Akhil Krishan Maggu Vs Deputy Director

GST - Four exporters had availed huge amount of refund of IGST and they are allegedly dummy owners - DGGI on 15.08.2019 searched the Gurugram residence of Ramesh Wadhera-alleged owner of dummy export firms who happens to be neighbour of petitioners - on the request of Ramesh Wadhera, Petitioners Akhil Krishan Maggu (practising lawyer) and Sanjeev Maggu came to his residence and some commotion took place between petitioners and officials of DGGI - accordingly, at the behest off DGGI, Police registered a FIR u/s 186, 353 IPC against both the petitioners and arrested them on the same day, both of them were later released on 22.08.2019 - DGGI on 27.8.2019 again recorded statements of said dummy exporters and who allegedly disclosed the name of petitioners apart from the earlier names of Ramesh Wadhera and Mukesh Kumar as also being involved - DGGI searched the Gurugram residence of petitioners on 28.08.2019 who were not at home and after completing search took away younger brother of petitioner no.1 to their office and arrested him on 29.08.2019 - another FIR was lodged by DGGI on the ground of obstruction in performance of official duty - DGGI directed petitioners to appear before SIO and tender their statement in connection with exports made by the dummy export firms - Apprehending coercive action, petitioners have filed the present Writ Petition - petitioners appeared before respondent on 11th and 12th September 2019 and the DGGI handed over petitioner no. 2 to DRI who arrested him and is presently in judicial custody - petitioner no. 1 appeared before respondent DGGI on 7.10.2019 and tendered his statement but no further statements were recorded on 11.10.2019 and 16.10.2019 when he again appeared before DGGI - Petitioner contends that it is a case of vendetta and there is no evidence against petitioners to connect them with fraud, if any, committed by the alleged dummy firms; that the intention of the respondent is to tarnish their reputation.

Held: Counsel for respondents have submitted record of investigation in sealed cover and upon perusing the same, Bench does not find in recording statement of petitioners, Dhruv Maggu - brother of Petitioner no. 1, Ramesh Wadhera and Mukesh Kumar to ascertain disclosure made by all of them - except petitioner no. 1, all other named persons have been arrested so their statements are necessary to ascertain prima facie role of petitioners - statements of dummy exporters who had retracted their earlier statements, were again recorded on 27.08.2019, however, their earlier statements recorded on 13.05.2019 are not produced probably because of the fact that these statements do not indict/implicate present petitioners - It would be profitable to look at judicial pronouncements relating to the issue involved - provisions of CGST Act, 2017 qua arrest and prosecution are pari materia with provisions of Finance Act, 1994 (Service Tax) - while dealing with power of arrest prior to determination of tax liability, Delhi High Court in the case of Make My Trip [ 2016-TIOL-1957-HC-DEL-ST ] has thoroughly examined the scheme of the Act and concluded in paragraph 116 that without even an SCN being issued and without there being any determination of the amount of service tax arrears, the resort to the extreme coercive measure of arrest was impermissible in law and that this judgment has been upheld by the Supreme Court [ 2019-TIOL-65-SC-ST ] - similar is the stand taken in the cases of Jayachandran Alloys (P) Ltd. 2019-TIOL-1021-HC-MAD-GST , VIMAL YASHWANTGIRI GOSWAMI Vs STATE OF GUJARAT  -  2019-TIOL-1746-HC-AHM-GST , CLEARTRIP PVT LTD MUMBAI & ORS Vs THE UNION OF INDIA  -  2016-TIOL-863-HC-MUM- ST , C. PRADEEP Petitioner(s) =  2019-TIOL-339-SC-GST - It is the consistent opinion of courts that power of arrest should be resorted in exceptional circumstances and with full circumspection - maximum sentence prescribed under GST is 5 years and it is directly linked with quantum of evasion of tax - Prosecution of any persons is directly linked with determination of evasion of tax because if there is no evasion of tax, there cannot be a criminal liability - determination of tax liability does not fall within the realm of criminal courts whereas liability of tax and penalty is determined by adjudicating authority under GST Act which is subject to challenge before Tribunal and Courts - opinion expressed by Telangana High Court P.V. RAMANA REDDY Vs. UNION OF INDIA)  =  2019-TIOL-873-HC-TELANGANA-GST  cannot be made applicable to each and every case and cannot be treated as an authority to conclude that DGGI has power to arrest in every case during investigation and that too without determination of tax evaded as well as finding that accused has committed an offence described u/s 132 of the CGST Act, 2017 - Arrest deprives any person from his right of liberty enshrined under Article 21 of the Constitution of India - provisions of CGST Act are not subject to exclusion of Criminal Procedure Code, rather section 67(10) as well as Section 69(3) borrow provisions of Code of Criminal Procedure, 1973 - As per s.41(1)(b) as amended by Code of Criminal Procedure (Amendment) Act, 2008 applicable w.e.f 01.11.2010, a person may be arrested if he has committed a cognizable offence punishable with imprisonment which may be less than 7 years or may extend to 7 years if conditions specified therein are satisfied - As per s.41A of Cr.PC, a notice shall be issued to the person against whom complaint has been made or creditable information has been received or reasonable suspicion exists and he shall not be arrested if he complied with the notice - Taking cue from the judgment of Delhi High Court in the case of Make My Trip, followed by Madras High Court in Jayachandran Alloys (P) Ltd., law laid down by the Supreme Court in Siddharam Satlingappa Mhetre 2011(1) SCC 694 as well as keeping in mind section 69 and 132 of the CGST Act which empower proper officer to arrest a person who has committed any offence involving evasion of tax of more than Rs.5 crores and prescribed maximum sentence of 5 years which falls within the purview of s.41A of Cr.P.C, Bench is of the opinion that power of arrest should not be exercised at the whims and caprices of any officer or for the sake of recovery or terrorising any businessman or create an atmosphere of fear, whereas it should be exercised in exceptional circumstances during investigation which illustratively may be - (i) a person is involved in evasion of huge amount of tax and is having no permanent place of business, (ii) a person is not appearing inspite of repeated summons and is involved in huge amount of evasion of tax, (iii) a person is a habitual offender and he has been prosecuted or convicted on earlier occasion, (iv) a person is likely to flee from country, (v) a person is originator of fake invoices i.e. invoices without payment of tax, (vi) when direct documentary or otherwise concrete evidence is available on file/record of active involvement of a person in tax evasion: High Court [para 7 to 10]

