Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
January 28, 2016
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Exemption u/s 54 - gift of the property so purchased to the daughter - exemption allowed subject to that, during the restriction period, the daughter shall not transfer the property by any means - AT
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Application of income in the computation of total income of assessee u/s. 11 - claim of assessee in respect to repayment of 'ways and means loan', borrowed during assessment year 2004-05 and wholly and exclusively used for its objects, as an application of income in the computation of total income of assessee u/s. 11 allowed - AT
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Validity of assessment - non-existent entity consequent to the order of merger - final order of assessment for Assessment Year 2010-11 dt.30.12.2014 passed in the name of ‘GE’ is null and void and the assessment is therefore held to be invalid and accordingly cancelled as the same has been passed after the appointed date 1.4.2012 on a non-existent entity. - AT
Customs
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Renewal of nonest Custom House Agent License - CHALR 2004 - In the present case the appellant had failed to appoint a Regulation 8/9 qualified employee before the expiry of the license. As the license had already expired it did not remain an issue of being non operative, it was a matter of license becoming nonest as held by the Commissioner. - AT
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Claim of Refund of duty paid after finalization of provisional assessment - the doctrine of unjust enrichment will not be applicable as the present refund claim relates to the period prior to amendment in Section 18 of the Customs Act, 1962 i.e. 14.07.2006 - AT
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Addendum to show-cause notice after receipt of the reply to show-cause - the learned Commissioner has erred in issuing addendum to show-cause notice after receipt of the reply to show-cause notice dated 18.12.2009. The addendum is also vitiated on the ground that there is no reference in the show-cause notice of any samples being forwarded for test. - AT
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Proper officers - Whether DRI is the proper officer - jurisdiction of DRI to initiate proceedings - In the wake of Section 28(11) ibid, Show Cause Notices issued by DRI do not suffer from any jurisdictional infirmities - AT
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Revocation of CHA License - forfeited of entire amount of security deposit - We do not find any force in this argument for the reason that even if the offence is committed by employee but since it was authorized by the appellant to his employee, it is the appellant who is responsible for offence committed by his employee. - AT
Indian Laws
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Eviction of tenant from mortgaged property - validity of lease - A non obstante clause (Section 35 of the SARFAESI Act) cannot be used to bulldoze the statutory rights vested on the tenants under the Rent Control Act - SC
Service Tax
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Supply of tangible goods - revenue was of the view that allowing use of such capital assets amounts to providing of services, namely, "supply of tangible goods" service. - stay granted partly - AT
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Club or Association Services - collection of subscription from their members during the period 2005-06 - This issue is no more res-integra in view of various decisions of the Hon'ble Gujarat High Court and the Tribunal - Demand set aside - AT
Central Excise
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Duty demand - cenvat credit - appellant are not liable to pay any amount in respect of clearance of slag/dust which has been cleared by them without payment of duty as same has been emerged during the course of manufacture of M.S. Ingots - AT
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Adjustment of amounts of refund due to the respondent against confirmed dues of penalty - Section 11 of the Central Excise Act does not provide for adjustment of money due towards the amount due to Revenue. - AT
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Under-valuation being from related persons - interconnected undertaking - Both the entities are controlled by the same person - All the observations are fact based observations. - demand confirmed invoking extended period of limitation - AT
VAT
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Demand of composition tax on service contract involving supply of labour, trenching and excavation works - Delhi Value Added Tax (DVAT) - the legislative intention was not to bring pure labour contracts within the purview of the Act, much less within the purview of Section 6 (1) - HC
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Purchase of Goods against Form C - concessional rate of tax - Deputy Commissioner amended the registration certificate after deleting the two items, namely, “deep-freezer” and “tricycle”, on the ground, that the petitioner is not re-selling the said items. - Order of DC is wrong and incorrect - directed to issue Form-C - HC
Case Laws:
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Income Tax
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2016 (1) TMI 903
Entitlement for deduction u/s 54 - gift of the property so purchased to daughter - whether gift does not attract long term capital gain tax? - difference between gift and settlement u/sec. 47(i)(iii) - Held that:- The assessee being a father has settled the property in favour of his daughter out of love and affection without any consideration as referred at para 3 of settlement deed. As far as the settlement is concerned the assessee as a donor transferred the immovable property out of love and affection without consideration to the daughter done and same is not regarded as transfer of a capital asset under a gift, or will or an irrevocable trust does not attract long term capital gain as the provision of Sec 47(iii) of the Act. Hence, the gift does not attract long term capital gain tax. Coming to the exemption provisions of Sec 54 the assessee has complied with the provisions and the conditions laid down and the long term capital gains set-off with the cost of acquisition of new asset purchased in the same year but the issue arise whether the settlement or gift of such property claimed as exemption will call for addition on transfer within three years. After considering the elaborate submissions, judicial decisions followed, the assessee after availing exemption settled the property in favour of the daughter duly following the process of law. However, we make it clear that during the restriction period, the daughter shall not transfer the property by any means. At this stage we have no information about status of the property. Hence for limited purpose to examine the present status of the property, we remit the issue to the file of the Assessing Officer, and Assessing Officer shall provide adequate opportunity of being heard before deciding the issue. - Decided partly in favour of revenue
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2016 (1) TMI 902
Disallowance on account of business promotion expenditure - CIT(A) deleted the disallowance - Held that:- The major portion of the expenses i.e. ₹ 7,88,883/- pertains to expenses incurred abroad and foreign travel. This disallowance has already been deleted and the Assessing Officer is not in appeal. As regards balance amount of ₹ 3,82,937/-, the ld. CIT(A) has already confirmed the disallowance to the extent of ₹ 1,00,000/- in respect of element of personal expenses, yet the Assessing Officer is in appeal. There is no material, however, to show that the personal expense incurred in the credit card statement exceeds the amount of disallowance which has been confirmed by the ld. CIT(A). In our considered view, action of the ld. CIT(A) seems to be reasonable and it does not call for any interference in the matter, particularly in the absence of any material having been brought on record to show that the disallowance confirmed by the ld. CIT(A) is inadequate or unreasonable. We, therefore, uphold the action of the ld. CIT(A) and decline to interfere in the matter. - Decided against revenue Disallowance on account of interest expenses - assessee itself had agreed that the advances are made out of loan from HDFC Bank (interest bearing fund) - CIT(A) deleted the disallowance - Held that:- as noted by the ld. CIT(A), the assessee has share capital of ₹ 2,97,21,600/- and accumulated profit to the extent of ₹ 2,20,75,710/-. Clearly, therefore, the assessee has sufficient non-interest bearing funds which covers more than the interest free advance of ₹ 45,00,000/- to its director. In view of this factual position and in the light of Hon'ble Bombay High Court's judgement in the case of CIT vs. Reliance Utilities [2009 (1) TMI 4 - HIGH COURT BOMBAY ], which holds that as long as sufficient interest free funds are available to an assessee, no disallowance can be made in respect of interest free advances given by the assessee. To that extent, we approve the action of ld. CIT(A) and decline to interfere in the matter.- Decided against revenue
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2016 (1) TMI 901
Disallowance of loss of foreign Exchange Fluctuation loss - CIT(A) deleted the addition - Held that:- The issue in dispute is squarely covered by the decision of the Hon'ble Supreme Court in the case of Wood world Governor India Pvt. Ltd., reported in (2009 (4) TMI 4 - SUPREME COURT) wherein it has been held that increase in liability on revenue account due to foreign exchange fluctuation as per the exchange rate prevailing as on the last day of the financial year was neither notional or a contingent liability and the same, there was allowable as a deduction. We do not find any infirmity in the order passed by the ld.CIT(A) - Decided against revenue Disallowance of depreciation on the opening WDV of P&M in respect of the amount of Custom Duty on import of P&M imported in the year - CIT(A) deleted the addition - Held that:- Perusal of the facts on record show that the Hon'ble ITAT in the appellant's own case from A. Y. 2003-04 & 2004-05 on identical facts has decided the issue in favor of the appellant stating that the Learned First Appellate Authority is not justified in confirming the disallowance of depreciation. The assessee has capitalized the security deposit by treating it at par with the customs duty. It has waited for 8 long years and when realized that follow up action with the customs department would be a futile exercise only then took a decision of capitalizing this amount on the value of the assets. In case in subsequent years assessee was able to get the amount the it will be offered for taxation or it will be brought to tax under sec. 41(1) of the Act. No prejudice is caused to the revenue if depreciation is allowed by permitting the assessee for capitalizing of this security deposit. - Decided against revenue
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2016 (1) TMI 900
Charging of interest u/s.234D - Held that:- This issue is now settled that when no refund has been granted to the assessee vide intimation u/s.143(1) of the Act, there cannot be levy of interest u/s.234D of the Act. This view is fortified by the Jurisdictional High Court in the case of CIT v. Ramco Industries Ltd. [2009 (12) TMI 54 - MADRAS HIGH COURT ]. It is also to be noted that the Assessing Officer vide letter dated 12.4.2012 to the Senior Authorized Representative clarified that on verification of relevant case records, it was found that no refund has been granted to the assessee company u/s.143(1) of the Act, while processing the return of income u/s.143(3) vide order dated 30.3.2004. Being so, in our opinion, there is no question of levy of interest u/s.234D of the Act. Disallowance of amortization of lease charges paid - leasehold land taken on lease by the assessee and used in its business - Held that:- This issue came up for consideration before this Tribunal in assessee's own case for the assessment year 200-01 wherein held that once lease rights for industrial lands are obtained for 30 to 99 years, then normally assessee is owner of such lands, particularly because there is always a renewal clause in such lease deeds. pex Court also in the case of Aditya Minerals Pvt. Ltd. [1999 (9) TMI 2 - SUPREME Court] held that where lease deed allowing use of land even for excavation purposes and where rent was deposited in advance, then only adjustment of such rent was not deductible. - Decided against assessee. Disallowance of additional depreciation in respect of additions to plant and machinery in the previous assessment year - Held that:- Tribunal in the case of M/s. I.P.Rings Ltd. [2014 (9) TMI 998 - ITAT CHENNAI] held that as the assessee used new plant and machinery below 180 days and therefore, additional depreciation shall be allowed only 50%. - Decided against assessee. Disallowance of interest on additional excise duty(AED) u/s.43B - Held that:- in the present case, the principal amount of AED is not a decretal amount. The Finance Act, 2005, prescribed the procedure to be followed for the recovery of the AED credit availed by the assessee and interest payable thereon. The Finance Act required the amount to be paid back to the government, which could be paid back in instalments with interest at the rate of 13% per annum. Therefore, the interest payable on AED is part of the duty payable and provisions of sec.43B are applicable. Being so, the argument of the ld. AR that interest payable on AED is only compensatory in nature and does not fall within the purview of sec.43B cannot be upheld. In view of this, we are of the opinion that the CIT(Appeals) is justified in disallowing the claim of the assessee. - Decided against assessee Confirming the refunds allowed in sales tax assessment as the income of the current year and added to the total income of the assessee - Held that:- Sec.145 deals with the method of accounting. It has been radically recast with effect from 1.4.1997, so as to permit only cash or mercantile system of accounting. Further, the Supreme Court in Nalinikant Ambalal Mody v. S.A.I. Narayan Row. CIT [1966 (5) TMI 13 - SUPREME Court] has held that sec.145 is mandatory. In view of the clear statutory provision and ratio of the Supreme Court, it may be stated that the assessee can follow only one of the methods of accounting i.e. cash or mercantile system of accounting. Since the assessee is following mercantile system, the disallowance made by the AO is in order. Therefore, no interference is called for on the action of the AO. The other plea of the assessee that it is consistently following the above practice and the same has been accepted by the Department will also not come to its rescue because reliance on "rule of consistency" alone cannot be the basis for such allowance - Decided against assessee Disallowance u/s 14A - Held that:- The assessment year involved in this appeal is 2002-03 and there is no Rule 8D of the I.T. Rules at this relevant time. Rule 8D was inserted with effect from 24.3.2008 and Rule 8D has no application this assessment year. It is prospective in nature. Thus we direct the AO to disallow 2% of the total income. - Decided partly in favour of assessee
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2016 (1) TMI 899
Application of income in the computation of total income of assessee u/s. 11 - whether the amount borrowed by assessee in the AY 2004-05 and used for repayment of "ways and means" during the relevant AY 2007-08 be treated as an application of income u/s. 11 of the Act or not? - Held that:- The board circular No.100 dated 24.01.1973 states that the repayment of loan originally taken to fulfill one of the objectives of the trust will amount to an application of the income for charitable purposes. In the present case the assessee is juridical entity created by act of parliament for the object of general public utility and was very much in existence prior to 1st April 2005. Once the object is of general public utility, which is charitable in nature, the assessee's case is covered by the decision of Hon'ble Supreme Court in the case of CIT V Gujarat Maritime Board, [2007 (12) TMI 7 - SUPREME COURT OF INDIA ]. Accordingly, we allow the claim of assessee in respect to repayment of 'ways and means loan', borrowed during assessment year 2004-05 and wholly and exclusively used for its objects, as an application of income in the computation of total income of assessee u/s. 11 of the Act. - Decided in favour of assessee.
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2016 (1) TMI 898
Revision u/s 263 - as per CIT (A) violation of provisions of section 40A(3) - Held that:- CIT has assumed that the assessee must have made payments exceeding ₹ 20,000/- in lump sum and therefore, had violated the provisions of section 40A(3) and therefore, he directed the Assessing Officer to make a fresh assessment. The learned CIT did not consider Circular No.1/2009 issued by Central Board of Direct Taxes wherein, the Board amended the provisions of section 40A(3) and vide para 13.3 directed that provisions of section 40A(3) shall also be applicable where the aggregate of payments made to a single party otherwise than by an account payee cheque exceeds ₹ 20,000/- in a day. Vide para 13.4, the Circular states that the amendment will be applicable w.e.f. 1st April, 2009, therefore, this amendment will not be applicable for the year under consideration as the assessment year involved in 2007-08. The Circular vide para 13.2 itself states that assessee tend to circumvent the provisions of section 40A(3) by splitting a particular high value payment to one person into several cash payments, each below ₹ 20,000/-. There is no dispute that payments were found to be recorded in cash book which were less than ₹ 20,000/-. Therefore, from the above, it is apparent that the assessee had not violated the provisions of section 40A(3) as admittedly the payments recorded in the cash book were ₹ 20,000/- or below. As regards examination by Assessing Officer regarding violation of there provisions, we find that the Assessing Officer had raised this issue on two occasions and the assessee had replied to the Assessing Officer and after being satisfied that no payment of more than 20,000/- was paid by assessee he did not make the addition and therefore, the order of Assessing Officer on this account cannot be said to be erroneous and prejudicial to the interest of revenue.- Decided in favour of assessee. Assessing Officer did not examine the amount of lorry charges - Held that:- The view taken by one Assessing Officer in one year, if it differs from the view taken by Assessing Officer in succeeding year on the same issue cannot be said to be erroneous provided the view taken by Assessing Officer is a plausible view. The Assessing Officer did carry out necessary examination to arrive at the genuineness of payments and assessee also filed confirmations by parties to whom payments were made. The fact that the assessee had filed confirmations of payees becomes apparent from the reply filed by the assessee to CIT against the show cause notice under section 263. There is a difference between lack of enquiry and no enquiry. It is not a case of no enquiry as Assessing Officer did carry out sufficient examination to arrive at the genuineness of transactions and if he did not take one further step to examine the genuineness of transactions which he took in succeeding year, the assessment order passed in earlier year cannot be said to be erroneous only on the basis that in subsequent year, the Assessing Officer found certain bogus entries. It is also a fact emerging from records that Assessing Officer did examine the payments of lorry charges & obtained confirmation of payees. It is another matter that he did not call for information u/s 133(c) from RTO to further verify the genuineness of payments. Therefore it is a case of inadequate enquiry and not a case of lack of enquiry, therefore the order passed by A.O is held not to be erroneous and prejudicial to the interest of Revenue. - Decided in favour of assessee.
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2016 (1) TMI 897
Denial of claim of deduction u/s 54EC - short term capital gain or long term - inclusion of period of holding of the previous owner - inherited property - Held that:- It has been clarified by way of explanation, the expression previous owner of the property in relation to any capital asset owned by the assessee means the last previous owner of the capital asset, who acquired it by a mode of acquisition other than that referred to in clause (i) or clause (ii) or clause (iii) or clause (iv) of this sub-section. Thus, capital gain tax is to be computed by taking into consideration the provisions of section 49(1)(iii)(e), i.e. taking the cost of acquisition of the asset in question to be the cost of acquisition in the hands of the previous owner. The flat in question was inherited by the assessee from his grandmother and the assessee obtained the affidavit cum declaration in August 2006 and thereafter the society carried out the transfer in the name of the assessee. In fact, the assessee did not inherit the property directly from her grandmother but from sons and daughters of grandmother. Even as per the provision of the Act, it is the cost of the previous owner which has to be reckoned, thus, in view of section 2(45A) of the Act r.w. Explanation-1 and the circumstances mentioned in section 49(1) of the Act, the cost of acquisition of the asset shall be deemed to be the cost for which the previous owner of the property acquired it as increased by the cost of any improvement of the asset incurred or borne by the assessee, as the case may be. The two sons/daughters who in turn gifted the property to the assessee on 08/08/2006, thus, this is the relevant date with respect to the term previous owner. The assessee sold the property on 27/09/2008 before the period of 36 months, thus, the capital gain arising there from cannot be said to be long term capital gains and is certainly a short term capital gain as the sale was effected almost within a period of 2 years. In this case, the previous owners are sons and daughters of Smt. Kantaben Shah (grandmother) and from whom the property came to the assessee. The property directly did not come to the possession of the assessee from the grandmother, therefore, the stand of the ld. Commissioner of Income Tax (Appeals) is affirmed. - Decided against assessee.
