2020-TIOL-903-HC-P&H-GST

RCI Industries and Technologies Ltd Vs UoI

GST - On 6th March, 2020, a summons was issued to the Managing Director, Mr. Rajeev Gupta asking him to appear on 16th March, 2020 at 11:00 a.m. in the office of Respondent No.1 - However, on the very next day i.e. 7th March, 2020 in the early hours at around 6:00 a.m., a search was conducted at the residential premises of Mr. Rajeev Gupta and a Panchnama was drawn up at his residential premises - One of the grievances in the present petition is that with the Petitioners being prepared to cooperate with the Respondents, there was no need for the Respondent to resort to an extreme step of conducting search and, that too, without following the due process under the CGST Act and, in particular, Section 67 thereof, which requires that the proper officer, not below the rank of Joint Commissioner, pursuant to an inspection carried out under Section 67(2) to have "reasons to believe that any goods liable to confiscation or any documents or books or things, which in his opinion shall be useful for or relevant to any proceedings under this Act, are secreted in any place." - Counsel for Revenue submits that the authorized representative of Petitioner No.1, who had earlier appeared before the Respondents was not cooperative and was not providing the requisite information sought for by the Respondents; that a different officer of Petitioner No.1 appears on each occasion and is unable to provide requisite information - Counsel for Revenue also does not dispute that the procedure outlined under Section 67 of the Act was perhaps not resorted to while going in for a search of the residential premises of Petitioner No.2; that having issued summons to Petitioner No.2 to appear on 16th March, 2020, there was absolutely no need to resort to a search on the very next date.

Held: Court is of the considered view that the search proceedings which took place on 7th March, 2020 without the authority of law and cannot be sustained - The Panchnama drawn up on 7th March, 2020 is, therefore, quashed - At the same time, against the background, present litigation the Court cannot be unmindful of the need for investigation to proceed in accordance with law, for which purpose the cooperation of the Petitioners is essential - Notwithstanding that Petitioner No.2 may have earlier appeared pursuant to the summons issued and may have provided documents, it is directed that the Petitioner No. 2 will now appear before the Senior Intelligence Officer of the DGGSTI at Gurugram on 25th March, 2020 at 11 a.m; that he will be provided with the list of documents/ information that is required by the Respondents and Petitioner No.2 will cooperate in providing that information within a reasonable time to be provided to him by the Respondents - Court lists the present petition for further hearing on 17th April, 2020 - Till such time, no coercive steps of arresting Petitioner No.2 shall be resorted to - However, it is made clear that if the Court is satisfied that the Petitioners are not cooperating with the Respondents in providing the requisite documents/ information, the Court may be constrained to reconsider extending such protection to the Petitioner No.2: High Court [para 13 to 16]

- Matter listed : PUNJAB AND HARYANA COURT

2020-TIOL-902-HC-DEL-GST

Gillette India Ltd Vs UoI

GST - TRAN-1 - Petitioners' grievance in all the petitions is with respect to their inability to claim input tax credit on various eligible goods under Section 140 of the CGST Act, 2017.

Held: In terms of the transitional provisions, there was ambiguity and confusion amongst taxpayers - This was accentuated with technical glitches, which resulted in several taxpayers not being able to file the requisite Form GST TRAN-1 within time - This was the precise reason the last date was extended from time to time. However, despite extension, several taxpayers could not meet the extended deadline - Court has, in a series of cases, allowed the petitions filed by such taxpayers who could not file form GST TRAN-1 and were unable to take benefit of the transitional provisions with regard to the unutilized tax credit that they were not able to carry forward from the earlier regime to the present GST regime - In M/s Blue Bird Pure Pvt. Ltd ( 2019-TIOL-1564-HC-DEL-GST ), the court accepted the error in filling up of the requisite information to be inadvertent and directed the Respondents to either open the online portal or to enable the petitioner to file the rectified Form GST TRAN-1 electronically or accept the same manually - said decision has also been followed in M/s Aadinath Industries & Anr - 2019-TIOL-2289-HC-DEL-GST ; Lease Plan India Private Limited - 2019-TIOL-2164-HC-DEL-GST ; Godrej & Boyce Mfg. Co. Ltd. - 2019-TIOL-2421-HC-DEL-GST - The factual position in the present case is not any different and thus, Bench allows all petitions and directs the respondents to either open the online portal so as to enable the respective petitioners to file the Form TRAN-1 and TRAN-2 electronically, or to accept the same manually on or before 06.01.2020, if not already, filed pursuant to the interim order dated 01.05.2019 - Petitions allowed: HC [para 15 to 19]