GST - Arrest - Persons who are having established manufacturing units and paying good amount of direct or indirect taxes; persons against whom there is no documentary or otherwise concrete evidences to establish direct involvement in the evasion of huge amounts of tax, should not be arrested prior to determination of liability and imposition of penalty - Similarly, arrest of Chartered Accountant or Advocates who had filed returns or otherwise assisted in business but are not beneficiary or part of fraud merely on the basis of statement without any corroborative evidence linking the professional with alleged offence should be avoided - It is well known that if top brass of a running concern is arrested, there are all possibilities of closure of unit which results into unemployment and wastage of precious natural resources: High Court [para 10.1]

GST - Arrest - Petitioner No. 2 was interrogated on 11.9.2019 & 12.9.2019 by DGGI and thereafter handed over to DRI, who arrested him - There is nothing on record showing admission by Petitioner No. 2 and no further statement has been recorded in jail though he is in judicial custody since 13.9.2019 - Petitioner No. 1 has already put appearance on various occasions and there is nothing in file which indicates that Petitioner No. 1 was connected with alleged illegal refund sought by Exporters - Concededly, the Petitioner No. 1 is neither proprietor nor partner nor shareholder of any Exporter Concern/Firm/Company, who availed refund of IGST - There is no evidence of transfer of funds in the accounts of Petitioners or withdrawal of cash by any one of them: High Court [para 11]

GST - Arrest - Bench is of the view that it is case of some mis-understanding between Petitioners and officers of Respondent/DGGI who now want to implicate Petitioner and his family members - The investigation is going on for last couple of months and Respondents are unable to produce any evidence showing direct involvement of Petitioners - Intention of Respondents seems only to arrest Petitioner No. 1, one way or the other, which is evident from the fact that Petitioner No. 2 was handed over to DRI without concluding investigation at least qua petitioner no.2 and there is nothing contained in different affidavits of Respondent, filed before this Court, indicating that involvement of Petitioner No. 2 is apparent from his statements - The Petitioner No. 2 was handed over to DRI on 12.9.2019 and since 13.9.2019 he is in judicial custody, hence no direction is warranted qua him, however qua Petitioner No. 1 (Akhil Krishan Maggu), Bench deems it appropriate to direct Respondent not to take him in custody without prior approval of this court - Petitioner No. 1 shall appear before Respondent as and when summoned between 10 AM to 5 PM: High Court [para 12, 13]

