TMI Tax Updates - e-Newsletter
December 21, 2019

Case Laws in this Newsletter:

GST Income Tax Benami Property Customs Corporate Laws Service Tax Central Excise CST, VAT & Sales Tax Indian Laws

Articles

1. TRANSFER OF ASSETS – A SUPPLY?

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. FM holds Pre-Budget Consultation with Prominent Economists

2. Three combinations get automatic approval under CCI Green Channel

3. Commerce and Industry Minister meets export promotion Councils and Boards

4. Fresh Vegetables from Varanasi to Dubai

5. Innovative solutions required for all aspects of business and Industry: Piyush Goyal

6. Chairman 15th Finance Commission holds meeting with the CM Andhra Pradesh

7. Chairman 15th Finance Commission holds meeting with the CM Andhra Pradesh

8. Afghanistan first country to recognize Indian Pharmacopoeia

9. EChO Network launched to catalyze cross-disciplinary leadership in India; will train educators and students in interdisciplinary manner

10. Gem & Jewellwery sector has Huge Potential; Must reach target of USD 75 BN faster-Piyush Goyal

11. ADB, India Sign $ 490 Million Loan for PPP to Upgrade Madhya Pradesh Roads

Notifications

DGFT

1. F. No. 14/3/2018-EP(Agri-lll) - dated 18-12-2019 - FTP

Central Government notifies the Import Policy of items of Chapter 7 of the Indian Trade Classification (Harmonized System), 2017, Schedule-1 (Import Policy)

GST - States

2. 34/2019-State Tax - dated 12-12-2019 - Delhi SGST

Seeks to extend the last date for furnishing FORM GST CMP-08

3. 25/2019- State Tax (Rate) - dated 12-12-2019 - Delhi SGST

Categorization of certain activities relating to alcoholic liquor for human consumption as neither supply of goods nor supply of services

4. 23/2019- State Tax (Rate) - dated 12-12-2019 - Delhi SGST

Amendment in Notification No. F.3 (92)/Fin (Rev-I)/2017-18/ DS-VI/99 dated the 23rd February, 2018

5. 22/2019- State Tax (Rate) - dated 12-12-2019 - Delhi SGST

Amendment in Notification No. . 13/2017 State Tax (Rate), dated 30.06.2017

SEZ

6. G.S.R. 940(E) - dated 17-12-2019 - SEZ

Special Economic Zones (3rd Amendment) Rules, 2019.

7. S.O. 4524 (E) - dated 16-12-2019 - SEZ

Central Government notifies the 16.35 hectares area and constitutes a Approval Committee at Paschim Jalefa, Sabroom, South Tripura District, in the State of Tripura

Circulars / Instructions / Orders

DGFT

1. Trade Notice No.43/2019-20 - dated 19-12-2019

Laying down of modalities for import of additional Urad (2.5 Lakh MT) for the fiscal year 2019 - 2020.

2. Trade Notice No.42/2019-20 - dated 19-12-2019

Restriction on import of Pulses

Highlights / Catch Notes

Income Tax

• Pr.CIT can't replace Assessing Officer's satisfaction when imposing penalties u/s 271(1) for assessment changes.

  Case-Laws - HC : Penalty u/s 27(1)(c) - invocation of provisions of Section 263 - while the Pr.CIT could well initiate penalty u/s 271(1) if he proposed to effect modifications to the assessment itself, he cannot, in law substitute his satisfaction for that of the Assessing Officers’ for levying penalty in regard to the modifications to income effected in original assessment.
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• Section 264 Revision: No Double Demand Allowed on Fully Remitted Capital Gains from Share Sale.

  Case-Laws - HC : Revision u/s 264 - capital gains on sale of shares of an entity - As the amount of capital gains has been remitted in full by the company, there can be no double demand made of the same amount, in the hands of the petitioner.
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• Interest Expense Claim Denied: Must Be Wholly for Income-Earning Purpose Under Income Tax Act Section 57(iii.

  Case-Laws - AT : Disallowance of claim of interest expenses - The only requirement for allowing the deduction u/s 57(iii) is that the expenditure has been incurred wholly and exclusively for the purpose of earning the income. Thus the purpose of expenditure is relevant and not the end result of such expenditure laid out by the assessee.
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• Civil Court Cannot Entertain Suits on Income Tax Proceedings: Error in Dismissing ITO's Application Under Order 7 Rule 11.

  Case-Laws - HC : Bar of suits in civil courts - Section 293 makes an absolute bar to suit filed in Civil Courts with regard to any proceedings held under the Income Tax Act - d the court below has wrongly rejected the application under Order 7 Rule 11 CPC filed by the revisionist (ITO)
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• Failure to Submit Form 10 Denies Exemption u/s 11; Allowed Alternative Claim u/s 10(23C)(iiiad.

  Case-Laws - AT : