whether the movement of goods is provided for in the contract of sale or not, or whether the order is placed with any branch office or any head office which resulted in the movement of goods, if the effect of such a sale is to have the movement of goods from one State to another, an inter-State sale would ensue and would result in exigibility of tax under section 3(a).
The Supreme Court in Hyderabad Engineering held that when the sale has the effect of occasioning the movement of goods from one State to another irrespective of whether the movement of goods is provided for in the contract of sale or not or whether the order is placed with any branch office or head office which resulted in movement of goods, it would be a case of inter-State sale resulting in exigibility of tax under section 3A of the CST Act.
In Ashok Leyland [2004 (1) TMI 365 - SUPREME COURT], the Supreme Court held that where the purchaser places an order for manufacture of goods as per his specification, a presumption can be raised that agreement to sell had been entered into.
MSTT was, therefore, not justified in restricting the stand of the respondent to just three transactions for which material had been placed by the State as it is not the case of the respondent that in other transactions, the process had changed. What follows from the aforesaid factual position stated by the respondent before CESTAT is that the movement of the goods had occasioned from the factory of the respondent to the branch offices because of the orders placed by the customers at the branch offices of the respondent - thus, it has to be held that the Deputy Commissioner was justified in holding that the transaction in the present case was not a case of branch transfer but of inter-State sale and MSTT committed an error in holding that except for three transactions worth Rs. 53,21,459/-, the remaining transaction would be of branch transfers.
In view of the provisions of section 22B(1) of the CST Act, a direction would, therefore, have to be issued to the Deputy Commissioner to ascertain whether any additional amount is required to be deposited by the respondent and if so to recover the same from the respondent. A further direction is issued to the States to transfer the refundable amount to the State of Maharashtra - appeal allowed.
- 2024 (4) TMI 426
Validity of reassessment proceedings - Extension of period of limitation and the consequential notice dated 29.11.2022 issued by respondent no.3 to reassess the petitioner for assessment year 2012-13 (UP) - HELD THAT:- The Supreme Court in M/s Modi Naturals Ltd. Vs. The Commissioner of Commercial Tax, UP [2023 (11) TMI 298 - SUPREME COURT] has opined that notwithstanding the non-vatable/exempt nature of DORB, its sale value would have to be considered/included for the purpose of carving out exclusion under Section 13(1)(f) of the UP VAT Act. On that reasoning, the judgment of the learned Single Judge has been reversed.
In view of the above law declared by the Supreme Court, the material on the strength of which reassessment proceedings were drawn against the petitioner for A.Y. 2012-13 (UP) does not exist. In face of the law declared by the Supreme Court, it can never be said by the revenue, turn over had escaped assessment at the hands of the petitioner for the said assessment year.
The reassessment proceedings for the reassessment year 2012-13 (UP) are quashed - the writ petition is allowed.
- 2024 (4) TMI 369
Levy of tax - turnover of old machinery and equipment after the closure of business - scope of “Business” as contained in Clause (iv) of Section 2(e) of the U.P. VAT Act, 2008 - liability of payment of interest on the admitted turnover in terms of Sub-section (2) of the Section 33 of the U.P. VAT Act, 2008 - HELD THAT:- Upon a perusal of the orders passed by the Assessing Officer, First Appellate Authority and the Tribunal, one is able to decipher that the Tribunal has categorically come to the finding that the items that were sold after the closure of the business amounting to Rs. 1,33,20,839/- are in the nature of plant and machinery falling under capital goods. In light of the same, the Tribunal came to the finding that these goods would not fall within the definition of Section 2(e)(iv) of the Act - The finding of the Tribunal and the First Appellate Authority that the particular goods were in nature of capital goods and not the goods under Section 2(m) of the Act is not a perverse finding. This Court in its revisional jurisdiction would not enter into the findings of the Tribunal unless the same are factually unbelievable and perverse. The Tribunal being the last fact finding authority, its findings are paramount and should not be interfered with by this Court unless the same are patently illegal and perverse.
It is to be noted that the amended definition of Section 2(e) of the Act only includes the sale of goods acquired during the period in which the business was carried out. This definition pre-supposes that the goods were acquired during the period in which the business was carried out and were subsequently sold after the closure of the business. The definition could very well have been amended to include all kinds of goods including capital goods. The legislature has limited itself to only sale of “goods”, and therefore, the definition of goods as per the Section 2(m) of the Act has to be taken into account and not the goods which fall under the definition of capital goods in Section 2(f).
There is no requirement to interfere with the impugned order passed by the Tribunal. The revision petition is, accordingly, dismissed.
- 2024 (4) TMI 333
Reversal of Input Tax Credit - genuine transactions or not - deregistered firm or not - validity of assessment order.
Transactions not genuine - HELD THAT:- It is recorded that assessee, M/s. Chimco had declared purchase of coffee seeds from M/s.SLN Coffee Pvt. Ltd., and an output tax of Rs. 78,86,156/- has been paid. The assessment has been made by the Additional Commissioner of Commercial Taxes. The document speaks for itself that so far as petitioner was concerned, the tax amount was paid.
M/s. Chimco was deregistered - HELD THAT:- The document (Annexure-M) filed by the assessee shows that deregistration has been approved on 16.07.2011 and the effective date of deregistration mentioned therein is from 01.06.2006. The assessment year is 2009-10. As on that date, the said firm was not deregistered and it is only on 16.07.2011, deregistration has been retrospectively made.
Assessment order - M/s. Chimco does not exist - HELD THAT:- The assessment order and deregistration order clearly show that said private limited company was registered with Commercial Tax Department and the assessment has been made by an officer of the rank of Commercial Tax Officer.
Once movement of goods is accepted and in the assessment order of M/s. Chimco, the Assessing Officer has noted payment of output tax in a sum of Rs. 78,86,156/-, the contentions urged on behalf of the Revenue are untenable and liable to be rejected.
The order passed by the full Bench of the Karnataka Appellate Tribunal, Bengaluru, is set-aside - revision petition is allowed.
- 2024 (4) TMI 322
Review of the order - Recovery of dues - priority of charges - secured creditor have a prior right over the relevant Department of the Government to appropriate the amount realized by the sale of a secured asset - HELD THAT:- Considering the clear findings as recorded by the Court, in which the Court has clearly observed that the situation would be governed by the determination in paragraph 154 therein as there is material to indicate that the action of sale proclamation initiated by the respondents was preceded by notice under Section 178 of the MLR Code, warrant of attachment under Section 267(3), order of attachment in Form 4 and auction proclamation notice in Form 7 under the MRLR Rules.
It is thus clear that the entire procedure as known to law has been followed by the respondent/Sales Tax Department as observed and accepted by the Court. More so having already taken a chance to argue the case in the alternative, based on the provisions of Section 31B of the Recovery of Debts And Bankruptcy Act, 1993, the petitioners cannot be permitted to have a second round of arguments on the same issues under the garb of a review petition.
The principles on the exercise of the review jurisdiction are well settled. The Supreme Court in THE STATE OF WEST BENGAL VERSUS KAMAL SENGUPTA AND ANOTHER [2008 (6) TMI 578 - SUPREME COURT] has clearly held that a review cannot be sought on the ground of discovery of new matter or evidence. Such matter or evidence would be relevant and must be of such a character that if the same has been produced, it might have altered the judgment. It was thus observed that the mere discovery of new or important matter or evidence is not a sufficient ground for review ex debito justitiae. It was further held that parties seeking review also need to show that such additional matter or evidence was not within its knowledge and even after the exercise of due diligence, the same could not be produced before the court earlier.
There is no mistake or error apparent on the face of the judgment rendered by this Court. In fact, accepting the argument of petitioner involves the exercise of re-scrutiny and reconsideration of the facts and legal position, which stands already considered and concluded in the judgment under review. In the light of the above discussion, it is opined that the review petition is devoid of any merit.
Review petition dismissed.
- 2024 (4) TMI 220
Maintainability of appeal - requirement to pay the mandatory pre-deposit under the GVAT Act and CST Act.
It is the case of the petitioner that the Commissioner Appeals as well as the Tribunal while passing an order of pre-deposit has not considered the prima facie case in favour of the appellant.
HELD THAT:- It appears that the Tribunal has imposed the condition of pre-deposit consisting of the entire demand under the Central Sales Tax. The Tribunal has passed an order requiring the appellant to deposit Rs. 36,00,000/- out of the total remaining demand of Rs. 36,19,825/-. Therefore we are of the opinion that the Tribunal has exceeded its jurisdiction in passing the order of pre-deposit without considering the fact that if the appellant is required to pay almost entire amount of the outstanding dues then the very purpose of pre-deposit would be frustrated.
Therefore, as the appellant is ready and willing to deposit Rs. 5,00,000/- to show the bona fides and to enable the appellant to furnish the statutory forms in the remaining period of pre-deposit, the interest of justice would be served if the amount of pre-deposit is reduced to Rs. 5,23,000/-.
The appellant is therefore to deposit Rs. 5,23,000/- on or before 15.07.2024 towards the mandatory pre-deposit in the appellate proceedings and the present appeal filed by the appellant is accordingly allowed to the aforesaid extent and the matter is remanded back to the First Appellate Authority who will hear the appeals filed by the appellant on deposit of Rs. 5,23,000/- on or before 15.07.2024 - Matter on remand.
- 2024 (4) TMI 219
Requirement to fulfil condition to deposit 15% of the disputed tax demand, to participate in the assessment proceedings - alleged mismatch of purchases between the returns filed by the appellant and the other dealers - HELD THAT:- The learned Judge, after having considered the submission made by the learned counsel for the appellant / assessee, has granted one opportunity to the assessee, however subject to a condition that the assessee has to deposit 15% of the tax demanded, by the order impugned herein. According to the learned counsel for the appellant, when the learned Judge is inclined to remand the matter to the respondent for re-consideration, he ought not to have imposed such condition on the appellant, which is illegal and contrary to law.
The issue involved herein had already been considered by a Division Bench in Havea Handles & Components Pvt. Ltd v. Assistant Commissioner (CT) (FAC), Royapettah II Assessment Circle, Chennai [2014 (7) TMI 1367 - MADRAS HIGH COURT] and it was held that It has to be pointed out, at this stage, that once it has been found that the orders impugned in the writ petitions are unsustainable on account of violation of principles of natural justice, it is wholly unnecessary to impose any condition while remitting the matter for fresh adjudication and in the considered opinion of this court, the direction given to the appellant / writ petitioner to deposit 10% of the tax amount as claimed in the demand notice, as a condition precedent to enquire into the matter, is unsustainable and the said portion of the order is liable to be set aside.
Following the above said judgment, in an identical case in M/S. R.P.S. & CO VERSUS THE ASSISTANT COMMISSIONER (ST) (FAC) BROUGH ROAD CIRCLE, ERODE [2022 (2) TMI 1430 - MADRAS HIGH COURT], this court, in which, one of us (RMDJ) was a member, has set aside the pre-condition imposed on the appellant therein to deposit 30% of the tax amount for consideration of the matter afresh by the assessing authority, observing that the same was certainly unwarranted.
This Court is inclined to set aside the order of the learned Judge insofar as directing the appellant / assessee to deposit 15% of the demanded tax as a condition precedent for re-doing the assessment by the authority and the same is accordingly, set aside. Consequently, the appellant / assessee is directed to file objections to the order passed by the respondent treating the same as show cause notice as directed by the learned Judge, within a period of two weeks from the date of receipt of a copy of this judgment - Appeal allowed.
- 2024 (4) TMI 166
Illegal attachment and withdrawal from bank account by respondents to recover the arrears of VAT dues of another company - it was held by High Court that There is no question of lifting the corporate veil treating that the proprietor of petitioner entity and the assessee M/s.Shree Ganesh Jewellery House Limited as one and the same or as entities which are connected or related - HELD THAT:- There are no reason to interfere with the impugned judgment passed by the High Court. Hence, the Special Leave Petition is dismissed.
- 2024 (4) TMI 165
Levy of tax under Section 4A of the Entry Tax Act - extraction of coal and the work of coal extraction - manufacture or not - HELD THAT:- The issue raised by the applicant needs to be adjudicated. Therefore, the Commercial Tax Tribunal is called upon to make a reference elaborating the facts and question of law and refer the same to this Court.
The Tax Case is disposed of.
- 2024 (4) TMI 2
Recovery of dues - priority of charges - whether appellant State/Excise Department will be having first charge upon the property of M/s Gilvert ISPAT Pvt. Ltd., in terms of provisions of Section 26 of the H.P. VAT Act, 2005 or secured creditor Punjab National Bank shall have priority to recover over any other charge, including charge in favour of State, in terms of provisions of Recovery of Debts and Bankruptcy Act, 1993 (RDB Act) and Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) as amended from time to time?
HELD THAT:- In Central Bank of India’s case [2009 (2) TMI 451 - SUPREME COURT], it was held by the Supreme Court that charge created in favour of State under the provisions of General Sales Tax Act in respect of sales tax dues prevailed over the charge created in favour of the Bank in respect of loan taken by a person/Firm/Company and the amendment made in the State operated in respect of charge that were in force on the date of introduction of Section 33-C of Madhya Pradesh General Sales Tax Act, creating first charge in favour of the State.
After incorporation of Section 31-B in RDB Act, High Court of Kerala has decided similar issue in a petition State Bank of India vs. State of Kerala and others, WP (C) No. 28316 of 2016 and other connected matters, vide judgment dated 30.07.2019 [2019 (7) TMI 1684 - KERALA HIGH COURT] holding that secured creditor under Section 26E of the SARFAESI Act and Section 31B of the RDB Act, obtains priority over the right claimed by the Revenue both in proceeding against the properties in question or in recovering the secured debt.
It is apt to record that in Section 38 of Kerala Value Added Tax, 2003, there was provision that notwithstanding anything to the contrary contained in any other law for the time being in force for recovery of any amount of tax, penalty, interest and any other amount, if any, payable by a dealer or any other person under this Act, there shall be the first charge in favour of State on the property of the dealer, or such person - It is apt to record that SARFAESI Act and RDB Act are Special Central Acts, whereras H.P. VAT Act is a State Act.
In view of provisions of Articles 246, 251 and 254 of Constitution of India, law made by the Parliament i.e. Central Act, RDB Act and SARFAESI Act, shall prevail upon law made by the legislature of the State, i.e. H.P. VAT Act and being special enactment shall also have precedence over any general Central Act.
Thus, learned Single Judge has not committed any mistake, irregularity, illegality or perversity in allowing petition2 preferred by respondent No. 1- petitioner Himanshu Prashar - appeal dismissed.
- 2024 (3) TMI 1134
Recovery of dues - Attachment of assets - dues of MVAT Authorities’ have charge in priority to the secured creditors or not - HELD THAT:- A plain reading of Section 26-E would show that once a secured creditor registers its security interest (under Section 26-B), notwithstanding any other law in force, the debts owed to the secured creditor shall be paid in priority over all other debts including taxes payable to the State Government. The “registration of security interest” referred to in Section 26-E of the SARFAESI Act, is the registration of such interest with CERSAI under Section 26-B.
The formulation of the two provisions in the SARFAESI Act and the MVAT Act respectively, is a conscious policy choice of balancing of interests of competing creditors who have finite assets to pursue in enforcing recovery of their claims. Dues owed to banks, if not paid, can have a harsher and wider adverse social impact. A collapse of banks would not only hurt the interests of various depositors but also inflict a wider deleterious impact on other segments of the economy. Potentially, it would be tax-payers’ funds that would have to be infused into the banks to bail them out to avoid such adverse social impact. On the other hand, if the banks are given a priority in recovery, and in the process, the secured assets are sold without hindrance to an auction purchaser, such asset would continue to be put to economic use, which would also generate tax revenues. In addition, other assets that are not the subject matter of a security interest registered prior in time can continue to be proceeded against in enforcement proceedings to recover tax dues.
The issue at hand has been extensively analysed in the case of Jalgaon Janta Sahakari Bank [2022 (9) TMI 163 - BOMBAY HIGH COURT]. Examining multiple fiscal statutes that create a statutory charge over assets of an assessee and their interplay with Section 26-E of the SARFAESI Act where such assessee has created a security interest in favour of secured creditors, the Full Bench of this Court held that where Section 26-E is attracted, the position in law is not that dues owed to a department of the State Government would have to be paid first. The Full Bench repelled exactly the same argument we were presented with – that Section 26-E only provides a “priority” but does not actually create a “first charge”, whereas provisions akin to Section 37 of the MVAT Act create a first charge. The Full Bench held that the secured creditor whose security interest is registered with CERSAI prior in time, would get precedence over the dues owed to the State. The Full Bench ruled that such a formulation is a conscious choice made by the legislature.
The assertion of the MVAT Authorities that they had priority over secured creditors was totally misconceived and without basis in law. Statutory authorities enforcing law must necessarily refrain from conducting themselves in a manner that conflicts with the law declared by a Full Bench of a constitutional court. There are no hesitation in declaring that none of the attachment orders can result in the MVAT Authorities stealing a march in priority over the registered security interest enjoyed by the Petitioner-led consortium of banks.
The impugned attachment orders of the MVAT Authorities dated 24th February, 2022, 7th April, 2022 (issued to the Borrower) and 31st July, 2023 (issued to the Petitioner) would not confer any priority over the registered security interest enjoyed by the Petitioner-led consortium banks over the Secured Assets - The Petitioner has the first priority in respect of enforcement against the Secured Assets by reason of Section 26-E and having a prior registration of the security interest with CERSAI. The Petitioner is therefore entitled to enforce such security interest enjoying priority over the MVAT Authorities.
Petition allowed.
- 2024 (3) TMI 1033
Rate of the State sales tax on silk fabrics - taxable at 4% or 12%? - demand made for the period between 15th January 2000 and 31st March 2000 - HELD THAT:- During the said period, silk fabric was a part of Schedule I of the DST Act, on which sales tax was leviable at the rate of 12%. Sections 14 and 15 of the Central Sales Tax Act were deleted by Act No. 18 of 2017. Section 14, before its deletion, declared certain goods specified therein as of special importance in inter-state trade or commerce. Until 11th May 1968, item (xi) was incorporated in Section 14, which covered the item of “silk sarees”. However, with effect from 11th May 1968, the said item was deleted by Act No. 19 of 1968.
Section 15(1) of the CST Act, as existed during the period for which the impugned assessment was made, provided that the local sales tax rate on declared goods should not exceed 4% of the sale or purchase price of such goods. So long as the silk fabric was a part of the list of declared goods under Section 14 of the CST Act, the sales tax levy under the DST Act could not have exceeded 4% in view of Section 15(1) of the CST Act. However, silk fabric was deleted from the list contained in Section 14 of the CST Act, effective 11 May 1968. Therefore, during the relevant period for which the impugned assessment order was issued, as silk fabric was not a part of the list under Section 14, there was no embargo on levying sales tax on silk fabric at a rate exceeding 4%. Therefore, the argument based on Section 15(1) of the CST Act will not help the appellant.
The second Schedule of the ADE Act provides that during each financial year, each State shall be paid a certain percentage of net proceeds of the additional duties levied and collected during the financial year in respect of the goods described in column (3) of Schedule I. However, no additional duty was made payable on silk fabric under the ADE Act. The proviso makes it clear that notwithstanding the ADE Act, there is no bar on the States levying sales tax - the argument that as silk fabric formed a part of Schedule I of the ADE Act, it disentitled the State Government from levying sales tax is fallacious and cannot be accepted.
The High Court has noted that its Co-ordinate Bench in the case of MR. TOBACCO PVT. LTD. VERSUS UNION OF INDIA AND OTHERS [2006 (1) TMI 567 - DELHI HIGH COURT] upheld the validity of notification dated 31st March 2000 issued under the DST Act.
There are no error in the view taken by the Delhi High Court in the impugned judgment - Accordingly, the appeal is dismissed.
- 2024 (3) TMI 1032
Settlement of dues - determination of tax liability under the M.P. Sales Tax Act, M.P. Vat Tax Act, Central Sales Tax Act and Entry Tax Act - HELD THAT:- It is informed that proceedings under the SICA Act were concluded by the order passed by the Board for Industrial and Financial Reconstruction (BIFR) on 28.01.2024. A copy of the order dated 28.01.2014 is placed and it evidences that the issue relating to the tax claim by the State of Madhya Pradesh has attained finality.
In view of the representation of the Government of Madhya Pradesh in the above referred order of BIFR that the Company had settled their dues, followed by the final direction of the BIFR, that Government need not attend further hearings, nothing remains for consideration in these appeals.
Appeal disposed off.
- 2024 (3) TMI 1031
Review petition - Issuance of sales certificate with regard to the sales tax dues - Registration of a Sale Certificate issued in favor of one party for a property purchased in an auction held by another party under the SARFAESI Act. - HELD THAT:- Reliance placed on the decision of the Supreme Court in Tamil Nadu Electricity Board and Another v/s. N Raju Reddiar and Another [1996 (12) TMI 348 - SUPREME COURT] wherein the Supreme Court has deprecated the practice of litigants engaging a fresh set of Advocates to file and also argue matters in Review proceedings, without obtaining the consent of the Advocate who had appeared at the original stage.
In the above case, the Supreme Court dismissed the Review Petition with exemplary costs - the present case is not different and would completely fall in the nature of the proceedings which have been deprecated by the Supreme Court in the above judgement.
The Review Petition is accordingly dismissed with costs of Rs. 50,000/- to be deposited by the Petitioner, within a period of four weeks from today, with the Maharashtra Legal Services Authority. In the event, if such costs are not deposited, the Maharashtra Legal Services Authority shall take further steps to recover the said costs as arrears of land revenue.
- 2024 (3) TMI 973
Reduction of turnover - cement imported from outside the State of U.P. - Rule 9 of the Value Added Tax Rules - HELD THAT:- Upon perusal of the order of Tribunal it is patently clear that the goods were imported from outside the State of U.P. and were used in one project in the State of U.P. There does not appear to be any perversity in the finding of the Tribunal with regard to the above factum. Such being the case, Rule 9 (1)(e) of the Rules would definitely apply and the petitioner would be entitled to the benefit thereunder.
The general rule of law in taxing statutes is that in case of any doubt the benefit should be given to the assessee. However, in case of exemption and deduction to be given, a stricter approach may be followed, as per catena of judgments of the Supreme Court, to examine whether the assessee is eligible for such benefit. In the present case, there is no factual dispute of goods having been imported from outside the State of U.P. and, therefore, the assessee clearly qualifies for the said benefit.
The question of law is answered in favour of the assessee and against the Department - Application dismissed.
- 2024 (3) TMI 972
Violation of principles of natural justice - impugned order does not take into consideration the reply submitted by the petitioner and is a cryptic order - HELD THAT:- The observation in the impugned order dated 23.12.2023 is not sustainable for the reasons that the reply filed by the petitioner is a detailed reply. Proper Officer had to at least consider the reply on merits and then form an opinion whether the reply is not clear and unsatisfactory. He merely held that the reply is not clear and satisfactory which ex-facie shows that the Proper Officer has not applied his mind to the reply submitted by the petitioner.
Further, if the Proper Officer was of the view that reply was unsatisfactory and further details were required, the same could have been specifically sought from the petitioner. However, the record does not reflect that any such opportunity was given to the petitioner to clarify its reply or furnish further documents/details.
The order cannot be sustained, and the matter is liable to be remitted to the Proper Officer for re-adjudication. Accordingly, the impugned order dated 23.12.2023 is set aside. The matter is remitted to the Proper Officer for re-adjudication - the impugned order records that petitioner’s reply is not satisfactory. The Proper Officer is directed to intimate to the petitioner details/documents, as maybe required to be furnished by the petitioner.
Petition disposed off.
- 2024 (3) TMI 909
Violation of principles of natural justice - Validity of assessment order - bills to indicate that no form 'C' was ever issued not considered - erroneous observation that sale took place - no opportunity of hearing has been accorded to the revisionist at any stage by the authorities.
Revisionist was having three copies of the bills in his bill book which has not been appreciated by the competent authority - HELD THAT:- Perusal of the assessment order dated 24.03.2011 would indicate that the version of the revisionist has been considered by the assessing authority and he has observed that he himself has examined the bill book upon being produced by the revisionist but the bill book is not having the original bill contained in the bill book. Thus, the said ground is rejected. Incidentally, this finding of the bill book having been examined by the Authority has not been denied anywhere by the revisionist upon filing of either the first appeal or the second appeal.
The learned Tribunal has erroneously observed in the judgment dated 14.12.2012 that sale took place with respect to bill no. 107 dated 01.01.2008 and bill no.121 dated 30.01.2008 of which all three copies are available in the bill book as per the list of sales produced before the Tax Assessing Authority - HELD THAT:- No denial to the said finding has been given by the revisionist while filing the instant revision of the said sales being indicated in the list of sales produced before the Assessing Authority. As such, the said ground is rejected.
No opportunity of hearing has been accorded to the revisionist - HELD THAT:- The said ground is also misconceived considering that the assessment order dated 24.03.2011 has been passed after issuing notice to the revisionist and thereafter the revisionist had ample opportunity while filing the first and second appeal of rebutting the specific finding that had been given by the assessing authority which he himself failed to do - while considering the revision filed by the revisionist and even considering the grounds as raised by the learned counsel for the revisionist, no perversity or illegality emerges and consequently no case for interference is made out.
The instant revision as well as the connected revision is dismissed at the admission stage.
Case Laws - Indian Laws
- 2024 (4) TMI 719
Dishonour of Cheque - grant of interim compensation - whether the provision of sub-section (1) of Section 143A of the Negotiable Instruments Act, 1881 (for short, ‘the N.I. Act’), which provides for the grant of interim compensation, is directory or mandatory? - factors to be considered while exercising powers under sub-section (1) of Section 143A of the N.I. Act.
HELD THAT:- In the case of Section 143A, the power can be exercised even before the accused is held guilty. Sub-section (1) of Section 143A provides for passing a drastic order for payment of interim compensation against the accused in a complaint under Section 138, even before any adjudication is made on the guilt of the accused. The power can be exercised at the threshold even before the evidence is recorded. If the word ‘may’ is interpreted as ‘shall’, it will have drastic consequences as in every complaint under Section 138, the accused will have to pay interim compensation up to 20 per cent of the cheque amount. Such an interpretation will be unjust and contrary to the well-settled concept of fairness and justice. If such an interpretation is made, the provision may expose itself to the vice of manifest arbitrariness - there are no manner of doubt that the word “may” used in Section 143A, cannot be construed or interpreted as “shall”. Therefore, the power under sub-section (1) of Section 143A is discretionary.
Section 143A can be invoked before the conviction of the accused, and therefore, the word “may” used therein can never be construed as “shall”. The tests applicable for the exercise of jurisdiction under sub-section (1) of Section 148 can never apply to the exercise of jurisdiction under subsection (1) of Section 143A of the N.I. Act.
Factors to be considered while exercising powers under sub-section (1) of Section 143A of the N.I. Act - HELD THAT:- When the court deals with an application under Section 143A of the N.I. Act, the Court will have to prima facie evaluate the merits of the case made out by the complainant and the merits of the defence pleaded by the accused in the reply to the application under sub-section (1) of Section 143A. The presumption under Section 139 of the N.I. Act, by itself, is no ground to direct the payment of interim compensation. The reason is that the presumption is rebuttable - While deciding the prayer made under Section 143A, the Court must record brief reasons indicating consideration of all the relevant factors.
In the present case, the Trial Court has mechanically passed an order of deposit of Rs.10,00,000/- without considering the issue of prima facie case and other relevant factors. It is true that the sum of Rs.10,00,000/- represents less than 5 per cent of the cheque amount, but the direction has been issued to pay the amount without application of mind. Even the High Court has not applied its mind - the Trial Court is directed to consider the application for grant of interim compensation afresh. In the meanwhile, the amount of Rs. 10,00,000/- deposited by the appellant will continue to remain deposited with the Trial Court.
The impugned orders are set aside, and the application made by the complainant under Section 143A (1) of the N.I. Act is restored to the file of Judicial Magistrate First Class, Bokaro - appeal allowed in part.
- 2024 (4) TMI 669
Dishonour of Cheque - Plea to expedite the trial of a complaint - Case of applicant is that though this complaint under the Act, 1881 was filed in the year 2022, but the trial could not be concluded - Section 143(2) of NI Act, 1881 - HELD THAT:- The Apex Court in the case of INDIAN BANK ASSOCIATION AND OTHERS VERSUS UNION OF INDIA AND OTHERS [2014 (5) TMI 750 - SUPREME COURT], has issued direction for expeditious disposal of the cases under the Act, 1881 where it was held that We, therefore, direct all the criminal courts in the country dealing with Section 138 cases to follow the above-mentioned procedures for speedy and expeditious disposal of cases falling under Section 138 of the Negotiable Instruments Act.
From the above mentioned judgements of Hon'ble Apex Court, it is clear that the Apex Court for expeditious disposal of cases under the Act, 1881 has issued several directions which the concerned court/Magistrate has to follow while deciding the cases under the Act, 1881. From the observations of the Apex Court as well as analysis of Sections 138 & 143 of the Act, 1881, it is expedient that all the proceedings under the Act, 1881 should be concluded expeditiously without going into unnecessary technicality.
This Court directs the Chief Judicial Magistrate, Sant Kabir Nagar to conclude the trial of Complaint Case No. 10260 of 2022 (Shyam Ji Vs. Bhagwandas Chaudhary) u/s 138 Negotiable Instrument Act, P.S. Bakhira, District Sant Kabir Nagar, keeping in mind the direction of the Apex Court, expeditiously preferably within a period of six months from the date of receipt of certified copy of this order, strictly in accordance with statutory provision of Sections 143(2) and 143(3) of the Act, 1881, if there is no legal impediment.
Application disposed off.
- 2024 (4) TMI 668
Dishonour of Cheque - Grant of Bail - Mandate to deposit of a minimum of twenty percent of the fine or compensation awarded by the trial court - failure to consider the Statutory Provisions as enshrined U/S 148(1) & 148 (2) of NI Act 1881 - HELD THAT:- In the instant case, the Appellate court although vide order dated 29.02.2024 had admitted the appeal and also allowed the Bail Application moved by the appellant/petitioner but by the same order despite admitting the appeal preferred by the appellant/petitioner had erroneously rejected the stay and operation of the impugned order dated 16.02.2024 passed by the trial court and thereby, rejected the stay application (Paper No.5B) and further directed him to deposit amount of fine imposed by the trial court within a period of ten days' from the date of the order and also provided that in case of non-deposition of fine by the appellant/petitioner, the order of granting bail to the appellant/petitioner shall stand automatically cancelled, thus, the appellate court while passing the impugned order dated 29.02.2024 by which it has rejected to stay the operation of the order dated 16.02.2024 passed by the trial court has failed to consider the Statutory Provisions as enshrined under Section 148(1) and 148(2) of the Negotiable Instrument Act, 1881, which resulted in miscarriage of justice.
This Court finds that the Appellate Court has erred in law while rejecting the stay application of the appellant/petitioner, by which it was prayed by the appellant/petitioner to stay the fine of Rs.4,00,000/- imposed by the trial court while convicting him under Section 138 of the Negotiable Instruments Act, 1881 till the disposal of the appeal preferred by the appellant/petitioner before the Appellate Court.
Petition disposed off.
- 2024 (4) TMI 600
Regularization of petitioners who had served as casual/daily wage workers for a period of more than 10 years when decision in Uma Devi was pronounced by Apex Court [2006 (4) TMI 456 - SUPREME COURT] - Reason for Tribunal's disinclination to grant relief was that no material could be brought on record to establish that appointment of petitioners was not illegal but merely irregular.
HELD THAT:- It is not dispute at the Bar by learned counsel for employer that the petitioners are equally situated as Ravi Verma & Ors [supra] for having completed more than 10 years of casual/daily wage services on the date 10.04.2006 when decision in Uma Devi was pronounced by Apex Court [2006 (4) TMI 456 - SUPREME COURT]. It is also not disputed by the learned counsel for employer that the petitioners herein were also appointed in similar manner as the case of Ravi Verma & Ors. and thus their appointments were not illegal but merely irregular and, therefore this Court is of the considered view that the benefit flowing from the decision of Uma Devi specially the directions in paragraph 53 of the said judgment squarely apply to the petitioners who are thus entitled to the same relief as extended by the Apex Court to Ravi Verma & Ors.
The period of 10 years which was pre-requisite for consideration for regularization as one time measure vide para 53 of Apex Court decision in Uma Devi, has been completed by all the petitioners herein. Therefore, the case of the petitioners is identical to the case of Ravi Verma and Ors. Accordingly, the objection raised by Shri Gopi Chourasia - Advocate on behalf of appellant stands rejected.
- 2024 (4) TMI 557
Maintainability of curative petition - restoration of arbitral award which had been set aside by the Division Bench of the High court on the ground that it suffered from patently illegality.
Curative Jurisdiction may be invoked if there is a miscarriage of justice - HELD THAT:- In RUPA ASHOK HURRA VERSUS ASHOK HURRA & ANOTHER [2002 (4) TMI 889 - SUPREME COURT], a Constitution Bench of this Court dwelt on whether any relief is available against a final judgement of this Court after the dismissal of a petition seeking review of the judgement. Two opinions were authored. The main judgment was by Justice Syed Shah Quadri (on behalf of Chief Justice S P Bharucha, Justice Variava, Justice Shivraj Patil and himself). A concurring opinion was authored by Justice U C Banerjee - In his concurring opinion, Justice Banerjee also laid down a similar test of ‘manifest injustice’ to exercise the jurisdiction of this Court under Article 142 while entertaining a curative petition. In essence, the jurisdiction of this Court, while deciding a curative petition, extends to cases where the Court acts beyond its jurisdiction, resulting in a grave miscarriage of justice.