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2016 (1) TMI 896
Disallowance of interest payment - CIT(A) deleted the addition - whether the assessee failed to discharge the onus cast on him to prove the genuineness that the interest payment was not diversion of interest bearing funds to non interest bearing loans and advances - Held that:- The only question raised by A.O. in his assessment order is reasons for not charging interest under loans and advances shown in the balance sheet at ₹ 2,02,81,372/- and the same has been properly replied by the assessee along with supporting evidences which amicably justify that assessee was having sufficient source of interest free funds. Further, most of the interest free loans /advances, were for the business purposes. Out of total loans and advances as on 31.03.2009 shown at ₹ 2,06,81,372/- only a sum of ₹ 1,18,70,000/- was fresh loan given during the year and further out of ₹ 1,18,70,000/-, a sum of ₹ 91,50,000/- was given for real estate business and only a sum of ₹ 27,20,000/- was given as interest free loans and advances. The assessee has agreed for addition on interest of ₹ 1,30,254/- on the fresh loans of ₹ 27lacs given to M/s. Akshar Info Service (P) Ltd. calculated on the basis of days for which loans were given. Further, after reducing ₹ 1,18,70,000/- on the total loan advance of ₹ 2,06,81,372/-, the remaining amount comes to ₹ 88,11,372/- and out of this remaining amount of ₹ 88,11,372/-, assessee has already shown interest income of ₹ 10,40,040/- from old loan of ₹ 81,55,873/-. Thus we are of the view that assessee has proved the genuineness of interest payment and also proved that there was no diversion of interest bearing fund to non interest bearing loans and advances. - Decided in favour of assessee.
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2016 (1) TMI 895
Penalty u/s 271(1)(c) - disallowance u/s 14A - technique adopted for disallowance - Held that:- While disallowing the interest expenses incurred in relation to the exempt income, the assessee adopted the gross current assets in the balance sheet whereas, the AO had taken the net assets (current assets less current liabilities) and on account of assessing the indirect expenses, the assessee had applied 0.5% of average investment or actual dividend received whichever was lower. Thus, the assessee had followed the ratio that if no dividend is actually received, no disallowance is to be made and when dividend is received, expenses deemed to be incurred for earning such income cannot exceed the exempt income itself. The view taken by the assessee is supported by certain legal decisions. The assessee itself disallowed an amount of ₹ 52,39,420/- in its computation of income as per tax audit report. Without going into so much of technicality, if, it is assumed that the claim of the assessee is wrong, then, no doubt, the claim of the assessee is not to be considered as a case of furnishing of inaccurate particulars or concealment of income. The decision relied upon by the assessee in the case of CIT Vs Reliance Petrochemicals (P) Ltd. (2010 (3) TMI 80 - SUPREME COURT) is applicable in the present case. Thus we are unable to agree with the order of the learned CIT(A) confirming the penalty levied by the AO u/s 271 (1) (c) of the Act - Decided in favour of assessee.
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2016 (1) TMI 894
Income arising from sale of agricultural land - whether exempt or is taxable as capital gains in the facts of the case? - Held that:- In the present case there is no allegation that the assessee had ever applied for change of land use. The 7/12 extracts show the land as agricultural land and there is cultivation of crop. The land is beyond 8 km from the Municipal limits and the village is having population of less than 10,000. There is no evidence on record to show that the land was used for any other purpose, other than agriculture. We are of the considered opinion that the authorities below have erred in holding that the plots of land sold by the assessee are capital asset within the meaning of section 2(14) of the Act. - Decided n favour of assessee
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2016 (1) TMI 893
Addition on account of inflated and bogus purchases - adoption of N.P. rate - CIT(A) deleted the addition - Held that:- It is absolutely clear that, firstly, without purchase of material the execution of work contract given by the MCGM is not possible and even if the supplier is not traceable and not coming forward to confirm the sales, then also the factum of purchase cannot be denied; and secondly, the net profit rate on the entire contract work and of the sub-contractor is not more than 8% and 5% respectively. Here in this case also, even if the particular supplier has not confirmed the purchases, this does not lead to any inference that assessee has not made any purchases and the net profit rate of 5.87% is not only unreasonable but is still on a higher side as per finding given by Settlement Commission. Accordingly, the finding of the fact as recorded by the CIT(A) in the impugned order is affirmed and we hold that the addition of ₹ 74,01,988/- made by the AO has rightly been deleted. - Decided in favour of assessee.
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2016 (1) TMI 892
Validity of assessment and jurisdiction - non-existent entity consequent to the order of merger - Held that:- The proceedings have been continued in the name of ‘GE’ rather than, as was warranted, in the name of ‘Wipro’ even after the appointed date of 1.4.2012 rendered by both the Hon'ble High Courts of Karnataka and Delhi. We find that the draft order of assessment was passed on 28.2.2014 after the last hearing took place in both the Hon'ble High Courts of Karnataka on 24.7.2013 and Delhi on 27.8.2013. Thereafter, even though ‘Wipro’ filed the objections in Form No. 35A before the DRP, the DRP has continued the proceedings in the hands of ‘GE’ rather than ‘Wipro’. We also find that the impugned final order of assessment for Assessment Year 2010-11 has also been passed by order dt.30.12.2014 in the hands of ‘GE’ which was nonexistent as on the date of the order of assessment. In our view, the legal position is very clear in that any order made on a non-existent entity is a nullity and invalid. Applying these principles to the case on hand, we hold that the impugned final order of assessment for Assessment Year 2010-11 dt.30.12.2014 passed in the name of ‘GE’ is null and void and the assessment is therefore held to be invalid and accordingly cancelled as the same has been passed after the appointed date 1.4.2012 on a non-existent entity. - Decided in favour of assessee.
