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Magma HDI General Insurance Company Ltd. Versus Union of India & Others

2017 (9) TMI 286 - CALCUTTA HIGH COURT

Power of access the premises of the assessee - Vires of Rule 5A(1) of the Service Tax Rules, 1994 - Rule 5A(2) of the Service Tax Rules, 1994 has been declared ultra vires once. Such a Rule was amended subsequently. The amended Rule is presently under challenge - Is Rule 5A(1) of the Service Tax Rules, 1994 ultra vires the Finance Act, 1994? - Held that: - Sub-section (2) of Section 82 employs the provisions of the Code of Civil Procedure, 1973 relating to searches for the searches to be made un .....

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carrying out any scrutiny, verification and checks as may be necessary to safeguard the interest of the revenue. Access to the premises is a lesser power than the power to search the premises as granted under Section 82 of the Act of 1994. Sub-rule (1), therefore, cannot be construed to mean that, it is in excess of the parent power of searching the premises as granted under Section 82 of the Act of 1994 - decided against petitioner. - Are the proceedings taken by the respondent no. 2 again .....

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ioner who is engaged in the business of insurance and is suspected to have indulged in such wrongful practices is required to be examined so also officers of the petitioner involved in the transactions - In such circumstances, I am not in a position to say that, the proceedings taken by the respondent no. 2 against the petitioner are required to be quashed. The second issue is answered in the negative and against the petitioner. - Petition dismissed - decided against petitioner. - W. P. No. .....

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ner has challenged the vires of Rule 5A(1) of the Service Tax Rules, 1994. The petitioner has also assailed the action taken by the respondent no. 2 particularly the Summons dated July 17, 2015 and June 8, 2016 and the letter dated June 22, 2016. Learned Advocate for the petitioner has submitted that, Rule 5A(2) of the Service Tax Rules, 1994 has been declared ultra vires once. Such a Rule was amended subsequently. The amended Rule is presently under challenge. He has referred to Section 82 of t .....

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nquiry which such officer is making for any of the purposes of the Act of 1944. He has submitted that, in the facts of the present case, there was no enquiry pending and that, an appropriate officer did not form an opinion requiring a search and seizure to be carried out at the premises of the petitioner. He has submitted that, a group of officers claiming to be authorised by the respondent no. 2 had visited the premises of the petitioner at Kolkata on July 17, 2015. A section of the officers we .....

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office of the respondent no. 2 at 15:00 hours on the same day. He has submitted that, the action of the officers from the Chennai office of the respondent no. 2 is wholly without jurisdiction as, the petitioner is assessed at Kolkata and that, the Kolkata office has jurisdiction over the premises of the petitioner as well as the petitioner. He has submitted that, the officers of the respondent no. 2 had continued with the illegal action despite the protest in writing by the petitioner. He has re .....

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l Officer Commanding-in-Chief & Anr. v. Dr. Subhash Chandra Yadav & Anr.) learned Advocate for the petitioner has submitted that, a Rule made beyond the Rule-making power is invalid. He has referred to 2016 Supreme Court Cases Online Del page 3630 (Mega Cabs Pvt. Ltd. v. Union of India) and submitted that, sub-rule (2) of the Service Tax Rules, 1994 has been declared ultra vires by the Delhi High Court. He has submitted that, sub-rule (1) of the Service Tax Rules, 1994 gives unbridled po .....

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provisions of Section 82 of the Finance Act, 1994 and Rule 5A of the Service Tax Rules, 1994. On the parity of reasoning as of Mega Cabs Pvt. Ltd. (supra) sub-rule (1) of Rule 5A of the Service Tax Rules, 1994 should also be declared ultra vires. Learned Additional Solicitor General appearing for the Union of India has submitted that, the respondent no. 2 is the intelligence wing of Central Excise. It had received credible intelligence that a large number of insurance companies were taking ille .....

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Directorate of Central Excise intelligence, Chennai Zonal Unit as contained in the letter dated June 18, 2015 of such Zonal Unit. The officers of the respondent no. 2 had issued the Summons dated July 17, 2015 under Section 14 of the Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994. Such Summons were issued from the camp at Kolkata. The Summons were duly received by the petitioner. The officers of the respondent no. 2 has jurisdiction on all India basis in terms of the noti .....

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, no service of any nature was actually provided by them to the petitioner, though such dealers have raised invoices mentioning rendering of certain services. According to such dealers, they had prepared the invoices based on formats of invoices sent by Electronic Mail by the petitioner for claiming the payouts. Since the details provided by the Chief Finance Officer of the petitioner in his statement dated July 17, 2015 was at variance with the documents and statements of the dealers provided d .....

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994? (ii) Are the proceedings taken by the respondent no. 2 against the petitioner required to be quashed being in excess of the powers? The first petitioner is engaged in the business of insurance. The Directorate General of Central Excise Intelligence claims that, it had developed and collected credible intelligence that a large number of general insurance companies in India are taking illegal credit of Central CENVAT on invoices issued by car dealers for which no service has been provided by .....

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ioner of Central Excise or Additional Commissioner of Central Excise or such other Central Excise officer as may be notified by the Board has reasons to believe that any documents or books or things, which in his opinion shall be useful for or relevant to any proceedings under this Chapter, are secreted in any place, he may authorise in writing any Central Excise officer to search for and seize or may himself search and seize such documents or books or things. (2) The provisions of the Code of C .....

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ation of the Delhi High Court in 2014 Supreme Court Cases Online Del page 3943 (Travelite (India) v. Union of India & Ors.). The Delhi High Court had held that, sub-rule (2) of Rule 5A of the Service Tax Rules, 1994 is ultra vires the rule making power conferred under Section 94(1) of the Finance Act, 1994. Such rule was struck down. A different version of sub-rule (2) was introduced subsequent to the decision of Travelite (India) (supra). The amended sub-rule (2) had received the considerat .....

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ted by the Commissioner or the Comptroller and the Auditor General of India or a Cost Accountant or Chartered Accountant nominated under Section 72A of the Finance Act, 1994, the documents mentioned in clauses (i) to (iii) of such sub-rule. Sub-rule (1) on the other hand, permits an officer authorized by the Principal Commissioner or Commissioner, as the case may be, to have access to any premises registered under the Service Tax Rules, 1994 for the purpose of carrying out any scrutiny, verifica .....

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Rule 5A cannot be placed at the same pedestal as that of sub-rule (2). Section 82 of the Finance Act, 1994 allows a Central Excise Officer duly authorized to search and seize documents or books or things. Sub-section (2) of Section 82 employs the provisions of the Code of Civil Procedure, 1973 relating to searches for the searches to be made under the Act of 1994. The power to search given in Section 82, therefore, cannot be said to be unbridled. It has the checks, balances and parameters of the .....

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than the power to search the premises as granted under Section 82 of the Act of 1994. Sub-rule (1), therefore, cannot be construed to mean that, it is in excess of the parent power of searching the premises as granted under Section 82 of the Act of 1994. The first issue is, therefore, answered in the negative and against the petitioner. As noted above, the officers of the respondent no. 2 had entered into the premises of the petitioner on July 17, 2015. The entry was made on the basis of the Su .....

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he petitioner had made a statement which was found to be evasive. The documents required for investigation were obtained under a letter dated July 15, 2005 of the petitioner. The petitioner had produced certain documents/details by the letters dated July 29, 2015, July 31, 2015, November 10, 2015, April 7, 2016 and May 31, 2016. The statements of the Chief Finance Officer of the petitioner dated July 17, 2015 were found to be at variance with the documents/details provided by the dealers during .....

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