Scope of interference of courts with arbitral awards - HELD THAT:- The contours of the power of the competent court to set aside an award under Section 34 has been explored in several decisions of this Court. In addition to the grounds on which an arbitral award can be assailed laid down in Section 34(2), there is another ground for challenge against domestic awards, such as the award in the present case. Under Section 34(2-A) of the Arbitration Act, a domestic award may be set aside if the Court finds that it is vitiated by ‘patent illegality’ appearing on the face of the award.
In ASSOCIATE BUILDERS VERSUS DELHI DEVELOPMENT AUTHORITY [2014 (11) TMI 1114 - SUPREME COURT], a two-judge Bench of this Court held that although the interpretation of a contract is exclusively within the domain of the arbitrator, construction of a contract in a manner that no fair-minded or reasonable person would take, is impermissible. A patent illegality arises where the arbitrator adopts a view which is not a possible view. A view can be regarded as not even a possible view where no reasonable body of persons could possibly have taken it. This Court held with reference to Sections 28(1)(a) and 28(3), that the arbitrator must take into account the terms of the contract and the usages of trade applicable to the transaction. The decision or award should not be perverse or irrational. An award is rendered perverse or irrational where the findings are (i) based on no evidence; (ii) based on irrelevant material; or (iii) ignores vital evidence. Patent illegality may also arise where the award is in breach of the provisions of the arbitration statute, as when for instance the award contains no reasons at all, so as to be described as unreasoned.
While adjudicating the merits of a Special Leave Petition and exercising its power under Article 136, this Court must interfere sparingly and only when exceptional circumstances exist, justifying the exercise of this Court’s discretion - Unlike the exercise of power under Section 37, which is akin to Section 34, this Court (under Article 136) must limit itself to testing whether the court acting under Section 37 exceeded its jurisdiction by failing to apply the correct tests to assail the award.
The award was patently illegal - HELD THAT:- In the case at hand, the Division Bench found the award to be perverse, irrational and patently illegal since it ignored the vital evidence of CMRS certification in deciding the validity of termination. This, the Division Bench held, overlooked the statutory certification deeming it irrelevant without reasons and thus the award was patently illegal according to the test in Associate Builders - The Tribunal did not appreciate the individual import of the two phrases separately from each other. This was not a matter of mere “alternate interpretation” of the clause, but an unreasonable and uncalled for interpretation of the clause, which frustrated the very provision, and which no reasonable person would have accepted considering the terms of the clause. It is clarified that Tribunal could have still arrived at the conclusion that the steps taken during the cure period were not effective within the meaning of the clause for certain reasons. However, such discussion and reasoning is conspicuously absent.
In essence, therefore the award is unreasoned. It overlooks vital evidence in the form of the joint application of the contesting parties to CMRS and the CMRS certificate. The arbitral tribunal ignored the specific terms of the termination clause. It reached a conclusion which is not possible for any reasonable body of persons to arrive at. The arbitral tribunal erroneously rejected the CMRS sanction as irrelevant. The award bypassed the material on record and failed to reconcile inconsistencies between the factual averments made in the cure notice, which formed the basis of termination on the one hand and the evidence of the successful running of the line on the other. The Division Bench correctly held that the arbitral tribunal ignored vital evidence on the record, resulting in perversity and patent illegality, warranting interference.
The parties are restored to the position in which they were on the pronouncement of the judgement of the Division Bench. The execution proceedings before the High Court for enforcing the arbitral award must be discontinued and the amounts deposited by the petitioner pursuant to the judgment of this Court shall be refunded.
The Curative petitions must be and are accordingly allowed.
- 2024 (4) TMI 556
Dishonour of Cheque - issuance of statutory notice to proper person or not - acquittal of respondent No. 2 - ‘not giving findings by the trial court’ will affect the outcome of the case or not.
HELD THAT:- In this case, admittedly the cheques are issued on a Bank account maintained by the Company with the Federal Bank. It was not a Bank Account in the name of Respondent No. 2. He has signed as a Director of Respondent No. 1. The issue in Aneeta Hada’s case is slightly different. It is on the point of necessity of joining Company when the cheques are drawn on an account maintained by the Company. The Company has to be joined - In this case, Company is joined as an Accused along with the signatory who is its Director. The issue is different. The issue is about issuance of a notice to proper person. The proviso (b) contemplates issuance of a notice to a drawer. In this case, cheques are drawn by Respondent No. 2 as a Director of Respondent No. 1 and that too on an account standing in Bank’s record in the name of Respondent No. 1. It is not in dispute that notice is not issued to the Company and Respondent No. 2 as Director of Respondent No. 1.
There is a liability in between the complainant and Accused No. 1. But he has not issued the cheques in his personal capacity on an account maintained by him in his person but he has chosen to draw the cheques on a Bank account maintained by his Company. The complainant has failed to issue notice to Company and Respondent No. 1 as Director. The provisions of clause (b) of Section 138 are mandatory. When the consequences of a particular Act are deterrent, the provisions have to be followed and interpreted strictly.
The complainant has failed to adhere to the provisions of the proviso (b) of Section 138 of the NI Act. So even though I have given finding in favour of the complainant on the other aspect, the contention of learned Advocate Shri Khanchandani cannot be accepted. Respondent No. 2 is a Director in Respondent No. 1 Company but law recognizes both these entities as separate.
The judgment of acquittal need no interference - appeal dismissed.
- 2024 (4) TMI 466
Sale of mortgaged (scheduled) properties which was to be conducted by the Authorized Officer (Respondent No.2) of the Respondent-Bank - default in repayment of loan by the Borrower - HELD THAT:- This Court has clearly held that the High Court will ordinarily not entertain a petition under Article 226 of the Constitution if an effective remedy is available to the aggrieved person. It has been held that this rule applies with greater rigour in matters involving recovery of taxes, cess, fees, other types of public money and the dues of banks and other financial institutions. The Court clearly observed that, while dealing with the petitions involving challenge to the action taken for recovery of the public dues, etc., the High Court must keep in mind that the legislations enacted by Parliament and State Legislatures for recovery of such dues are a code unto themselves inasmuch as they not only contain comprehensive procedure for recovery of the dues but also envisage constitution of quasi-judicial bodies for redressal of the grievance of any aggrieved person. It has been held that, though the powers of the High Court under Article 226 of the Constitution are of widest amplitude, still the Courts cannot be oblivious of the rules of self-imposed restraint evolved by this Court.
In the present case, it can clearly be seen that though it was specifically contended on behalf of the appellant herein that the writ petition was not maintainable on account of availability of alternative remedy, the High Court has interfered with the writ petition only on the ground that the matter was pending for sometime before it and if the petition was not entertained, the Borrower would be left remediless - the High Court has failed to take into consideration the conduct of the Borrower. It is further to be noted that, though the High Court had been specifically informed that, on account of subsequent developments, that is confirmation of sale and registration thereof, the position had reached an irreversible stage, the High Court has failed to take into consideration those aspects of the matter.
The High Court ought to have taken into consideration that the confirmed auction sale could have been interfered with only when there was a fraud or collusion. The present case was not a case of fraud or collusion. The effect of the order of the High Court would be again reopening the issues which have achieved finality.
Thus, the High Court has grossly erred in entertaining and allowing the petition under Article 226 of the Constitution - impugned order set aside - appeal allowed.
- 2024 (4) TMI 465
Time limitation - Refusal to condone the delay in challenging the Order passed by the Competent Authority and Administrator, SAFEM(FOP)A, 1976 and NDPS Act, 1985, New Delhi - HELD THAT:- A perusal of the judgments in CHHATTISGARH STATE ELECTRICITY BOARD VERSUS CENTRAL ELECTRICITY REGULATORY COMMISSION AND OTHERS [2010 (4) TMI 1031 - SUPREME COURT] and M/S. PATEL BROTHERS VERSUS STATE OF ASSAM AND OTHERS [2017 (1) TMI 330 - SUPREME COURT] show that if a special Act provides for a special period of limitation then Sections 4 to 28 of the Limitation Act cannot be made applicable and, therefore, there is no power in the Appellate Tribunal to condone the delay. In the facts of the present case, admittedly the last date for filing the appeal had expired on 04.08.2023 and the appeal was filed on 20.09.2023 and, therefore, the Appellate Tribunal Could not have condoned the delay between 04.08.2023 and 20.09.2023.
It is equally well settled that the High Courts while exercising jurisdiction under Article 226 of the Constitution of India cannot go beyond the framework of a statute.
This Court does not find any reason to interfere with the Order dated 21.11.2023 passed by the Appellate Tribunal refusing to entertain the appeal filed by the Petitioner herein beyond the prescribed period of limitation.
The writ petition is dismissed.