- Petitions allowed : DELHI HIGH COURT

ACCT Vs Glaxo Smith Kline Consumer Health Care Ltd

VAT - Andhra Pradesh Value Added Tax Act, 2005 - The moot question in this Revenue appeal emanating from the judgment and order dated 19.11.2018 in passed by the High Court of Judicature at Hyderabad for the State of Telangana and the State of Andhra Pradeshis: Whether the High Court in exercise of its writ jurisdiction under Article 226 of the Constitution of India ought to entertain a challenge to the assessment order on the sole ground that the statutory remedy of appeal against that order stood foreclosed by the law of limitation.

Held: [para 8, 10, 11, 12, 13, 14, 15, 18, 19, 21, 22]

++ It is evident that the assessment order dated 21.6.2017 was challenged by the respondent by way of statutory appeal before the Appellate Deputy Commissioner only on 24.9.2018.

++ Going by the text of Section 31 of the 2005 Act, it is evident that the statutory appeal is required to be filed within 30 days from the date on which the order or proceeding was served on the assessee. If the appeal is filed after expiry of prescribed period, the appellate authority is empowered to condone the delay in filing the appeal, only if it is filed within a further period of not exceeding 30 days and sufficient cause for not preferring the appeal within prescribed time is made out. The appellate authority is not empowered to condone delay beyond the aggregate period of 60 days from the date of order or service of proceeding on the assessee, as the case may be.

++ In the present case, admittedly, the appeal was filed way beyond the total 60 days' period specified in terms of Section 31 of the 2005 Act.

++ The appellate authority vide order dated 25.10.2018, considered the reasons offered by the respondent for the delay in filing of the appeal and concluded that the same were not substantiated with sufficient cause. On that finding, including that the delay beyond the period of 60 days from the date of service of the assessment order on the respondent­assessee cannot be condoned, the appellate authority rejected the appeal.

++ When the matter travelled to the High Court, the Division Bench, after hearing the respondent, proceeded to pass an ex­parte order on 8.11.2018 mentioning that the petitioner had already paid 12.5% of the disputed tax for the purpose of filing appeal but the employee who was in-charge and who was subsequently suspended in contemplation of disciplinary proceedings failed to file appeal; that since the petitioner has already paid 12.5% of the disputed tax, the request of the petitioner for granting one more opportunity would be considered favourably if the petitioner pays an additional amount equivalent to 12.5% of the disputed tax.

++ Respondent was advised to file writ petition merely for setting aside of the assessment order dated 21.6.2017, presumably, in light of the decision of Full bench of the same High Court in Electronics Corporation of India Ltd. vs. Union of India & Ors.

++ The High Court finally allowed the writ petition vide the impugned judgment and order on the ground that the statutory remedy had become ineffective for the respondent (writ petitioner) due to expiry of 60 days from the date of service of the assessment order. The High Court was also impressed by the contention pressed into service by the respondent that it ought to be given one opportunity to explain to the authority (Assistant Commissioner) about the discrepancies between the value reported in the CST returns and the amount indicated in Form “F” relating to the turnover.

++ The central question is: whether the High Court ought to have entertained the writ petition filed by the respondent?

++ As regards the power of the High Court to issue directions, orders or writs in exercise of its jurisdiction under Article 226 of the Constitution of India, the same is no more res integra . Even though the High Court can entertain a writ petition against any order or direction passed/action taken by the State under Article 226 of the Constitution, it ought not to do so as a matter of course when the aggrieved person could have availed of an effective alternative remedy in the manner prescribed by law.

++ To put it differently, the fact that the High Court has wide jurisdiction under Article 226 of the Constitution, does not mean that it can disregard the substantive provisions of a statute and pass orders which can be settled only through a mechanism prescribed by the statute.

++ Indubitably, the powers of the High Court under Article 226 of the Constitution are wide, but certainly not wider than the plenary powers bestowed on this Court under Article 142 of the Constitution. Article 142 is a conglomeration and repository of the entire judicial powers under the Constitution, to do complete justice to the parties. Even while exercising that power, this Court is required to bear in mind the legislative intent and not to render the statutory provision otiose.

++ The principle underlying the dictum in [ Oil and Natural Gas Corporation Limited vs. Gujarat Energy Transmission Corporation Limited & Ors.] would apply proprio vigore to Section 31 of the 2005 Act including to the powers of the High Court under Article 226 of the Constitution.

++ A priori, we have no hesitation in taking the view that what this Court cannot do in exercise of its plenary powers under Article 142 of the Constitution, it is unfathomable as to how the High Court can take a different approach in the matter in reference to Article 226 of the Constitution. The principle underlying the rejection of such argument by this Court would apply on all fours to the exercise of power by the High Court under Article 226 of the Constitution.

++ Fact that the High Court has wide powers, does not mean that it would issue a writ which may be inconsistent with the legislative intent regarding the dispensation explicitly prescribed under Section 31 of the 2005 Act. That would render the legislative scheme and intention behind the stated provision otiose.

++ The remedy of appeal is creature of statute. If the appeal is presented by the assessee beyond the extended statutory limitation period of 60 days in terms of Section 31 of the 2005 Act and is, therefore, not entertained, it is incomprehensible as to how it would become a case of violation of fundamental right, much less statutory or legal right as such.

++ Pertinently, no finding has been recorded by the High Court that it was a case of violation of principles of natural justice or non­compliance of statutory requirements in any manner. Be that as it may, since the statutory period specified for filing of appeal had expired long back in August, 2017 itself and the appeal came to be filed by the respondent only on 24.9.2018, without substantiating the plea about inability to file appeal within the prescribed time, no indulgence could be shown to the respondent at all.

++ High Court ought not to have entertained the subject writ petition filed by the respondent herein. The same deserved to be rejected at the threshold.

++ Accordingly, the impugned judgment and order passed by the High Court is set aside.

- Revenue appeal allowed: SUPREME COURT OF INDIA

SERVICE TAX

2020-TIOL-694-CESTAT-ALL

Wheler Club Vs CCE

ST - The dispute is with respect to rejection of claim of refund of service tax paid in respect of 'Club or Association Service' by assessee - Assessee has relied on the ruling by Supreme Court in the case of Calcutta Club Ltd. 2019-TIOL-449-SC-ST-LB , and that Supreme Court in the said case has raised the question as to whether there was any difference made in the provisions of levy of service tax of Club and Association w.e.f. 01.07.2012 - Relying on the Supreme Court's above stated ruling, it is held that there was no difference in the provisions of service tax levy in respect of Club and Association Service for the period prior to 01.07.2012 and subsequent to 01.07.2012 - Therefore, assessee is entitled for said claim of refund: CESTAT

- Appeal allowed: ALLAHABAD CESTAT

2020-TIOL-693-CESTAT-MUM

CCE & ST Vs Cybage Software Pvt Ltd

ST - Respondent develops software for its customers, within and outside India, as an approved unit under the Software Technology Park scheme embodied in the FTP notified under FTDR Act, 1992 - adjudication order found merit in the claim of the respondent that the activity occurring at the premises of the client was taxable only with effect from 16th May 2008 when 'information technology or software service' was included in section 65(105) of Finance Act, 1994 and that, even if 'manpower recruitment or supply' service was rendered, the activity undertaken at their own premises would not fall within the ambit of such tax - The normal activities of a commercial transaction with the four customers, notwithstanding the deployment of staff at the premises of the latter being taxable as a service, which may have been recompensed by monetising the time spent by the employees of the respondent on discharging a contractual obligation cannot be construed as a service merely because another transaction, being taxable service, has been established - To extend the logic of the grounds of appeal would be tantamount to subjecting every commercial activity, other than manufacture, to the tentacles of Finance Act, 1994 which clearly is not the legislative intent - The designation of such deployed staff in a segregated portion of the premises of the respondent, not too unusual model in the software industry, is merely an extension of off-site activity pertaining to 'information technology software service' that is not exigible to tax - Revenue appeal dismissed: CESTAT [para 8]

- Appeal dismissed: MUMBAI CESTAT

CENTRAL EXCISE

2020-TIOL-692-CESTAT-MAD

Southern Wires Vs CC, CE & ST

CX - The assessee is engaged in manufacture of 3MM Stranded Ply wire - On verification, it was noticed that during the period from April' 2008 to December' 2008, the assessee had cleared their products to buyers by adopting transaction value for the goods - The department was of the view that as the buyers are related persons, assessee has wrongly adopted transaction value and they ought to have arrived assessable value by adopting 110% of cost of production of such goods as per CAS-4 as envisaged in Rule 10 (a) r/w Rule 8 of CEVR, 2000 - The authorities below have concluded that valuation under Section 4 (1) (b) has to be adopted and not the transaction value mainly on account of the fact that the six units are inter-connected undertakings - However, from the O-I-O or the impugned order there is no discussion how the buyers are related persons - As per Rule 10 (a) of Valuation Rules, only if the buyers and seller are related in the manner specified under the sub-clause (ii), (iii), (iv) of Clause-(b) of Sub-section (3) of Section 4 of CEA, 1944, the valuation as alleged in SCNs will come into application - Apart from the units being inter-connected undertakings, there is nothing to show that the buyers and seller are related persons - There is no mutuality of interest or fund flow brought out as evidence on the part of the department - The demand cannot sustain, thus the impugned orders are set aside: CESTAT

- Appeal allowed: CHENNAI CESTAT

2020-TIOL-691-CESTAT-DEL

United Brewries Ltd Vs CC, CE & CGST

CX - Whether Carbon dioxide generated during the process of fermentation of beer, and used in house for carbonation of beer is dutiable - The impure Carbon dioxide gas arises in the course of manufacture of beer as by-product which was being stored by them in tanks and thereafter liquefied - The said Carbon dioxide was subsequently used by assessee for carbonation of beer - When in house generation of Carbon dioxide is insufficient, assessee purchases Carbon dioxide from manufacturer of Carbon dioxide, which is in pure form - It appeared to Revenue that assessee is liable to pay Central Excise duty on the Carbon dioxide which is generated in their factory in the course of fermentation and as the same is captively used by them - The issue is squarely covered by precedent decision of Division Bench of this Tribunal in assessee's own case vide 2015-TIOL-940-CESTAT-DEL , wherein it is held that just because the respondent were purchasing carbondioxide from other suppliers, it cannot be presumed that the carbondioxide generated in their unit was of the same character and properties as the gas being purchased from outside and hence, would be marketable and appeal of the Revenue was dismissed - Accordingly, following the same, impugned order is set aside: CESTAT

- Appeal allowed: DELHI CESTAT

CUSTOMS

2020-TIOL-690-CESTAT-DEL

Sony India Pvt Ltd Vs CC

Cus - Demand-cum-show cause notice dated 10 April 2017 was issued to the Appellant mentioning therein that during the audit scrutiny of bills of entry from 11 April 2012 to 5 March 2013, it was noticed that the Appellant had imported colour data projectors by classifying them under 8528 6100 and availed the benefit of the exemption Notification dated 1 March, 2005 from payment of Basic Customs Duty, even though colour data projectors were equipped with AV Terminal such as HDMI and S-video suitable for high quality projection, making them classifiable under 8528 6900; that this had resulted in short levy of Customs Duty amounting to Rs.2,20,97,287/- - SCN further alleged that the Appellant had wilfully suppressed facts by misdeclaring the subject goods under 8528 61 00 instead of 8528 69 00 and, therefore, extended period of limitation is being invoked - demand confirmed but refrained from imposing any penalty on the ground that penal provisions under the relevant sections of the Customs Act had not been invoked - aggrieved, appeal filed by importer as well as Revenue before CESTAT.

Held: Following issues arise for consideration viz. (1) Whether the colour data projectors imported by Sony India are classifiable under 8528 61 00 as projectors of a kind "solely or principally used in an ADP system of heading 8471" or under 8528 69 00; (2) Whether the extended period of limitation under section 28(4) of the Customs Act could have been invoked in the present case, and, (3) Whether the Commissioner was justified in refraining from imposing penalty - In view of the judgments of the Supreme Court - 2019-TIOL-219-SC-CUS and the decisions of the Tribunal 2018-TIOL-2693-CESTAT-MAD , 2018-TIOL-1150-CESTAT-HYD , 2013-TIOL-1045-CESTAT-MUM, it has to be held that the colour data projectors imported by Sony India are classifiable under Heading 8528 61 00 - data colour projectors fall under Heading 8528 61 00 which is at Serial No. 17 of the Notification, therefore, they would be exempted from the whole of the duty of Customs - Commissioner on his own made out a case that the Appellant was claiming exemption from payment of duty on the basis of the decision of the Supreme Court in Sun Export Corporation and then proceeded to determine the issue - The Commissioner, it can be said, created a 'ghost' and then tried to kill it - There is no discussion in the order passed by the Commissioner as to why the decision of the Supreme Court in Dilip Kumar 2018-TIOL-302-SC-CUS-CB would be applicable to the facts of the present case - Only the legal position explained by the Supreme Court in Dilip Kumar has been stated and, thereafter, a bald statement has been made that in view of the decision of the Supreme Court in Dilip Kumar, the earlier judgments of the Supreme Court and the decisions of the Tribunal stand overruled - Such an approach of the Commissioner would amount to judicial indiscipline and impropriety - impugned order, insofar as it confirms the demand of short paid Customs Duty with interest, deserves to be set aside - Appeal allowed: CESTAT [para 12, 27, 28, 34, 38, 39, 42, 44]

Cus - Penalty - Department has not been able to place any portion of the show cause notice which calls upon Sony India to show cause why penalty should be imposed under particular sections of the Customs Act - The show cause notice is the foundation and unless an assessee is put to notice, penalty cannot be imposed - Thus, no penalty could have been imposed upon the Appellant - Appeal filed by the Department, therefore, deserves to be dismissed: CESTAT [para 47, 48]

- Assessee appeal allowed/Revenue appeal dismissed: DELHI CESTAT

2020-TIOL-689-CESTAT-BANG

GSEC Ltd Vs CCE & ST

Customs - DRI issued 3 separate Show Cause Notices, in respect of imports at different ports - It was alleged that the appellants misdeclared country of origin; GSEC (appellant) & Gulf Petrochem were related parties; appellants misdeclared value to evade payment of Customs Duty and that Shri Anand Mathur, Shri Nikharv Hashmukh Shah, Shri S K Gowri Shankar and Shri Sachin Saxena abetted with GSEC Ltd. to undervalue the said goods – Commissioner confirmed the demand and imposed penalties on importer and persons, hence appeals to CESTAT.

Held:

Cus - Panchnama in question suffers from the various discrepancies - Coming to the precise issue of taking out the emails from respective computers, the Panchnama does not record the vital questions relating to the start of computers and copying of the emails – Appellant has raised certain vital questions as to where was the computer; what type of a computer it was; what was the password for opening of the computer; how did the officers get the password; if they got from others, who was the other person; what was the email id; what was the password of the email id etc. - Panchnama does not answer these questions - Statement of the responsible person i.e. Shri Rakesh Shah, Chairman and MD, was not recorded, who was available in the premises during the course of Panchnama - Under the circumstances, the contents therein of the Panchnama certainly become suspect if not liable to be thrown out at the first instance - A Panchnama requires to present a vivid description of the events that occur during that particular duration - In other words, it should be a verbal representation of the vision of the activity that takes place during the course of the proceedings - Absence of the same casts doubts about the authenticity of documents recovered during the course of such Panchnama - Therefore, drawal of Panchnama and particularly the copying of emails from the computer were faulty in the instant case, therefore, the appellants are within their rights to seek the cross-examination of the Panch witnesses – denial of the said request is a clear case of violation of principles of Natural Justice - argument taken by the Commissioner in OIO and reiterated by AR that the claim was made belatedly and, therefore, be dismissed as an afterthought, is not correct - electronic evidence discussed and relied upon in the show-cause notice were not obtained as per the procedure laid down under Section 65B of Indian Evidence Act, 1872 or Section 138C of Customs Act, 1962, however, this being a case of tax evasion, it would be beneficial to examine the evidence contained in the emails and to see if the Department has established the case of undervaluation by reliable evidence - Commissioner has proceeded on the figures found in emails without ascertaining if the same were finalised - Other than the emails, Bench does not find any documentary or other evidence to indicate that the said price of 610/625 USD PMT has been accepted by the appellants - At best, the price of 610/625 USD PMT can be a price quoted - Unless it is established that the price has actually been agreed upon by the contracting parties, the same cannot be held to be the price paid or payable and thus to be transaction value - Moreover, the appellants claim that they were given a discount of 15-20% as per prevailing practice, was neither examined nor countered: CESTAT [para 20, 21, 23, 24, 25, 28, 30]

