2017 (7) TMI 752 - SC - Indian Laws

Guilty of professional misconduct against CA - Disciplinary action was taken against the Respondent herein for issuing certificates for consumption of raw materials showing the value of imported raw material as CIF value to the units without seeing the records since imported value of the raw materials should have been shown as value of the raw materials and not the CIF value - also, it was alleged that the units did not maintain any record for past production, still the certificates were issued which shows that the figures were manipulated and the certificates issued were not correct - Held that - the High Court has considered the statements made on behalf of the Respondent to hold that there is no material on record to establish that the units had paid an amount more than what was mentioned in the CIF value or purchase vouchers and merely because the sellers from whom the units had purchased the goods had imported the same, it does not mean that the units in question had paid the custom duty. Thus, no adverse inference can be drawn against the Respondent on this ground. So far as non-maintenance of books of accounts by the units is concerned, the High Court has held that it is also without any substance as it has found that the only witness examined before the Disciplinary Committee Mr. Phillips, proprietor of M/s. Progressive Storage Systems had stated that the books and the record are available at Bombay. Appeal dismissed - decided against appellant.

Summary

Issues:
1. Disciplinary action against chartered accountant for professional misconduct in issuing certificates.
2. Error of law in High Court setting aside findings of Disciplinary Committee and Council.
3. Adverse inferences based on CIF value and non-maintenance of books of accounts.

Analysis:
1. The appeal stemmed from disciplinary action against the Respondent for issuing certificates without proper verification, showing imported raw material value as CIF value to units. The Disciplinary Committee found the Respondent guilty of professional misconduct for failing to obtain sufficient information before issuing certificates, as per the Chartered Accountants Act, 1949. The Council agreed with the findings and recommended reprimand to the High Court.

2. The Appellant argued that the High Court erred in overturning the findings of the Disciplinary Committee and the Council. The High Court's judgment was scrutinized, revealing that it dismissed the findings due to lack of evidence showing units paid more than CIF value. It was clarified that units purchasing imported goods did not necessarily pay customs duty. The High Court also noted that the non-maintenance of accounts by the units lacked substance, as a witness confirmed the availability of records.

3. The Supreme Court concurred with the High Court's analysis, upholding its findings and observations. It was emphasized that no adverse inference could be drawn against the Respondent based on CIF value or non-maintenance of accounts. Consequently, the appeal was dismissed, and each party was directed to bear its own costs, maintaining the order of the High Court.