- 2024 (4) TMI 425
Interpretation of a contract condition, which required the measurement of quantities used for payment for embankment construction with soil or with pond ash - Section 34 of the Arbitration and Conciliation Act, 1996 - HELD THAT:- This Court, in VOESTALPINE SCHIENEN GMBH VERSUS DELHI METRO RAIL CORPORATION LTD. [2017 (2) TMI 1239 - SUPREME COURT] commenting on the value of having expert personnel as arbitrators, emphasized that "technical aspects of the dispute are suitably resolved by utilising their expertise when they act as arbitrators."
The prevailing view about the standard of scrutiny- not judicial review, of an award, by persons of the disputants' choice being that of their decisions to stand- and not interfered with, [save a small area where it is established that such a view is premised on patent illegality or their interpretation of the facts or terms, perverse, as to qualify for interference, courts have to necessarily chose the path of least interference, except when absolutely necessary]. By training, inclination and experience, judges tend to adopt a corrective lens; usually, commended for appellate review. However, that lens is unavailable when exercising jurisdiction Under Section 34 of the Act. Courts cannot, through process of primary contract interpretation, thus, create pathways to the kind of review which is forbidden Under Section 34 - As long as the view adopted by the majority was plausible- and this Court finds no reason to hold otherwise (because concededly the work was completed and the finished embankment was made of composite, compacted matter, comprising both soil and fly ash), such a substitution was impermissible.
It is evident that a dissenting opinion cannot be treated as an award if the majority award is set aside. It might provide useful clues in case there is a procedural issue which becomes critical during the challenge hearings. This Court is of the opinion that there is another dimension to the matter. When a majority award is challenged by the aggrieved party, the focus of the court and the aggrieved party is to point out the errors or illegalities in the majority award. The minority award (or dissenting opinion, as the learned authors point out) only embodies the views of the arbitrator disagreeing with the majority. There is no occasion for anyone- such as the party aggrieved by the majority award, or, more crucially, the party who succeeds in the majority award, to challenge the soundness, plausibility, illegality or perversity in the approach or conclusions in the dissenting opinion - the so-called conversion of the dissenting opinion, into a tribunal's findings, [in the event a majority award is set aside] and elevation of that opinion as an award, would, with respect, be inappropriate and improper.
The awards, which were the subject matter of challenge, and to the extent they were set aside, are hereby upheld and restored. The direction in the awards, to the extent they required compounded monthly interest payments, are modified. Instead, the NHAI shall pay uniform interest on the amounts due, on the head concerned, i.e., construction of embankment, to the extent of 12% from the date of award to the date of payment, within eight weeks from today.
Appeal allowed.
- 2024 (4) TMI 368
Dishonour of Cheque - seek production of documents in order to discover or to obtain proper proof of the relevant facts - Section 311 of the Cr. P.C. - HELD THAT:- The petitioner seeks to place on record the pleadings of the parties in the Petition filed by the respondents before this Court. The said petition had culminated in the judgment and Order dated 18.02.2019 of this Court. It is thereafter, that the Notice under Section 251 of the Cr. P.C. was framed against the respondents, on 08.04.2019. On 16.09.2019, the petitioner, by way of an application filed under Section 311 of the Cr. P.C., sought to bring on record the documents that are now being sought to be brought on record by way of the application in question. The said application was withdrawn by the petitioner on 23.10.2019. The petitioner has not sought to explain the reason for withdrawing the said application, nor submitted any change in circumstances that would justify a new application with the same prayer to be filed afresh.
The judgment of the High Court of Bombay in U.T. OF DADRA AND HAVELI AND ORS. VERSUS FATEHSINH MOHANSINH CHAUHAN [2006 (8) TMI 684 - SUPREME COURT] cannot come to the aid of the petitioner, as in the said case, the earlier application under Section 311 of the Cr. P.C. seeking recall of PW2 therein, had been filed by the complainant therein. However, the same was withdrawn by the complainant. Within four days thereof, the prosecution filed an application seeking recall of four witnesses, including PW2, contending that these witnesses had earlier deposed due to threats received by them from the accused. It was in those peculiar facts, that the High Court of Bombay upheld the Order of the learned Trial Court therein allowing the application of the prosecution.
The application in question in the present case has been, admittedly, filed at a belated stage. It appears to be an afterthought. It only makes vague averments, and is also bereft of any explanation with regard to such delay. The learned Trial Court has also correctly observed that the petitioner has failed to file such documents with the complaint(s) itself or at an earlier and appropriate stage, even after being in possession of the said documents. There is also no explanation in the application in question with regard to the withdrawal of the earlier application seeking similar relief.
The learned Trial Court has, therefore, rightly rejected the application in question by the Impugned Order and has also given detailed and cogent reasons while dealing with the same. Therefore, the Impugned Order does not warrant any interference by this Court.
There are no merit in the present petitions. The same are, accordingly, dismissed.
- 2024 (4) TMI 366
Bills of Exchange - Discounting of bill or Document Collection Method - appellant would vehemently contend that the learned Trial Judge was not right in treating the transaction as a 'Bill Discounting Transaction' where the appellant had assured payment - HELD THAT:- Though appellant would contend that there was no underlying LC or BG or an OCC limit in favour of the first defendant to support these transactions, we are unable to accept his contention as the arrangement between the first and second defendants are exclusively within their knowledge and the presence or absence of LC or BG or an OCC limit will not affect the liability of the second defendant as against third parties more so when the Bank has chosen to issue a SFMS message confirming that the bill will be cleared on 22.08.2017. This is also confirmed by the e-mail dated 06.06.2017 wherein there is a clear and categorical undertaking by the appellant / Bank to pay the bill amount on the due date.
A similar question was considered by a Single Judge of this Court in REVATHI – C.P. EQUIPMENTS LTD. VS. SANGEETHA TUBEWELL CORPORATION, MADRAS [1988 (10) TMI 289 - MADRAS HIGH COURT] wherein the impact of Sections 32 and 37 of the Negotiable Instruments Act, 1881, was considered. This Court ultimately concluded that if the Bill of Exchange is accepted by a Bank that by itself confirmed a separate and independent contract.
Once the Bill of Exchange is accepted by the Bank, the Banker would be liable as an acceptor under Section 37 of the Act.
There are no reason to interfere with the judgment of the learned Single Judge and the appeal fails and the same is dismissed.
- 2024 (4) TMI 332
Freezing of Bank Accounts - investigation under the FCRA - Seeking to continue utilising their accounts for payment of salary and institutional expenses - Section 37 of the Foreign Contribution (Regulation) Act 2010 - Contempt petition - HELD THAT:- The petitioner had taken the Court through various documents to show that actually there was no contempt and whatever amount had been withdrawn was within the permissible limits depending upon the expenses incurred in the previous years and the allegations of any withdrawal from the accounts for purposes other than the salary and institutional expenses, is not correct.
The petitions disposed off making the interim order dated 7th April, 2021 absolute, however, with a rider that the petitioners would not only maintain proper and complete statement of accounts but would also get the same audited by a Chartered Accountant and provide quarterly statements of the same to the Investigating Officer or to the Trial Court on regular basis. The pending proceedings before all other forums to continue in accordance with law where it would be open for all the parties concerned to raise all such contentions as may be available under law.
The contempt petition stand disposed of.
- 2024 (4) TMI 218
Dishonor of Cheque - Ascertaining nature of transaction - whether a criminal proceeding can be initiated and an accused held guilty when there is already a civil court decree concerning the same transaction - criminal jurisdiction would be bound by the civil Court or not - HELD THAT:- This Court in Satish Chander Ahuja vs. Sneha Ahuja [2020 (10) TMI 1379 - SUPREME COURT] considered a numerous precedents, including Premshanker [2002 (9) TMI 849 - SUPREME COURT] and Vishnu Dutt Sharma [2009 (5) TMI 862 - SUPREME COURT], to opine that there is no embargo for a civil court to consider the evidence led in the criminal proceedings.
The position as per Premshanker is that sentence and damages would be excluded from the conflict of decisions in civil and criminal jurisdictions of the Courts. Therefore, in the present case, considering that the Court in criminal jurisdiction has imposed both sentence and damages, the ratio of the above-referred decision dictates that the Court in criminal jurisdiction would be bound by the civil Court having declared the cheque, the subject matter of dispute, to be only for the purposes of security.
The criminal proceedings resulting from the cheque being returned unrealised due to the closure of the account would be unsustainable in law and, therefore, are to be quashed and set aside. Resultantly, the damages as imposed by the Courts below must be returned to the appellant herein forthwith - Appeal allowed.