- Petition is disposed of: PUNJAB AND HARYANA HIGH COURT

2019-TIOL-2611-HC-DEL-GST

2019-TIOL-3350-CESTAT-DEL

CCE & ST Vs Shri Vrindavan Dairies

ST - The assessee entered into a tripartite agreement with M/s Banas District Cooperative Milk Producers Union Ltd. and M/s Gujarat Cooperative Milk Marketing Federation Ltd., under which the assessee was to undertake several activities on behalf of these two companies - The activities included weighment and unloading of milk from tankers, storage of bulk milk under proper conditions, chilling the milk, pasteurization of milk, packing the milk in pouches, storage of pouched milk in cold store, delivery and lading of crates, carrying out CIP cleaning of plant & equipment, providing office space and laboratory facilities for testing of milk, unloading & washing of empty crates and washing of empty tankers - The assessee claimed that as per Chapter Note 6 to Chapter 4 of the CETA, the activity of labeling or relabeling of containers and repackaging from the bulk packs to retail packs or adoption of any other treatment to render the products marketable to the consumer shall amount to manufacture as per the provisions of Section 2(f) of CEA 1944 - It was also contended that since its activities amounted to manufacture, therefore, by virtue of Section 65(19) of the Finance Act 1994, they did not fall under the category of BAS and hence were exempted from service tax - Later, the Commr.(A) settled the issue in favor of the assessee - Hence the Revenue's appeal.

Held: It is seen that Section 65(19)(iv) of the FA 1994 provides that service in relation to production or processing of the goods for or on behalf of a client is covered under BAS - However, the definition of BAS specifically excludes any activity which amounts to manufacture within the meaning of Section 2(f) of the CEA 1944 from levy of service tax - As is evident from the notes to Chapter 4 of the CETA 1985, even adoption of any other treatment by itself or with packing/re-packing, labeling/re-labeling to make the product marketable amounts to manufacture - The definition of manufacture under Chapter 4 of CETA is much wider and leaves no doubt that pasteurization, packing from bulk pack to branded consumer packs clearly amounts to manufacture as per Note 6 of Chapter 4 of the CETA 1985 - Hence such activities are covered under the definition of manufacture u/s 2(f) of the CEA 1944 - The provisions of law are unambiguous on this aspect and conclude that since the activity is of manufacture, levy of service tax is excluded from the scope of its levy - Hence such activity is not taxable under BAS: CESTAT

- Revenue's appeal dismissed: DELHI CESTAT

Sharma Transports Vs CCE & ST

ST - The assessee operates buses in and around the State of Karnataka - The assessee booked bus tickets of other transport operators too for a commission agreed upon by such transport operators - During the relevant period, the jurisdictional Commissioner of Service Tax issued SCN proposing to raise duty demand under Tour Operator Service and Business Auxiliary Service, along with interest and penalty - On adjudication, such demands were confirmed - Hence the present appeal, assailing the demand raised under BAS only.

Held: The issue at hand is no longer res integra and stands settled by the Tribunal and by the High Court of Kerala, through the decision in CCE vs. Shabeer Travels where in similar circumstances, the High Court found that the service rendered by the assessee therein was essentially travel agency service as it was acting as an agent of the main travel agent - Hence the High Court opined that the assessee therein could not be held liable to pay tax under BAS - As the issue is squarely settled in favor of the assessee through the decision in CCE vs. Shabeer Travels, following the ratio in such case, the demand raised under BAS in the present case is not sustainable - Hence the O-i-O in challenge merits being quashed - Moreover, the entire demand is barred by limitation since the Revenue wrongly invoked extended limitation by alleging suppression whereas the issue at hand involved pure interpretation of law - In such circumstances, invoking extended limitation is unsustainable: CESTAT

- Assessee's appeal allowed: BANGALORE CESTAT

UoI Vs Rose Zinc Ltd

Cus - The present writ petition has been preferred by the Directorate of Revenue Intelligence, challenging an Admission Order dated 11.1.2008 passed by the Customs and Central Excise Settlement Commission under section 127C of the Customs Act, 1962 [Act] as well as an order of transfer of the matter by the Chairman, Principal Bench to the Additional Bench, Mumbai vide order dated 18.10.2007.