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2016 (1) TMI 891
Eligibility for deduction u/s 10AA - CIT(A) allowed the claim - Held that:- It is required to examine many factual aspects relating to the claim of the assessee by duly considering the submissions of the assessee, books of accounts of old and new M/s H.K.Jewels, the books of accounts of the assessee, the terms and conditions relating to Letter of Permission etc. With regard to the labour charges also, we notice that the Ld CIT(A) has not examined the crucial aspect, i.e., whether the claim of the assessee that the labour charges were received in foreign exchange is correct or not. Further, we notice that the various case laws referred to by Ld CIT(A) relate to the goods manufactured by the assessee by outsourcing, where as, in the instant case, M/s Vaibhav Gems Ltd has outsourced the production activities to the assessee. Hence those case laws would apply to M/s Vaibhav Gems Ltd and not to the assessee. To this extent, in our view, Ld CIT(A) has misdirected himself. Hence, this issue also requires fresh examination. There should not be any dispute that the law can be applied correctly only, if the relevant facts are very much clear. The foregoing discussions show that there is no clarity on facts of the present case and hence they need to be brought on record correctly. In view of the above, we set aside the orders passed by Ld CIT(A) in all the three years under consideration and restore all the issues to the file of the assessing officer with the direction to examine the issue afresh from all the angles that may be required. - Decided in favour of revenue for statistical purposes.
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2016 (1) TMI 890
Rental income - treated under the head ‘House property’ or 'business income’ - revision u/s 263 - Held that:- We do not find any lack of enquiry on the part of the Officer for taxing the income under the head business income and not under the head income from house property. The AO has taken a view which may be different from the view of the Ld. Commissioner and assuming that the view taken by the AO is a loss to the Revenue but the Hon’ble Supreme Court in the case of Malabar Industrial Co. Ltd (2000 (2) TMI 10 - SUPREME Court ) has held that “every loss of Revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interest of the Revenue”, for e.g. when an Income Tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue or where two views are possible and the Income Tax Officer has taken one view with which the Ld. Commissioner does not agree, it cannot be treated as an order which is erroneous or prejudicial to the interest of Revenue unless the view taken by the Income Tax Officer is unsustainable in law. Moreover, the view taken by the AO is now well supported by the decision of the Hon’ble Supreme Court taken in the case of Chennai Properties & Investment Ltd [2015 (5) TMI 46 - SUPREME COURT]. Thus, even if the revised return have been completely ignored by the AO that would only make the assessment order erroneous but by any stretch of imagination, it cannot be said to be prejudicial to the interest of the Revenue in the light of the ratio laid down by the Hon’ble Supreme Court in the case of Chennai Properties & Investment Ltd (supra). Thus we do not find any merit in the assumption of jurisdiction by the Commissioner u/s. 263 of the Act. We, therefore, set aside the order of the CIT and restore that of the AO made u/s. 143(3) of the Act. - Decided in favour of assessee.
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Customs
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2016 (1) TMI 878
Renewal of nonest Custom House Agent License - CHALR 2004 - Held that:- In the present case the appellant had failed to appoint a Regulation 8/9 qualified employee before the expiry of the license. As the license had already expired it did not remain an issue of being non operative, it was a matter of license becoming nonest as held by the Commissioner. Therefore we do not find any fault in the order of the Commissioner. - Decided against the appellant.
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2016 (1) TMI 877
Claim of Refund of duty paid after finalization of provisional assessment - unjust enrichment - import of Automatic Exhaust Emission Analysis System - claim of benefit of Notification 243/78-Cus for basic duty and additional duty and Notification 23/91-Cus and Notification 70/90-CE for benefit of auxiliary duty. - Held that:- the doctrine of unjust enrichment will not be applicable as the present refund claim relates to the period prior to amendment in Section 18 of the Customs Act, 1962 i.e. 14.07.2006. - Decided in favor of assessee.
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2016 (1) TMI 876
Addendum to show-cause notice after receipt of the reply to show-cause - Export of other rice in the name of Basmati Rice - export of Non-Basmati Rice was prohibited - Confiscation of goods - Held that:- the learned Commissioner has erred in issuing addendum to show-cause notice after receipt of the reply to show-cause notice dated 18.12.2009. The addendum is also vitiated on the ground that there is no reference in the show-cause notice of any samples being forwarded for test. Further, the findings of the learned Commissioner are vitiated for not following the prescribed procedure of testing as noted herein above. When the law prescribes for a particular thing to be done in a particular manner, the same is to be done in the prescribed manner or not done at all. Further, the learned Commissioner has erred in observing that the DGFT Circular No. 33/08, permits only export of Basmati rice, but on perusal of the said Circular, I find that the export of ‘PUSA 1121' variety is also permitted. - the goods (rice under export) was not liable to confiscation - Decided in favor of assessee - Decided against the revenue.
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2016 (1) TMI 875
Proper officers - Whether DRI is the proper officer - jurisdiction of DRI to initiate proceedings - assessment, re-assessment or levy of short remitted Customs duty under Section 17 and 28 of Customs Act, 1962 - Held that:- The officers namely those from the Directorate of Revenue Intelligence having been entrusted and assigned the functions as noted above, they are deemed to have been possessing the authority, whether in terms of Section 28 un-amended or amended and substituted. In the wake of Section 28(11) ibid, Show Cause Notices issued by DRI do not suffer from any jurisdictional infirmities and therefore the proceedings relating to show cause notices issued by DRI need not be kept pending to await the disposal of the challenge to Section 28(11) pending before the Hon'ble Delhi High Court. - Decided against the appellants.
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2016 (1) TMI 874
Revocation of CHA License - forfeited of entire amount of security deposit - period of limitation - appellant submits that the entire proceeding of inquiry suspension and revocation of it is time barred. He submits that the mis-declaration was detected in January 2008 and the suspension of the licence was ordered in October 2012. - Held that:- t only due to delay in various time limitation in the proceeding, the action of revocation cannot be held illegal. The time limitation provided in Regulations is directory and not mandatory. In view of this position, we are the view that the proceeding of revocation of appellant's CHA licence is not time bar. The appellant violated various Regulations which were held to have been proved in the proceeding by the Adjudicating Authority. It was also observed that the appellant has committed the offence earlier also as noticed from the judgment in the appellant’s own case - We do not find any force in this argument for the reason that even if the offence is committed by employee but since it was authorized by the appellant to his employee, it is the appellant who is responsible for offence committed by his employee. The impugned order is legal and proper, which does not require any interference. - Decided against the appellants.
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Service Tax
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2016 (1) TMI 889
GTA service - Denial of benefit of 75% exemption in respect of GTA services for want of an endorsement on the consignment note to the effect of non availment of Cenvat credit and Notification No. 12/2003-ST on consignment note of the transporter. - exemption notification No. 32/2004-ST - Held that:- We find that in the various judgments, issue in question has been settled that the assessee where liable to pay service tax could not be insisted upon to produce the proof of non availment of Cenvat credit and Notification No. 12/2003 which is not requirement of notification. We therefore set aside the demand of service tax, interest and penalties confirmed in the impugned order. The appeal of the assessee is allowed with consequential relief - Decided in favor of assessee.
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2016 (1) TMI 888
Supply of tangible goods - revenue was of the view that allowing use of such capital assets amounts to providing of services, namely, "supply of tangible goods" service. - Held that:- It is not disputed that the appellants have already discharged VAT on the transaction. The terms of the agreement have been examined in the Order in Appeal in detail. Hon'ble High Court of AP in case of Rashtriya Ispat Nigam Ltd. vs Commercial Tax Officer [1989 (12) TMI 325 - ANDHRA PRADESH HIGH COURT] - The contract needs a detailed examination vis a vis the decisions of the courts interpreting this constitutional provision. Considering that the appellants have paid VAT on the transaction it will be in the interest of justice to allow stay of the recovery subject to deposite of Rs Three Lakhs only within eight weeks of this order. - stay granted partly.
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2016 (1) TMI 887
Refund of service tax on services used for export of goods - GTA Services and Port Services. - co-relation of Service Tax paid by the Service providers - Notf No. 41/2007-ST dt 6/10/2007 - Held that:- Though the clarification vide Circular No. 120/01/2010-ST dt 19/10/2010 was with respect to Notf No. 5/2006-CE(M.T) but it clearly conveys that in budget 2009 the scheme under Notf No. 41/2007-ST was simplified in Notf No. 17/2009-ST by providing self certification or Chartered Accountant’s certification about co-relation and nexus between input Services & the exports. That above logic can be followed for Notf No. 5/2006-CE(MT) where such simplification of Notf No. 17/2009-ST may not be available. As the benefit of CBEC Circular dt 19/10/2010 and relied upon case laws were not available before the adjudicating authority, the matter is remanded back to the Adjudicating authority to decide the matter on the basis of Chartered Accountant’s certificate to establish the co-relation required under Notf No. 41/2007-ST - Matter remanded back.
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2016 (1) TMI 886
Levy of penalty - appellant has discharged 25% of the amount of service tax on 05/03/2014, while they received the order-in-original on 28/01/2014 - advance payment for construction work - appellant has already discharged service tax liability before issuance of the show cause notice and also discharged interest liability on issuance of the show cause notice. - Held that:- the period for discharging service tax and penalty has been extended to 90 days if the value of the service tax is less than ₹ 60 lakhs during any of the years, which I find in this case is to as, per annexure to show cause notice. Accordingly, accepting the amount of penalty paid by the appellant as sufficient compliance to Section 78 of the Finance Act, 1994, the appeal is disposed of.
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2016 (1) TMI 885
Club or Association Services - collection of subscription from their members during the period 2005-06 - Held that:- appellant was collecting subscription from their members of the Federation and therefore, the Federation is covered under the ambit of 'Club's or Association Membership Services' under the provisions of Section 65 of the Finance Act, 1994. This issue is no more res-integra in view of various decisions of the Hon'ble Gujarat High Court and the Tribunal - Demand set aside - Decided in favor of assessee.
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Central Excise
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2016 (1) TMI 884
Duty demand - cenvat credit - clearance of slag/dust cleared without payment of duty - Held that:- As from reading of sub-rule (2) and sub-rule (3) of Rule 6, it is clear that sub-rule (3) is applicable only when die provisions of sub-rule (2) are not complied with by a manufacturer. In this case, in course of manufacture of MS Ingots, slag dust arises as an inevitable by-product and in the present case, even if manufacturer, in accordance with the provisions of Rule 6 (2), wants to maintain separate account or inventory of inputs/input services used in the manufacture of dutiable product - MS ingots and take credit only in respect of inputs and inputs services used in the manufacture of MS ingots, this is impossible a slag emerges as an inevitable and unavoidable by-product. Separate account and inventory as per the provisions of Rule (2) can be maintained only when a manufacturer using common inputs/input services consciously manufactures final products one dutiable and other exempt in two separate processes. But complying with Rule 6 (2) is impossible where while manufacturing a product A, a product B emerges as an unavoidable by-product or as waste. Lex Non Cogit ad Impossibila is a well settled legal principle applicable in respect of taxation matters also. When it is impossible to comply with the provisions of sub-rule (2) of Rule 6, it would not be applicable. Sub-rule (3) of Rule 6 becomes applicable only when the manufacturer does not comply the provisions of sub-rule (2) and the provisions of sub-rule (3) would not be applicable in the cases where the sub-rule (2) is inapplicable. We find that same view has been taken in the case of Nirma Ltd (2012 (10) TMI 138 - GUJARAT HIGH COURT), case of Rallis India Ltd (2008 (12) TMI 46 - HIGH COURT BOMBAY ) and Hindustan Zinc Ltd. (2014 (5) TMI 253 - SUPREME COURT ). Therefore, the appellant are not liable to pay any amount in respect of clearance of slag/dust which has been cleared by them without payment of duty as same has been emerged during the course of manufacture of M.S. Ingots. - Decided in favour of assessee.
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2016 (1) TMI 883
Area based exemption availed under Notification No. 50/2003-CE dated 10/06/2003 - effect of correction in the name of village / area in the notification - Held that:- Observation made by the Tribunal in the case of Tirupati LPG Industries Ltd. vs. CCE, Meerut - I (2015 (10) TMI 622 - CESTAT NEW DELHI ) wherein in the identical situation this Tribunal hold that -just because the village in which Industrial area falls was wrongly mentioned and village name is corrected by amending notification, which does not mean that before the amendment, the unit was located in the notified Industrial area and was not eligible for exemption. Therefore, following the precedent decision in the case of Tirupati LPG Industries Ltd. vs. CCE, Meerut - I (supra) we hold that the respondent are entitled for benefit of exemption Notification No. 50/2003-CE dated 10/06/2003 as their factory has been located in the notified area. With these terms, we do not find any infirmity in the impugned order. - Decided in favour of assessee.
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2016 (1) TMI 882
Adjustment of amounts of refund due to the respondent against confirmed dues of penalty - FAA deleted the adjustment - Held that:- Section 11 of the Central Excise Act does not provide for adjustment of money due towards the amount due to Revenue. - The first appellate authority has justifiably held that the adjudicating authority could not have adjusted the amount of ₹ 10 lakhs towards the penalty imposed on the respondent by Order-in-Original dated 2.11.2005. Also see COMMISSIONER OF C. EX., BANGALORE-III Versus STELLA RUBBER WORKS (UNIT-II) [2013 (3) TMI 299 - KARNATAKA HIGH COURT] - DEcided against revenue
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2016 (1) TMI 881
Denial of CENVAT credit - non receipt of goods - only procuring invoices - absence of cross examination - Held that:- Cross examination of the witness is required to arrive at a fruitful decision of the case. Admittedly in this case, the cross examination was denied to the appellants. As no other corroborative evidence has been produced by the Revenue to deny Cenvat Credit. Therefore, merely on the basis of the statements of transporter / owner / driver of the vehicle, the cenvat credit cannot be denied to the appellants. In these circumstances, in the absence of any contrary evidence, the demands against the appellants is not sustainable, hence set aside. Consequently, the penalties on the appellants are also set aside. - Decided in favour of assessee
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2016 (1) TMI 880
Under-valuation being from related persons - interconnected undertaking - Both the entities are controlled by the same person - Held that:- All the observations are fact based observations. We do not find any infirmity in the same. Therefore, we conclude that M/s.DKL and M/s. Delite Furniture 2000 are related persons. Consequently, the demands confirmed on account of under-valuation being related persons are upheld. Demands hit by limitation - Held that:- We do not agree with this contention on fact that M/s. DKL and Delite Furniture 2000 are related persons and the fact that M/s. Delite Furniture 2000 controlled by M/s. DKL was not known to the department prior to investigation. In these set of facts, we hold that the extended period of limitation is rightly invoked in this matter. Computation of assessable value - inclusion of packaging charges - Held that:- We further find that the appellant have failed to discharge their obligations to prove that the packaging charges are being recovered in special circumstances from the customers. Therefore, the Authorities Below has rightly included the packaging charges in the assessable value. - Decided against the assessee.
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2016 (1) TMI 879
Utilized ineligible credit for the payment of final product - whether or not the process undertaken by the appellant amounts to manufacture for central excise purpose - Held that:- The original authority has erred in not analyzing all the relevant facts involved in the present case. As such, we find that the assessee has followed the cenvat credit scheme as applicable to them in the manufacture of their final products. The demand is not sustainable on this ground. We also find much force in the appellant's contention regarding unsustainability of demand to recover the input credit as the said credit has been utilized by them for payment of duty on the final product. Even in case the process is not amounting to manufacture, as the input credit stands reversed during the course of payment of duty on final products, no further demand for such reversed credit is sustainable. - Decided in favour of assessee.
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CST, VAT & Sales Tax
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2016 (1) TMI 873
Demand of composition tax on service contract involving supply of labour, trenching and excavation works - Delhi Value Added Tax (DVAT) - Held that:- The stand of the AA that, once the dealer opts for composition, he is required to pay tax on the aggregate value of all the contracts, including pure labour contracts does not appear to be based on a correct understanding of the provisions of the Act. When the provisions are read as a whole, and in the context of the object and purpose of the Act, it is seen that the legislative intention was not to bring pure labour contracts within the purview of the Act, much less within the purview of Section 6 (1) of the Act. - pure labour contracts would not be subject to levy of tax under Section 5 or 6 of the Act. - Decided in favor of assessee. Change in the nature of contract from works contract to service contract - Held that:- Assessee did not produce copies of the composite works contract executed by it on which it paid the reduced amount of 4% tax in terms of Section 6(1) of the Act. - The Court is of the view that an opportunity ought to be given to the Assessee to produce all the relevant contracts before the AA to enable the AA to pass a fresh order on the issue. This would not unduly prejudice the Respondent. - Matter remanded back on the second issue.
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2016 (1) TMI 872
Purchase of Goods against Form C - concessional rate of tax - Deputy Commissioner amended the registration certificate after deleting the two items, namely, “deep-freezer” and “tricycle”, on the ground, that the petitioner is not re-selling the said items. By another order of the same date, the Deputy Commissioner rejected the petitioner's application for issuance of Form-C, on the ground, that the registration certificate has been amended and, therefore, Form-C could not be issued. Held that:- the petitioner was purchasing tricycles and deep-freezers from the manufacturers outside the State of U.P. and these products are mentioned in the certificate of registration issued under Section 8(3)(b) of the Act. The petitioner was, therefore, entitled for issuance of Form-C to enable the petitioner to avail concessional rate of tax on the purchase of these products. The respondents have also admitted that the petitioner has entered into a lease agreement with its distributors and sub-dealers and is paying taxes every year on the lease rent. The order amending the registration certificate is quashed as well as the order refusing to grant Form-C is also quashed. - Form-C to be issued - Decided in favor of assessee. In the light of the aforesaid provisions, it is apparently clear, that deep-freezers and tricycles are re-sold to the distributors and dealers of the petitioner in the same form and condition as a transfer on the right to use the goods. Such “transfer of the right to use the goods” is a “sale” as defined under the Central Sales Tax Act as well as under the VAT Act. The goods purchased by the petitioner as per the products indicated in the certificate of registration are clearly intended “for resale” by it and consequently, the petitioner is entitled for issuance of Form-C in order to avail concessional rate of tax.
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Indian Laws
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2016 (1) TMI 905
Determination of contribution to the ESI - Employment by the sub-contractors - Principal employer are manufacturing papers and board at Pallipalayam. - Is not the respondent ESI corporation bound by their own circulars and are they not bound to follow the judgments rendered by this Hon'ble Court in LPA.Nos.159 and 160 of 2000 on 09.03.2004 and in CMA.No.1606 of 1995 on 10.12.2003? - Has not the respondent ESI corporation acted arbitrarily and capriciously treating 90% of the contribution bill amount of ₹ 1,45,07,900/- as wages (labour charges) paid to the workmen of the contractor by the Contractor? - Is not the act of the ESI Corporation unjustified in invoking section 45-A of the Employees State Insurance Act, 1948 for making the arbitrary demand of ₹ 9,46,268.15, when the 20th appellant had forwarded all documents and books and accounts relating to Feeding charges. Held that:- This Court finds no fault in probable percentage theory applied by the labour Court for want of particulars about the exact payments made and the impugned order hence calls for no interference. However, it is made clear that the total amount payable by the 20th petitioner towards ESI contribution for the relevant period is ₹ 9,46,758/- as evident from the order made in IA.No.162 of 1999 dated 28.03.2000 and the sum of ₹ 4,96,268.15 has already been paid and the balance sum is only payable by the petitioners. The substantial questions of law are accordingly answered against the petitioners.
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2016 (1) TMI 904
Eviction of tenant from mortgaged property - validity of lease - Whether a ‘protected tenant’ under The Maharashtra Rent Control Act, 1999 can be treated as a lessee, and whether the provisions of The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) will override the provisions of the Rent Control Act. How can the right of the ‘protected tenant’ be preserved in cases where the debtor-landlord secures a loan by offering the very same property as a security interest either to Banks or Financial Institutions. Held that:- As far as granting leasehold rights being created after the property has been mortgaged to the bank, the consent of the creditor needs to be taken - We have already taken this view in the case of Harshad Govardhan Sondagar [2015 (11) TMI 1315 - SUPREME COURT]. We have not stated anything to the effect that the tenancy created after mortgaging the property must necessarily be registered under the provisions of the Registration Act and the Stamp Act. It is a settled position of law that once tenancy is created, a tenant can be evicted only after following the due process of law, as prescribed under the provisions of the Rent Control Act. A tenant cannot be arbitrarily evicted by using the provisions of the SARFAESI Act as that would amount to stultifying the statutory rights of protection given to the tenant. A non obstante clause (Section 35 of the SARFAESI Act) cannot be used to bulldoze the statutory rights vested on the tenants under the Rent Control Act. The expression ‘any other law for the time being in force’ as appearing in Section 35 of the SARFAESI Act cannot mean to extend to each and every law enacted by the Central and State legislatures. It can only extend to the laws operating in the same field. If the interpretation of the provisions of SARFAESI Act as submitted by the learned senior counsel appearing on behalf of the Banks is accepted, it would not only tantamount to violation of rule of law, but would also render a valid Rent Control statute enacted by the State Legislature in exercise of its legislative power under Article 246 (2) of the Constitution of India useless and nugatory. The Constitution of India envisages a federal feature, which has been held to be a basic feature of the Constitution. In view of the above legal position, if we accept the legal submissions made on behalf of the Banks to hold that the provisions of SARFAESI Act override the provisions of the various Rent Control Acts to allow a Bank to evict a tenant from the tenanted premise, which has become a secured asset of the Bank after the default on loan by the landlord and dispense with the procedure laid down under the provisions of the various Rent Control Acts and the law laid down by this Court in catena of cases, then the legislative powers of the state legislatures are denuded which would amount to subverting the law enacted by the State Legislature. Surely, such a situation was not contemplated by the Parliament while enacting the SARFAESI Act and therefore the interpretation sought to be made by the learned counsel appearing on behalf of the Banks cannot be accepted by this Court as the same is wholly untenable in law. Appeals allowed - Decided against the Banks.
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2016 (1) TMI 871
Job posting - The petitioner since was not comfortable on the post of Commercial Tax Inspector, he made a request to the Joint Secretary [Services], Revenue Department on 2nd May 2014 to allow him to join back his duties as Deputy Mamlatdar on a plea that socially, physically and mentally, the work of Commercial Tax Inspector was not suitable to him. - it is the say of the respondent that once the resignation is tendered by the employee appointed on contractual basis, he cannot be reappointed without prior approval of the Revenue Department and condition no. 11 provides that once the service of a contractual employee ends, there is no provision to re-appoint him. Admittedly, the petitioner is a Government employee, selected for being appointed to the post of Deputy Mamlatdar by way of a regular procedure as per the prevalent recruitment rules. The petitioner was also selected after due procedure by the State for the post of Commercial Tax Inspector. Both the positions are equivalent in Class III cadre. The Government Resolution dated 4th May 2007 issued by the General Administration Department confers right in favour of regularly selected candidates for appointment after following recruitment process to be re-appointed in the original cadre. The person concerned also has a right to be reappointed in the original cadre with the seniority that he enjoined before joining another post. The Circular dated 21st November 2014 issued by the Revenue Department is at the most an administrative instruction. If the same is contrary to the Government Resolution dated 4th May 2007, the same cannot be allowed to prevail. The said circular clearly provides that once resignation is tendered by a Government employee appointed on contractual basis, he cannot be reappointed without prior approval of the Revenue Department. As discussed above, such policy is understandable as frequent hopping from one cadre to another cadre may cause lot of administrative issues, and therefore, prior approval of the Department would be necessary, if some body is desirous of rejoining the post. However, to say that once the service of the employee are ended who joined on contractual basis, there should be no provision to reappoint them is surely against the essence of Government Resolution dated 4th May 2007 and particularly when the Department itself has permitted such re-appointment in case of some of the employees who had already joined on fixed contractual services. Resultantly, the present writ petition succeeds with consequential reliefs. Respondent no.1 shall forthwith reappoint the petitioner on the post of Deputy Mamlatdar and thereby issue necessary orders of his reappointment on the said post by relieving the petitioner from the post of Commercial Tax Inspector.
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