- 2024 (4) TMI 217
Criminal Conspiracy - Challenge to impugned order primarily on grounds that the prosecution case is based on speculations and the trial court has failed to appreciate the prosecution story in right perspective - Existence of conspiracy between the appellants Arun Kumar Gurjar and Baljeet Singh as alleged by the prosecution or not - HELD THAT:- In the present case the complainant PW 1 brought one typed complaint in office of CBI which was stated to be not properly addressed. Thereafter another complaint Ex. PW 1/A was retyped in office of CBI and said complaint is basis of registration of present FIR. There is nothing on record which can suggest that the contents of previous complaint which was already typed in office of the complainant PW 1 were materially different from the complaint Ex. PW 1/A which was retyped in office of CBI - The trial court rightly held that there was nothing to prove that there was any material change in the retyped complaint except the proper address as clarified by the complainant PW 1 during his testimony and no importance can be given on aspect of change of complaint in the facts and circumstances. The trial court rightly observed that case law cited on behalf of the appellants as referred herein above can be distinguished under facts and circumstances of present case.
It is accepted legal proposition that delay in lodging FIR must be properly explained to rule out chance of manipulation and embellishments. In present case the appellants Arun Kumar Gurjar and Baljeet Singh were handling income tax assessment of firm of the complainant i.e. MPVC. The appellants Arun Kumar Gurjar and Baljeet Singh as per the complainant initially demanded bribe of Rs. 1.5 lacs in month of October, 2010 which was raised to Rs. 5 lacs in month of December, 2010 which the complainant was not able to pay and thereafter the complainant on 28.12.2010 lodged the complaint Ex. PW 1/A which was basis of registration of FIR. The prosecution under given facts and circumstances of case has properly explained delay in registration of FIR. There is no legal force in arguments advanced on behalf of appellants Arun Kumar Gurjar and Baljeet Singh that there was unexplained delay in registration of FIR.
The appellant Baljeet Singh was assisting the appellant Arun Kumar Gurjar in the income tax assessment case of MPVC and was writing the order sheets. The trial court further observed that the appellant as per testimony of the complainant PW 1, the appellant Baljeet Singh was continuously in the touch in respect of demand of bribe. The trial court held that in ordinary course of events, it is hard to believe that the complainant PW 1 will go to the extent of lodging false case against the appellant Baljeet Singh on account of minor argument much prior to present case - in consideration of the trial court plea of false implication of the appellants Arun Kumar Gurjar and Baljeet Singh by the complainant PW 1 did not inspire any confidence and there is no convincing material on record to accept the plea of false implication. The trial court as such considered plea of false implication of the appellants Arun Kumar Gurjar and Baljeet Singh by the complainant PW 1 due to reasons as mentioned hereinabove in detail and in right perspective. The plea of false implication is without any justification and there is no force in arguments advanced by the learned Senior Counsels for the appellant Arun Kumar Gurjar and the Baljeet Singh that they were falsely implicated at instance of the complainant.
Existence of conspiracy between the appellants Arun Kumar Gurjar and Baljeet Singh as alleged by the prosecution - HELD THAT:- The inference of conspiracy between the appellants Arun Kumar Gurjar and the Baljeet Singh cannot be based on the shaky ground that the appellant Baljeet Singh met the complainant PW 1 in the room no. 207 which belonged to the appellant Arun Kumar Gurjar. The charge of conspiracy between the appellants Arun Kumar Gurjar and Baljeet Singh cannot be deemed to have been established on mere suspicion and surmises or inferences which are not supported by cogent and acceptable evidence and has to be proved beyond reasonable doubt which it has not been.
It is accepted legal proposition that proof of demand and acceptance of the gratification is a sine qua non to constitute offence punishable under section 7 of the PC Act and presumption under section 20 of the PC Act can be invoked only on proof of demand of gratification by the accused and the acceptance thereof. The offence under Section 7 cannot be established unless demand and acceptance are established. It is also accepted legal proposition that mere acceptance of any illegal gratification or recovery thereof in the absence of proof of demand would not be sufficient to bring home the charge under Sections 7 of the PC Act.
The prosecution has failed to prove the acceptance of the tainted money by the appellant/Arun Kumar Gurjar and substantial doubts are appearing from the evidence led by the prosecution as to the guilt of the appellant Baljeet Singh - The impugned judgment and impugned order passed by the trial court are set aside and appellants are acquitted for the offence for which they were charged. If the appellants Arun Kumar Gurjar and Baljeet Singh have deposited any fine in terms of impugned order, they are entitled for refund of fine.
Accordingly, the appeals are allowed.
- 2024 (4) TMI 164
Conscious possession of contraband item - poppy seeds - facts not put to the appellant during his examination - Section 313 of Cr.P.C. - violation of principles of natural justice - HELD THAT:- The circumstance against the appellant that he visited the railway station and enquired with the station supervisor about the contraband parcels has not been put to the appellant during his examination under Section 313 of Cr.P.C - Even the alleged circumstance that the railway receipt was in the appellant’s name has not been put to him in his statement under Section 313 of Cr.P.C.
The circumstances on which the prosecution relied upon against the appellant were not put to him in his examination under Section 313 of Cr.P.C. Even the question No. 15 does not incorporate any specific circumstance against the accused - the circumstances alleged against the appellant will have to be kept out of consideration. There is no other material on record to connect the appellant with the offence. The incident is of May, 2001, and therefore, it will be unjust to subject the appellant to further examination under Section 313 of Cr.P.C. at this stage, nearly twenty-two and half years from the date of the alleged recovery of the contraband. As the only material circumstances pleaded by the prosecution against the appellant were not put to him, a serious prejudice has been caused to the appellant’s defence.
The appellant has undergone incarceration of five and a half years. If, after the lapse of more than twenty-two years, he is again subjected to examination under Section 313 of Cr.P.C., it will cause prejudice to him. Therefore, the failure to put two relevant circumstances to the appellant in his examination under Section 313 Cr.P.C. will be fatal to the prosecution case. Hence, on this ground, the appellant’s conviction cannot be sustained.
The impugned judgments of the Trial Court and High Court are set aside only insofar as the present appellant is concerned - Appeal allowed.
- 2024 (4) TMI 107
Constitutional power of the Central Government over State - The imposition of a Net Borrowing Ceiling on the state - The inclusion of State-Owned Enterprises in the borrowing restrictions - The adjustment of over-borrowing from previous fiscal years against the current year's borrowing limit - True import and interpretation of the expression “if and in so far as the dispute involves any question (whether of law or fact) on which the existence or extent of a legal right depends” contained in Article 131 of the Constitution - scope and extent of Judicial Review exercisable by this Court with respect to a fiscal policy - balance of convenience.
Whether the Plaintiff – State can be granted the ad-interim injunction? - HELD THAT:- It has been admitted by the Plaintiff – State that there has been over-borrowing/over-utilization of the borrowing limit between the F.Ys. 2017-18 and 2019-20. It is not denied that if, as contended by the Union, such over-borrowings are adjustable in the succeeding years, then the State has already exhausted its borrowing limits for the F.Y. 2023-24 - prima facie, there is a difference in the mechanism which operates when there is under-utilization of borrowing and when there is over-utilization of borrowing. The Plaintiff – State has not been able to demonstrate at this stage that even after adjusting the over-borrowings of the previous year, there is fiscal space to borrow.
There are prima facie merit in the submission of the Union of India that after inclusion of off budget borrowing for F.Y. 2022-23 and adjustments for over-borrowing of past years, the State has no unutilized fiscal space and that the State has over-utilized its fiscal space - the argument of the Plaintiff cannot be accepted at the interim stage that there is fiscal space of unutilized borrowing of either INR 10,722 crores as was orally prayed during the hearing or INR 24,434 Crores which was the borrowing claimed in the negotiations with the Union.
The Plaintiff – State has failed to establish a prima facie case regarding its contention on under-utilization of borrowing. Further, with respect to its other contentions, while the Plaintiff has sought to construe Article 293 restrictively to limit the Central government’s power only to the loans granted by it, the Defendant has contended that if Article 293 is read in such a manner, it would render this provision redundant as the Central Government has an inherent power as a lender to impose conditions on such loans even in the absence of any express constitutional provision. Similarly, the Defendant has contested the Plaintiff’s narrow reading of the term ‘borrowing’ and has argued that off-budget borrowings could also be included in the same if they are used to by-pass the conditions imposed under Article 293 of the Constitution - Since this Article has not been the subject of an authoritative pronouncement of this Court so far, the Plaintiff’s contention over the Defendant’s interpretation cannot be acceptedby taking it on face value.
Since the Plaintiff – State has failed to establish the three prongs of proving prima facie case, balance of convenience and irreparable injury, State of Kerala is not entitled to the interim injunction - Appeal disposed off.
- 2024 (4) TMI 29
Dishonour of cheque - Legally recoverable debt or liability - respondent/accused was acquitted of the offence under Section 138 of the NI Act - want of supporting certificate under section 65B of the Evidence Act - inadmissible evidence - HELD THAT:- There is evidence in the form of ledger book Ex. AW-1/1 which shows the supply of material by the respondents/accused to the complainant. That apart there is also an admission of the complainant in his cross-examination that the accused used to sell goods to the complainant. On the other hand, the complainant failed to produce and prove the bill and invoices raised against the accused. He also failed to prove the statement of account despite admitting that he maintains the account statement and the bills regarding supply of material to the accused were entered in the account statement.
The view taken of the evidence by the learned Trial Court is a plausible view and no perversity has been pointed out in the same.
It is trite law that the scope of interference in an appeal against acquittal is very limited. Unless it is found that the view taken by the Court is impossible or perverse, it is not permissible to interfere with the finding of acquittal. Equally if two views are possible, it is not permissible to set aside an order of acquittal, merely because the Appellate Court finds the view of conviction to be more probable. The interference would be warranted only if the view taken is not possible at all.
There are no infirmity in the impugned judgment and no interference is warranted - appeal dismissed.
- 2024 (4) TMI 1
Dishonour of Cheque - MoU between the parties contained an arbitration clause, pursuant to which arbitration proceedings have been initiated - maintainability of complaint under Section 138 NI Act - HELD THAT:- The arbitration proceedings as well as the proceedings under Section 138 of the NI Act arise from separate causes of action and the pendency of the arbitration proceedings would not affect the proceedings under Section 138 of the NI Act. There is no merit in the contention of the petitioners that the complaint under Section 138 of the NI Act is not maintainable in view of the ongoing arbitration proceedings between the parties. Additionally, whether the aforesaid cheque was given as a security or not is something which can only be proved as a matter of defence during trial.
There is no merit in the present petition - the present petition is dismissed.
- 2024 (3) TMI 1278
Cancellation of allotment of land on the basis of an alleged false affidavit - whether the petitioner had submitted a bona fide and genuine affidavit at the time of submission of his application seeking allotment of alternate plot of land in lieu of the compulsory land acquisition of his property? - HELD THAT:- The Allahabad High Court in IN RE : RAM KUMAR RAMNIWAS OF NANPARA [1952 (8) TMI 32 - HIGH COURT OF ALLAHABAD] had held that the HUF is not like a corporation or a limited concern and it cannot, therefore, be said that it had a legal entity quite distinct and separate from that of those who constituted it. It further observed that HUF is a status which can only be acquired by birth or adoption and the head or karta of that family has certain rights by which he can bind every member of the family though, the property may not belong to him and belongs to all. In another words, it appears to this Court that though the HUF may be a legal entity for the purposes of Income Tax and may hold a property in its own name, yet it cannot be said that the individual members constituting it, do not have any share in the said property. The share in such property on devolution may change or vary in proportions with the increase or decrease in the members constituting the HUF. This surely cannot mean that the individual members do not have any rights whatsoever over the HUF property.
It is clear that the HUF under the Income Tax Act, 1961 is a juridical person. However, the right or entitlement of the individual members constituting such HUF in respect of any property owned by it, has also been accepted. The role of karta in respect of such property is also clearly delineated - All the analysis leads this Court to the firm conclusion that the property belonging to the HUF also belongs to each of the individual constituents in the proportionate share. In another words, every member of the HUF has some share in the said property.
Thus, it is clear that though the Defence Colony Property was placed in the common hotchpotch of the HUF in the year 1962, yet the shares of the petitioner as also his wife and two minor children, as they then were, in the said property cannot be undisputed. As to what were the proportion of shares, is irrelevant to consider in the present dispute - this Court needs to examine as to whether the petitioner can now be said to have violated the eligibility conditions at the time of filing the affidavit in support of the application for allotment of alternate plot of land.
As on that date, not only the petitioner but also the family members, who individually constituted the HUF had a proportionate share in the Defence Colony Property. This fact was not disclosed. In the considered view of this Court, this was a concealment of material fact, which would have otherwise disentitled the petitioner from allotment of alternate plot of land as per the 1961 Scheme - The argument that the petitioner had thrown the self-acquired Defence Colony Property in the common hotchpotch of the HUF in the year 1962 even before the compulsory acquisition of his lands in the year 1964, and as such, had not committed any concealment is concerned, the same is recorded only to be rejected. The said rejection is on the basis of the aforesaid reasons in the preceding paragraphs, holding that each of the individual members of the HUF had proportionate share in such property.
The sanctity of the declaration and solemn affirmation was to be maintained at all times. In case an applicant furnished a false declaration or concealed material facts, it would be direct violation/contravention of mandatory condition of allotment. Since the petitioner had not disclosed the existence of a HUF property of which the petitioner himself was the karta and his wife and two minor children were the remaining members, in the considered opinion of this Court, that sanctity was broken.
Though the Defence Colony property was claimed to have been thrown in the common hotchpotch of the HUF in the year 1962, there was no reason furnished by the petitioner as to why the mutation of the said property in the name of HUF was not applied for till the month of January, 1979 which was finally carried out by the authority on 26.10.1979. Admittedly, the said property was leased out on rent indicating that the petitioner was not in dire need of an alternate plot of land.
There is no doubt that there was a delay however, keeping in view the ratio down by the Supreme Court in SP CHENGALVARAYA NAIDU VERSUS JAGANNATH [1993 (10) TMI 315 - SUPREME COURT], whereby it was categorically laid down that ‘fraud vitiates all solemn acts’. On the strength of this, this Court is of the considered opinion that the petitioner had obtained the allotment of an alternate plot by concealment of material facts amounting to fraud and as such cannot be heard to say that the respondents have delayed adjudication of the show cause notice. In that view of the matter, the said argument has no substance.
There is no merit in the writ petition and the same is dismissed.
- 2024 (3) TMI 1168
Time Limitation - Election Petition filed to challenge result of an Election (public) - Whether any procedural deficiency in the proceedings filed online within the prescribed limitation period designated with objection can be labelled as proceedings filed beyond limitation? - HELD THAT:- This Court observed that any deficiency in filing the Appeal / Application for failure to file the physical documents, cannot make the Appeal or the proceedings which was registered on the online portal within the prescribed period of limitation to be labelled and held to be barred by limitation. This Court held that once the proceedings are filed albeit under the online method within the prescribed limitation, any deficiency in the same certainly could be removed later on as the law does not provide that proceedings be strictly filed sans deficiency and only then the proceedings would be held to be validly filed.
While referring to the e-filing Rules applicable to the present case, it is seen that there is nothing in the said Rules which could construe that the proceedings which have been filed by Petitioners on 20.11.2023 would debar them from maintaining the Election Petition. It is clear that the Petition is filed online and electronically by them before the end of the limitation period generating the remark “Document not serial”. This Court has held that to take an extreme view that if there is deficiency in filing it would debar the party from maintaining the action would tantamount to patent absurdity and it would result in gross injustice prejudicially affecting the legitimate right of persons to a legal remedy (access to justice). It is trite that parties will undoubtedly have an opportunity to remove the deficiencies, if any, which may prevail at the time of filing the proceedings, after the proceedings are filed.
This Court has observed that procedural compliances can never defeat the substantive remedy and right to pursue substantive challenge and proceedings when filed within the limitation period - In the present case the procedural deficiency noted as “Document not serial” after admittedly electronically filing and registration of the Election Petition online on 20.11.2023 cannot be held to be as the Petition being not filed within the limitation period. What is crucial is the fact of receiving the Petition in the record of the Registry, which infact has been accomplished.
The impugned orders dated 21.12.2023 passed by the learned Trial Court though have rejected the Application filed by Writ Petitioners which was on account of considering the physical filing of the Election Petition two days later, the jurisdiction of this Court and the amplitude of this Court while hearing writs under its extraordinary jurisdiction under Articles 226 and 227 of the Constitution of India is extremely wide - The objection raised or subsequent act of the Petitioners to file the Petition physically later cannot render the electronic filing of the Petition on 20.11.2023 as nugatory. Petitioners’ right to maintain challenge is upheld as the Petitions are held to have been filed on 20.11.2023 online, despite the objection raised. The objection undoubtedly being a curable defect. This Court can always cure the defect of the action which is occurred.
Both the aforesaid Election Petitions have been filed within limitation on 20.11.2023 which was supposed to expire on 21.11.2023. They have therefore to be accepted as filed within limitation - Petition allowed.
|