20 January 2017   

simply inTAXicating GST RO(W)AD AHEAD (Episode8)

MIXED BUZZ

Draft National Steel Policy targets 300 MT capacity by 2030

Master Circular on Show Cause Notice, Adjudication and Recovery

PM Garib Kalyan Deposit Scheme - Cooperative Banks not authorised to accept deposits

CASE LAWS

2017-TIOL-27-SC-MISC

COMMON CAUSE A REGISTERED SOCIETY Vs UoI: SUPREME COURT OF INDIA (Dated: January 11, 2017)

Miscellaneous - admissible evidence & direct investigation

During the subject year, a raid was conducted by CBI on the premises of Aditya Birla group industries in four cities, followed by another raid by the Income Tax Department. The raid by the CBI reportedly led to recovery of incriminating documents and unaccounted cash amounting to Rs.25 crores. A laptop of Mr. Shubhendu Amitabh, Group Executive President was also seized during the raid, whereby an E-mail containing a cryptic entry was recovered referring to political functionaries. It was further revealed that a proposed payment of Rs.7.5 crores was made with respect to "Project-J - Environment & Forest", and that 13 projects of the Aditya Birla Group companies had been sanctioned by the Ministry of Environment and Forest. These projects were stated to be related to Coal Block of Birla Group of Companies by the Coal Ministry during the aforesaid period. Upon investigation, top officials of Birla Group admitted that large amounts of cash were routed by the Group through hawala. Accordingly, Income Tax Department prepared a detailed appraisal report on the Hawala transactions. The Income Tax Department thereafter also raided Sahara India Group offices and seized cash amounting to Rs.135 crores. In pursuence of the same, certain complaints were made to CBI, CBDT, CVC, SIT, Enforcement Directorate and Settlement Commissioner, but in vain. In spite of that, the Income Tax Settlement Commission gave immunity to the Sahara Group of Companies and absolved them criminal and civil liability on different grounds, even after receiving a letter from the counsel of the common cause that he was going to file an application before this Court in the said matter. Accordingly, the present petition had been preferred seeking constitution of Special Investigative Team and thereby issuance of appropriate writ for setting aside the appointment made by the Union of India, of Mr. K.V. Chaudhary as Central Vigilance Commissioner and Mr. T.M. Bhasin as Vigilance Commissioner, pointing out that these persons were not of impeccable integrity.

On appeal, the SC held that,

Whether documents which lack in requisite reliability, can still be the foundation of a police investigation - NO: SC

++ it is to be noted that the Court cannot remain on guard while ordering investigation against any important constitutional functionary, officers or any person in the absence of some cogent legally cognizable material. When the material on the basis of which investigation is sought is itself irrelevant to constitute evidence and not admissible in evidence, we have apprehension whether it would be safe to even initiate investigation. In case we do so, the investigation can be ordered as against any person whosoever high in integrity on the basis of irrelevant or inadmissible entry falsely made, by any unscrupulous person or business house that too not kept in regular books of accounts but on random papers at any given point of time. There has to be some relevant and admissible evidence and some cogent reason, which is prima facie reliable and that too, supported by some other circumstances pointing out that the particular third person against whom the allegations have been levelled was in fact involved in the matter or he has done some act during that period, which may have co-relations with the random entries. It is found that the materials which have been placed on record either in the case of Birla or in the case of Sahara are not maintained in regular course of business and thus lack in required reliability to be made the foundation of a police investigation;

Whether electronic data & fabricated entries found in the form of loose sheets, qualify as 'admissible evidences' for initiating direct investigation against any individual named in such documents - NO: SC

++ in case of Sahara, the Settlement Commission has observed that the scrutiny of entries on loose papers, computer prints, hard disk, pen drives etc. have revealed that the transactions noted on documents were not genuine and have no evidentiary value and that details in these loose papers, computer print outs, hard disk and pen drive etc. do not comply with the requirement of the Indian Evidence Act and are not admissible evidence. It further observed that the department has no evidence to prove that entries in these loose papers and electronic data were kept regularly during the course of business of the concerned business house and the fact that these entries were fabricated, non-genuine was proved. It held as well that the PCIT/DR have not been able to show and substantiate the nature and source of receipts as well as nature and reason of payments and have failed to prove evidentiary value of loose papers and electronic documents within the legal parameters. The Commission has also observed that Department has not been able to make out a clear case of taxing such income in the hands of the applicant firm on the basis of these documents. Therefore, on the basis of the materials which have been placed on record, no case is made out to direct investigation against any of the persons named in the Birla's documents or in the documents of Sahara;

++ having considered the principles, this court is of the opinion that the materials in question are not good enough to constitute offences to direct the registration of FIR and investigation therein. The complaint should not be improbable and must show sufficient ground and commission of offence on the basis of which registration of a case can be ordered. The materials in question are not only irrelevant but are also legally inadmissible u/s 34 of Evidence Act, more so with respect to third parties and considering the explanation which have been made by the Birla Group and Sahara Group, this court is of the opinion that it would not be legally justified, safe, just and proper to direct investigation, keeping in view principles laid down in the cases of Bhajan Lal and V.C. Shukla Case.