Held: Principal Bench, Delhi has all the powers, jurisdiction and authority to transfer the case to Additional Bench, Mumbai - no illegality has been committed by the Principal Bench, Delhi in transferring a case to Mumbai - a subjective satisfaction was arrived at by the Settlement Commission as stated in paragraph 6 of the order passed under section 127C by the Settlement Commission of the admission of an application preferred under section 127B of the Act - moreover, by now final order has also been passed by the Settlement Commission under section 127D of the Act - the final order has not yet been challenged by the Union of India meaning thereby the final order passed by the Settlement Commission remain intact and as it is - much has been argued out by the petitioner that if the admission order dated 11.1.2008 passed by the Settlement Commission under section 127C of the Act is quashed and set aside by this Court, automatically the final order passed by the Settlement Commission under section 127D of the Act will be quashed de facto - this Court is not quashing and setting aside the order of admission passed by the Settlement Commission for the reasons as stated herein above - moreover, there is nothing like "automatic cancellation of the order under Section 127D of the Customs Act" - it ought to be kept in mind that unless the final order is challenged by the Union of India passed by the Settlement Commission under section 127D, such order remain intact and as it is - there is nothing like a concept "automatically being extinct" - it is well settled that an order passed in excess of jurisdiction, too, would remain valid till it is eviscerated by a competent judicial or higher forum - the direction of this Court not to give effect to the Final Order of the Settlement Commission neither immunized the Final Order from challenge, nor inhibited the petitioner from challenging the order in accordance with law - besides, whenever the Settlement Commission passes the order under section 127D, the admission order always merges with the final order - thus, the admission order now does not remain in existence because final order has already been passed by the Settlement Commission - admission order has now merged with the final order passed by the Settlement Commission - thus, there is no separate existence of the order under section 127C and a final order under section 127D of the Act is already passed and that too the said order remains valid from 29th February, 2008 onwards because the final order under section 127D was passed more than a decade ago and the same has not been quashed and set aside by any competent court because there exists no challenge to the final order of the Settlement Commission - hence, no reason seen to entertain this writ petition and the same is, therefore, dismissed : HIGH COURT [para 9, 10, 11, 13]

- Writ Petition dismissed: DELHI HIGH COURT

Madina (Uz) Impex Vs UoI

Cus - Whether the impugned show cause notices (SCNs) issued on 15th December, 2016 and 26th December 2016 under the Customs Act, 1962 (Act) to the two Petitioners ought not to be quashed on the ground of delay ? both SCNs have been issued demanding the return of the drawback amount availed on the ground that in the previous SCNs these shipping bills were left out.

Held: There is no explanation given by the Respondents, in either petition, for the delay in issuing the impugned SCNs - the Court finds that the decision of the Supreme Court in Bhatinda District Co-operative Milk P. Union Limited - 2007-TIOL-176-SC-CT supports the case of the petitioners - it holds that even where there is no prescribed period of limitation for completing an assessment, it does not mean that the power can be exercised at any time - it had to be exercised within a reasonable period and what is reasonable would depend on the nature of the statute, the rights and liabilities thereunder and other relevant factors - in the present case, the delay of over nine years in WP(C) No.9173/2017 and over five years in WP(C) No.2190/2018 in issuing the SCNs have not been satisfactorily explained by the Respondents - for the aforementioned reasons, this Court quashes both impugned SCNs - the writ petitions are allowed : HIGH COURT [para 8, 12, 13, 14]

- Writ Petitions allowed: DELHI HIGH COURT

2019-TIOL-3346-CESTAT-BANG

M Phone Electronics And Technologies Pvt Ltd Vs CC

Cus - The assessee imported two models of feature phones, 'm280' and 'm380', batteries, chargers (power adapters) and other mobile accessories with a declared assessable value of Rs.36,14,969/- - The goods have been confiscated by Customs under Section 111(d) on the ground that the goods which are prohibited are attempted to be imported - Perusal of Section 111(d) of Customs Act, 1962 shows that the said Section is applicable only if the goods which are imported or attempted to be imported or are brought within Indian Customs Water contrary to any prohibition imposed by this Act or any other law for the time being enforce whereas the Customs in the present case has failed to bring anything on record to show that the mobile phones are prohibited for import - Further, the main ground for confiscating the goods are that the address of the manufacturer in BIS Certificate and in the Bill of Entry are not matched - It appears that both the authorities have ignored to see the Letter of Delegation issued by Shenzhen Huanuo Internet Technology Co., Ltd in favour of Honkong Internet Network Technology Co. Limited and in the said letter, it is specifically mentioned that both the companies are same - This has been done because payment was made in Hong Kong as the financial transaction in dollar could only be carried out there - The manufacturing unit in Shenzhen, China has authorized all its customers to effect all banking transactions pertaining to company to Hong Kong as part of usual business practice followed by all traders in India while importing articles from China - The finding of both the authorities that the names of both companies are different is not tenable in law and both the authorities have not properly examined all the documents produced before them - Further, assessee has produced the documents pertaining to earlier import by them of mobile phones and no such objection was raised earlier by the Customs authorities - The respondent has failed to appreciate the business practice followed by all Indian traders while importing articles from China and has unnecessarily detained the goods of assessee company without any reason - The imposition of penalty on assessee to the tune of Rs.10,000/- is also unwarranted in law, therefore, same is set aside, directing the Customs authorities to release the goods to the assessee immediately on receipt of the copy of this order: CESTAT

- Appeal allowed: BANGALORE CESTAT