JAMUNA FIBRES PVT LTD Vs STATE OF HARYANA: PUNJAB AND HARYANA HIGH COURT (Dated: August 23, 2016)
Haryana GST - Rules 28A(4), 28A(10)(v) & 28A(11)(b)
Keywords - benefit of exemption - recovery order - violation of provision & withdrawal of eligibility certificate
Whether a recovery order passed for demand of tax and interest on account of violation of conditions laid down under Rule 28A(11)(a)(i) of Haryana GST Rules, can be quashed on ground of being time barred, by equating the same with an assessment order - NO: HC
The assessee had set up an industrial unit to manufacture cotton yarn, which came into production on 20th March, 1993. Being an eligible industrial unit in terms of Haryana GST, the assessee applied for issuance of eligibility certificate claiming the benefit of exemption from payment of tax. The eligibility certificate was issued to the assessee with validity from 20th March 1993 to 19th March 2002. After receipt of eligibility certificate, the assessee applied for issuance of exemption certificate, which was issued on 28th October, 1993 entitling the assessee to claim benefit of exemption from payment of tax to the extent of Rs. 72,11,700/-. The assessee continued availing the benefit till the validity of the eligibility certificate as well as the exemption certificate expired. Subsequently, vide an order passed under Rule 28A(11)(b) of Haryana GST Rules, the Deputy Excise & Taxation Commissioner, withdrew the entire benefit availed by the assessee on the ground that the assessee unit was required to continue its production for next five years after availing the benefit at the average level of last five years. The assessee was thereafter directed to deposit the entire amount of benefit availed of along with interest. During the pendency of appeal against the aforesaid order, a process was initiated for withdrawal of the eligibility certificate. Although the matter was put up in the meeting of Lower Level Screening Committee, it was however dropped by observing that the concerned department should have initiated action at its own level under Rule 28-A. Thereafter, the matter was then taken up under Rule 28A(4) the exemption certificate granted to the assessee was cancelled w.e.f 1st July 2000 and in view of Rule 28A(10)(v), the assessee was directed to deposit the entire amount along with interest.
Having heard the parties, the High Court held that,
++ in the case in hand, the facts as noticed above are that the period of eligibility of the appellant was from 20th March 1993 to 19th March 2002. The unit had stopped production in July, 2000. Out of the total amount of Rs. 72,11,700/-, the benefit to the extent of Rs. 27,95,959/- was availed upto 30th June 2000. There was violation of Rule 28A(9)(i) as the unit discontinued its business for a period exceeding six months during the period of exemption. Hence, the exemption certificate was liable to be 'cancelled'. In A. S. Fuels Pvt. Ltd.'s case, a Division Bench of this Court opined that the exemption certificate is renewed on year to year basis. It can be cancelled during its currency and as a result the demand of tax only for that year could be raised and not for the earlier period. When the matter went before the Supreme Court, it was opined that this Court had failed to take notice of the provisions of Rule 28A(11)(a) in terms of which a unit even after claiming the benefit will have to remain in production for next five years and on failure, to pay the entire amount of tax, the benefit of which was availed of in addition to interest. It was further noticed therein that the eligibility certificate granted to the unit had also been withdrawn. In the case in hand as well as on the admitted facts, Rule 28A(11)(a) will also come into play on account of closure of production by the assessee, after it had availed of the benefits upto 30th June 2000;
++ as far as the contention raised by counsel for assessee regarding the assessment being time barred is concerned, the A.Ys involved in these cases are from the years 1992-93 to 2000-2001. As per Sections 28(4) and (5) of the Act, the AO could proceed to frame assessment for any period within five years from the last date of filing of returns. The contention of the counsel is that the orders of assessment having been passed even after a period of three years of the enactment of VAT Act w.e.f 1st April 2003 are time barred. The contention of counsel for assessee may be meritorious if the order passed by the AO was an order of assessment. However, a perusal of the order shows that in fact, it is not an assessment order, rather an order passed for demand of tax and interest on account of violation of conditions laid down in Rule 28A(11)(a)(i), which specifically provides that in case after availing the benefits, the unit does not remain in production for next five years, the entire amount of tax benefits availed of, shall be payable along with interest. This rule operates in a totally different field and has its own application. The contention that the withdrawal of exemption certificate is possible only during its currency and consequently the tax payable, will not be applicable in this case as this has operation after the benefit had been availed of and the currency of eligibility as well as exemption certificate is already over. The order further suggest that for the A.Y in question, the tax had already been calculated by the AO and it was that amount only which was sought to be recovered along with interest thereon. The order is not in the form of assessment order as framed in terms of provisions of the Act specifying the gross turnover and thereafter granting rebates and applying rate of tax for the purpose of final assessment. For the reasons mentioned, no substantial question of law arises for consideration.
Assessee's appeal dismissed
2016-TIOL-1933-HC-AP-CT
KOTHAMASU NASARAMMA Vs DCTO: ANDHRA PRADESH HIGH COURT (Dated: August 23, 2016)
Andhra Pradesh General Sales Tax Act, 1957 - Section 12 - Andhra Pradesh General Sales Tax Rules, 1957- Rule 28(8)
Keywords: surety, recovery, demand, tax arrears, net turnover, total turnover
Whether the requirement of furnishing security deposit is independent of the liability of a surety to bear the tax arrears, due from the defaulting dealer, for a period of one year - Yes: HC
Whether the tax payable on the net turnover, as determined by the assessing authority, would form the basis of its recovery from the surety - Yes: HC
Whether the surety given by a person, on behalf of the assessee, would remain in force against the tax payable under the APGST Act for a year as estimated by the assessee - Yes: HC
The petitioner is living in house along with her son, daughter-in-law and grandson; she does not have any other property. Her son was a partner in Sri D. The said firm had applied for registration under Section 12 in Form-D alongwith which it had filed Form-A return of estimated turnover under Rule 28(8) of the APGST Rules. At the instance of her son she had agreed to be a surety, and had executed a surety bond only to the extent of her son’s liability. She received a notice in Form-4 issued under the Andhra Pradesh Revenue Recovery Act demanding that she, as the surety, should pay the tax dues of the partnership firm for the years 1997-98 and 1998-99. She addressed a letter to the first respondent requesting him to furnish a copy of the Form-D application filed by the firm, a copy of the surety bond executed by her, a copy of the Form-A return of estimated turnover filed by the firm, a copy of the assessment order passed against the firm for the year 1997-98, and a copy of the partnership deed. It is alleged that the first respondent furnished her the copies sought for, except the copy of the Form-A return filed under Rule 28(8) of the APGST Rules. It was alleged that the said Form-A would disclose the estimated tax due for a year to which extent alone could the surety be enforced statutorily and the first respondent had deliberately withheld a copy of the Form-A return which determines the surety’s liability. It was alleged that the tax estimated, in the Form-A return, was only Rs.8,000/- on the estimated taxable turnover of Rs.2,00,000/- from out of the gross turnover of Rs.20,00,000/-, hence the demand for payment of tax of Rs.2,78,533/- was contrary to Section 12 read with Rule 28(8) and the service of the assessment orderis illegal. It was alleged that the partnership firm had admitted liability only on a turnover of Rs.16,19,767/-; the tax thereon was only Rs.64,791/- which was paid by the partnership firm and the tax dues were however determined by the 2nd respondent on a best judgment assessment. As the firm had paid the tax, her liability as a surety was nil.
Having heard the parties, the Court held that,
++ the dealers, who had applied for registration and were required to furnish security deposit, were grouped into two categories i.e., (a) dealers applying for A.P.G.S.T. registration only, and (b) dealers applying for A.P.G.S.T. and C.S.T. registrations; for dealers, who applied for A.P.G.S.T. registration, a security deposit of Rs.2,000/- was directed to be demanded, and for those who had applied for registration both under the A.P.G.S.T. and the C.S.T. Acts, a security deposit of Rs.6,000/- was directed to be demanded uniformly. It is evident from the said circular dated 21.07.1997 that the security deposit of Rs.2,000/-/Rs.6,000/- was not stipulated as the security for the tax dues for the entire year and the Commissioner was conscious that, even if a dealer defaulted in payment of tax, the security deposit amount may not be sufficient to clear the tax arrears of one year. It is evident, therefore, that the requirement of furnishing security deposit is independent of the liability of a surety to bear the tax arrears, due from the defaulting dealer, for a period of one year; (para 9)
++ it is clear, from the Circular of the Commissioner dated 21.07.1997, that grant of registration under the APGST Act is on the basis of the information furnished by the dealer in Form-D which only required the dealer to provide, in column 19 thereof, information regarding their estimated total turnover. Rule 28(8) of the APGST Rules, which required the applicant seeking registration to furnish security for an amount not exceeding an amount equal to the tax payable under the A.P.G.S.T. Act for the year as estimated by him, relates only to the estimated total turnover for the year as referred to in column 19 of Form D. Form A on the other hand, as stipulated under Rule 9 of A.P.G.S.T. Rules, required the dealer to furnish information regarding the estimated total and net turnover. It would be wholly inappropriate to read the condition stipulated in Form A read with Rule 9 of the A.P.G.S.T. Rules into Form D read with Rule 28(8) of the A.P.G.S.T. Rules, ignoring clause 19 of Form-D. There is no material on record to show that the dealer had submitted Form A and enforcement of security could, therefore, have been based only on the estimated turnover as specified in column 19 of the application for registration in Form D; (para 15)
++ a surety is considered a "favoured debtor" and his liability is strictissimi juris. A surety is bound to the letter of his engagement. Beyond the proper interpretation of that engagement, there can be no hold upon him. He receives no benefit and no consideration. He is bound, therefore, merely according to the proper meaning and effect of the written engagement that he has entered into; (para 17)
++ the terms of a surety bond should be strictly construed, and any ambiguity therein should go to the benefit of the surety. The rule that a security bond must be strictly construed according to its own terms is certainly true where there is no ambiguity in the terms but, where there is a contradiction in terms, Section 95 of the Evidence Act allows a reference to antecedent circumstances. The terms of the surety bond, whenever there is any doubt, should be construed reasonably with reference to the surrounding circumstances. If it is reasonably clear that the contingency in which the bond is sought to be enforced would not fall within the language of the condition, it is not permissible to override that language in the light of what the parties intended if they did not succeed in expressing that intention in suitable language. If on the other hand, on a fair reading of the Bond in the light of the surrounding circumstance, the Court considers that the contingency in which the security is sought to be availed of falls reasonably within the language of the condition which is sufficiently wide to comprehend it, there is no rule compelling the Court to adopt the stricter of the two constructions to both of which the language may be susceptible;(para 18)
++ while a surety can only be bound by the letter of his/her engagement (i.e the letter of surety furnished by him/her), the surety bond, in the present case, makes no reference to the estimated tax, and refers only to the petitioner having voluntarily agreed to pay the tax dues to the Government in case her son defaulted in payment. It is also evident from the counter affidavit filed by the respondents that Form A, allegedly filed by the dealer, is not available on record and, while furnishing all the other documents sought for by the petitioner, a copy of Form-A could not be furnished as no such Form-A appears to have been submitted by the dealer earlier. In any event, except for a self-serving assertion that Form A was filed, no material has been placed on record by the petitioner to show that Form A was filed, and the turnover estimated therein is different from the estimated total turnover referred to in the Form D application filed on behalf of the dealer; (para 20)
++ what is referred to in column 19 of Form D (application for registration) is the estimated total turnover, and the said Form neither makes any reference nor does it separately provide for details being furnished of the estimated turnover as distinct from the estimated total turnover. It is evident, therefore, that the estimated turnover, as referred to in Rule 28(8), is the estimated total turnover referred to in column 19 of Form D. The assessment order dated 14.03.2001 records the assessee-dealer as having admitted a net turnover of Rs.16,19,767/-. The assessing authority, however, assessed the net turnover of the dealer as Rs.85,83,101/- for the year 1997-98, and levied tax thereon of Rs.3,43,324/-, After adjusting the tax paid of Rs.64,791/-, a notice in Form B-3 was issued for the balance tax due of Rs.2,78,533/-. The tax payable on the net turnover, as determined by the assessing authority, would form the basis of its recovery from the surety. As the applicant had declared the estimated total turnover, in the Form-D submitted by them, as Rs.20,00,000/-, the liability of the surety is to repay the tax dues on the said estimated total turnover of Rs.20,00,000/-; (para 22)
++ while the impugned order required the petitioner, as a surety, to pay the tax dues of the partnership firm for the years 1997-98 and 1998-99 i.e for Rs.2,78,533/- and Rs.6,95/566/- respectively, it is settled law that the surety given by a person, on behalf of the assessee, would remain in force against the tax payable under the APGST Act for a year as estimated by the assessee. As the estimated turnover declared in Form D is Rs.20,00,000/-, and the rate of tax during the said period was 4%, the liability of the surety, to pay the tax arrears of the partnership firm, is only upto Rs.80,000/- and not beyond. The impugned demand notice, to the limited extent the surety was called upon to pay an amount in excess of Rs.80,000/-, is set aside. The respondents may proceed and recover the arrears of tax, due from the partnership firm, upto a limit of Rs.80,000/- from the petitioner-surety under the Revenue Recovery Act. (para 25)
Assessee’s Petition partly allowed
2016-TIOL-2262-CESTAT-MUM + Story
NIHILENT TECHNOLOGIES PVT LTD Vs CST : MUMBAI CESTAT (Dated: August 18, 2016)
ST - Refund - Rule 5 of CCR, 2004 - Turnover of the services provided by the branches located in South Africa and UK is to be excluded from the 'export turnover' and the 'total turnover' of the assessee - Both, Revenue and assessee Appeals dismissed: CESTAT [para 5, 6]
Appeals dismissed
2016-TIOL-2261-CESTAT-MAD
SUNDARAM BUSINESS SERVICES LTD Vs CST: CHENNAI CESTAT (Dated: June 24, 2016)
ST - CENVAT - Appellants are entitled to take credit of service tax paid on Outdoor catering service, Car Hire Service and Electricity charges as they are Input services as defined in rule 2(l) of the CCR , 2004 - Legal position is settled in the matter - Denial of credit on these services by Commissioner (A) by relying upon Maruti Suzuki Ltd. is incorrect as the same is no longer good law in view of Supreme Court's decision in the case of Ramala Sahkari Chini Mills Ltd. Vs CCE Meerut-I- 2016-TIOL-20-SC-CX-LB ; Tribunal's ruling in Sundaram Brake Linings & Others Vs CCE stands overruled by the Madras High Court in appellants own case -2015-TIOL-580-HC-MAD-CX ; ratio laid down by Tribunal's Larger Bench in the case of Vandana Global would have no application to the facts of the present case as that was a case dealing with eligibility of cenvat credit on supporting structures - Appeal allowed: CESTAT [ para 6, 7]
Appeal allowed
2016-TIOL-2260-CESTAT-MAD
SRI RAMA MACHINERY CORPORATION LTD Vs CCE: CHENNAI CESTAT (Dated: July 5, 2016)
CX-Clandestine removal of goods-S.4 of CEA , 1944-Cum-duty price-It is shocking to know that how such a concession can be given to an evader who did not maintain authentic record recognized by law to demonstrate cum duty clearances-Appellant resorted to clandestine removal and no records were maintained in respect of such clearance-Therefore the duty evaded transactions which have never seen the light of the day deserve no concession of cum-duty benefit at all-The tainted deals should be banned by coercive measures of law to prevent recurrence thereof as were as to discourage evasion-If such benefit is granted, that shall legalise illegalities-The very false documentation by the bill traders and spurious bank accounts maintained in the name of non-existing concerns establishes malafides of the appellant-company which does not permit it to any concession in law including the cum-duty benefit-benefit should not be allowed by learned Adjudicating Authority while re-computing the liability of the appellant: CESTAT [ para 20]
CX-Penalty-s.11AC of the CEA , 1944-section 11AC was not in force at the relevant point of time-That section having been enacted in the statute book with effect from 28/09/1996 same is not invocable : CESTAT [ para 21]
CX-Penalty-Rule 173Q of CER , 1944-Clandestine removal without payment of CE duty-Appellant was consciously and actively concerned as well as involved in the said illegal act-Deliberate breach of law by appellant could not be ruled out-Therefore, penalty under Rule 173Q (1) of CER , 1944 which is equal to the amount of duty evaded is to be imposed by Adjudicating authority upon re-computation of revised duty liability: CESTAT [ para 22]
CX-Clandestine removal-No law can be interpreted in a manner so as to give premium to illegal and criminal activities-It is basic common sense that no person will maintain authentic records of the illegal activities or unaccounted manufacturing done by it-Therefore in absence of authentic record to show above clearances, preponderance of probability comes to rescue of Revenue and the plea of set off of offence fails: CESTAT [ para 18]
CX-It is surprising why investigation, adjudicating authority as well as appellate authority had misplaced sympathy on the evaders to confine the evasion to 269.712 MTs ignoring 180MTs of finished admitted by the Director of the appellant to have been clandestinely removed causing evasion of duty over and above the quantity of 269.712 MTs as stated above when Show Cause Notice provided foundation for proper levy of duty-There is no set off of one offence against the other permitted under law since each offence is cognizable independently for its trial and sentence awarded except the sentence awarded against different offences concurrently undergone-Therefore on the facts and circumstances of the case, confining evasion made the appellant company to 269.712 MTS , shall be a bonus to appellants for the deliberate breach of law when they clandestinely removed 449.712 MTs (180 MTs + 269.712 MTs ) of finished goods evading duty-direction to the adjudicating authority to re-compute the liability as directed by this order without granting cum-duty benefit and levy penalties: CESTAT [ para 18]
CX-Penalty-Director Shri Sampath Raj Jain's involvement in clandestine removal has surfaced when investigation brought out his confessional statement which remained un-retracted at any point of time-Having perpetuated illegality and resorted to evasion deliberately, he is not immune from penalty imposed on him for which his appeal is dismissed: CESTAT [ para 23]
Appeals dismissed