In favour of Defendant

2017-TIOL-146-HC-DEL-FEMA

INNOVATIVE TECH PACK LTD Vs SPECIAL DIRECTOR OF ENFORCEMENT: DELHI HIGH COURT (Dated: January 11, 2017)

FERA - Sections 8(3) & (4)

Keywords - levy of penalty - forex remittances - failure of importer - bills of entry & violation of provisions

The appellant during the subject year, was issued show cause notices for violating the provisions of Section 8(3) & (4) of FERA r/w Chapter 7A.20 (i) of Exchange Control Manual, 1995. The notices alleged that though the appellant had remitted the foreign exchange in relation to the imports made by it, however it had failed to submit exchange control copy of Bill of Entry for confirmation of having imported the material for which the amount was remitted. Out of the total nine imports alleged, the AO was satisfied with six and as no bill of entry was submitted by the appellant for three remittances, and accordingly he levied a penalty of Rs.15 lakhs on the appellant. when the matter reached the Tribunal, though the appeal was dismissed, however the pre-deposit penalty was dispensed with.

On appeal, the HC held that,

Whether failure of an importer to locate the exchange copies of Bills of Entry qua single/double transactions, would make him liable for penalty under the provisions of FERA, in case forex remittances for the bulk transactions are sufficiently proved beyond reasonable doubt - NO: HC

++ it is seen that this Court in Xerox Modi Corp Ltd. case, relying upon the decision of the Supreme Court in Bareily Electricity Supply Co. Ltd. vs. The Workmen & Ors., has observed that proceedings under FERA are quasi criminal in character, and it is the duty of the epartment as prosecutor to make out a case beyond all reasonable doubt that there has been a violation of the law, before imposing any penalty. Thus, in quasi criminal proceedings, the penalty should not be imposed merely because it is lawful to impose the penalty. Whether penalty should be imposed or not is a matter of discretion to be exercised judicially and on consideration of all the relevant circumstances. Further simplicitor from the non-compliance of placing on record no inference can be drawn that the foreign remittance was not used for the purpose of import. It is trite law that to impose a penal liability compliance should be sought within a reasonable time and a person cannot be penalised for not retaining the documents for a period of 13 years. During the course of the present appeal, exchange copy of Bill of Entry has already been placed however, despite best efforts the appellant could not locate the exchange copies of Bills of Entry qua other two transactions. In view of the belated show cause notice being served on the appellant, his defence that it was not in possession of the copies of Bill of Entry for the two transactions is plausible. It cannot be held that the respondent has proved its allegation beyond reasonable doubt and the copies of the Bills of Lading probablise that the remittances were utilized for import. Consequently, the impugned orders passed by the Tribunal and the Adjudicating Authority are set aside.

In favour of Appellant

2017-TIOL-58-ITAT-BANG

ACIT Vs TEXAS INSTRUMENTS INDIA PVT LTD: BANGALORE ITAT (Dated: December 29, 2016)

Income tax - Sections 80JJAA

Keywords - employment of new workmen & requisite period of employment

The assessee is engaged in the business of design, manufacturing and export of computer software. While fing its return for the A.Ys 2001-02 & 2002-03, the assessee claimed deduction u/s 80JJAA for a sum of Rs.2,55,81,220/- and Rs.4,78,05,170/- respectively. The AO however denied the said claim on the ground that no new workmen were employed for a period of 300 days during the previous year.

On appeal, the ITAT held that,

Whether the condition of 300 days of employment during previous year, can be interpreted as 300 days in a year from the date of their employment, for purpose of granting benefit to an employer undertaking u/s 80JJAA, when the Legislature itself has expressly omitted the same in the provision - NO: ITAT

++ there is no dispute regarding the objects for which this provision of Section 80JJAA was inserted in the Act vide Finance Act, 1998 w.e.f. April 01, 1999. The Memorandum explaining the provision of Finance No.2 Bill makes it clear that in order to generate more employment, particular section 80JJAA was inserted to provide an incentive in the form of Special Deduction over and above the expenditure of wages or salaries which is otherwise allowable as business expenditure. The deduction is provided under this provision equivalent to 30% of the aggregate charges or salary paid to new workmen on satisfaction of the conditions provided under the said provision. In case of an industrial undertaking, the additional wages paid to the new regular workmen in excess of 100 workmen employed during the previous year and further the number of regular workmen employed during the year should not be less than 10% of the existing number of workmen employed as on last date of the preceding year. The dispute in the present case is not regarding number of workmen but is pertaining to the regular workmen as defined under clause (ii) of Explanation to Section 80JJAA. This definition of regular workmen exclude certain categories of workmen as enumerated in the clause (ii) As per sub-clause (e) any workmen employed for a period of less than 300 days during the previous year will not be included in the definition of regular workmen for the purpose of Section 80JJAA. The tenure of employment for a period of atleast 300 days as stated in the Memorandum explaining the provision is in a year, but it has been provided under Explanation to Section 80JJAA as during the previous year;

Whether additional wages paid to regular workmen who have been employed for a period of not less than 300 days during the previous year, are only eligible for deduction as per existing provisions of Section 80JJAA - YES: ITAT

++ the word 'previous year' as used in sub-clause (c) of Clause (ii) of explanation is not used in the Memorandum explaining the provision as the condition for such workman should be a regular workman is provided as he has been employed for atleast 300 days in an year. Therefore this condition of 300 days during the previous year as stipulated u/s 80JJAA for treating a worker as a regular workman can be satisfied only when a workman joins on or before 5th June of previous year and not thereafter. There is no doubt that the Legislature has not intended while providing this incentive of generation of employment opportunity that it should be only at the beginning of each financial year but the employment is generally given throughout the year depending upon the demand and supply of the workmen in the industry. Even otherwise the definition of workmen as given under Explanation to Section 80JJAA is not an inclusive definition but certain categories of workmen are excluded such as a casual workman, a workman employed through contract labour or any other workman employed for a period of less than 300 days during the previous year. All these three categories of employment excluded from the definition of regular workmen itself shows that these three categories of workmen cannot be otherwise considered as regular workmen. Therefore there seems force in the contention of the counsel that this condition of 300 days of employment during the previous year should be read as 300 days in a year from the date of employment. It is to be noted that once a workman is employed as a regular workman by an undertaking/assessee then in the absence of any ambiguity regarding the nature of employment being regular the other three categories of the workmen being casual employment through contract labour and employed for less than 300 days are not relevant;

++ though the language employed in the provision appears to militate with the intention of the Legislature as expressed in the Memorandum explaining the provision as well as against the very object and scheme of the provision of providing incentive for generating more employment opportunities in the industry however, this may be an omission in the provision which can be supplied only by an Act of Legislature through proper amendment. Therefore as per the existing provisions of Section 80JJAA, the additional wages paid to regular workmen who have been employed for a period of not less than 300 days during the previous year is eligible for deduction under section. Therefore, this Tribunal holds that the assessee has not fulfilled the condition of employing the new regular workmen in excess of 100 workmen and further an increase of 10% of the existing number of workmen employed by the assessee as on last date of preceding year. The AO has filed the remand report and the assessee has also accepted this fact that during the previous year, the number of workmen who were employed from 300 days or more days are only 16 and similarly during the previous year, the number of workmen who were employed for 300 days or more are only eight. Therefore the assessee does not satisfy the condition as prescribed under the provisions of Section 80JJAA because the workmen employed by the assessee cannot be included in the definition of regular workman as per explanation to this section.

Revenue's appeal allowed

Cus - Revocation of CHA Licence - As per Regulation 13(a) of the CHALR 2004, a CHA was required to obtain an authorization from exporter for whom he was working - Authorization letter dated 06.04.2010 was available with assessee - There is no doubt that assessee should have given a copy of authorization at the earliest but at the same time authorization dated 06.04.2010 has not been proved by Revenue to be forged - Assessee CHA licence was not suspended for nearly five years from the date of detection in April 2010 and no irregularity was committed by them till the impugned Adjudication order was passed - Accordingly, impugned order set aside and appeal allowed: CESTAT

Appeal allowed

2017-TIOL-189-CESTAT-DEL

AMBUJA CEMENTS LTD Vs CCE: DELHI CESTAT (Dated: December 19, 2016)

CX - Assessee engaged in manufacture of Cement and Clinker and was clearing the same, inter alia,to various buyers - Such buyers included manufacturer of excisable items, construction service providers, Government Departments and Charitable institutions/trusts - Some of the cement was also used for self-consumption and for quality control - Following the decisions in case of Grasim Industries Ltd. 2008-TOIL-2328-CESTAT-MAD and Heidelberg Cement and Ultra Tech Cement Ltd 2014-TOIL-1433-CESTAT-MUM, the assessee would be eligible for the benefit of Notification No. 4/2006 under Sr. No. 1C of the table annexed to it: CESTAT

Appeal allowed