Cus - There is no evidence placed to show that there has been a flow-back of money from the importer to the overseas suppliers - Under these circumstances, Bench finds that the prices declared by the appellants need to be considered as assessable value - In the absence of evidence to effect that there is no flow-back, declared prices cannot be rejected in view of the judgment of the Tribunal in  Impex Steel and Bearing Co - 2014-TIOL-3303-CESTAT-DEL - Chairman/MD of the appellant, was not questioned either about the discrepancies or on the averments of other persons - It is surprising that the investigations were concluded without questioning the Top man or without giving the reasons as to why such person is only a dummy and someone else was managing the affairs - department has missed out on an opportunity to fortify its own case: CESTAT [para 31]

Cus – Undervaluation - Appellants have submitted the prevailing international prices on the basis of certain commercial documents, however, the same were not considered in the impugned order and moreover, no reasons for rejecting the same have also been recorded - appellants submit that the insurance policy obtained by them for the cargo was on the price declared by the appellants and not on the price alleged by the Department - Revenue has relied upon the insurance policies obtained by the appellants to establish that the country of origin was Iran and not UAE as claimed by the appellants in the Bills of Entry - In such circumstances, the Department cannot take a different stand vis-à-vis the insurance claims to suit their allegation - Other than the findings on the basis of emails, revenue has not put forth any acceptable evidence - preponderance of probability ends when a fact is established, that is to say, that in view of the circumstantial evidence and evidence available on record, any common man of prudent understanding would come to conclusion that such an act as alleged has occurred - It may suggest that there is undervaluation, however, the same is not useful at arriving at the exact quantum of duty evaded, which is not in the realm of surmises and conjectures but needs to be based on hard figures that are reliable - Panchnama is not self-speaking; proper procedure to record electronic evidence was not followed; conclusions have been drawn on figures which were neither accepted nor confirmed; no proof that the re-determined value was the price paid or payable, was provided and no evidence of flow back has been made available, therefore, the department's allegations of undervaluation are not sustainable - Once such allegations are not sustained, duty demand and consequential penalties imposed on M/s GSEC and other appellants are liable to be set aside: CESTAT [para 32]

Cus - Misdeclaration of country of origin - The OIO is silent if any action, such as seizure or informing RBI etc, taken in respect of such consignments - The OIO doesn't link the misdeclaration to the redetermination of value also, therefore, the department, though established the misdeclaration, did not proceed further to discuss the consequences and penal action, thereby supporting the appellant's contention that it has no bearing on the case - the department was well within its right to seize the goods for such misdeclaration and impose penalties under Section 112 of Customs Act, 1962, notwithstanding the fact that the appellants had nothing to gain financially by such an action as there was no differential duty involved – Moreover, mens rea is not an essential prerequisite for action under Section 111(m) and Section 112(a) of the Customs Act, 1962 - However, as the SCN and OIO are silent on these issues, Bench refrains from discussing it further: Appeals are allowed with consequential relief, if any: CESTAT [para 33, 34]

- Appeals allowed: BANGALORE CESTAT

TII

TP - Disallowance of expenses is valid merely because there are no corresponding benefits: ITAT

TP - Functional dissimilarity has crucial impact on TP Study hence two companies having different functions cannot be compared: ITAT

TIOL CORPLAWS

Arbitration and Conciliation: In wake of COVID-19 pandemic, lockdown ordered by Govt and resultant difficulties being faced by lawyers and litigants, it is apporpriate to extend limitation period for statutory provisions u/s 138 of Negotiable Instruments Act & sec 29A of Arbitration & Concilliation Act: SC

Arbitration and Conciliation - Enforcement of foreign award can be declined on ground of violation of provision of FEMA: HC

Companies Act - Appellant fails to prove its ownership to flats with proper evidences as fails to file income tax returns to prove payment of consideration and original title documents are not produced to establish that sale has been completed by company under liquidation: HC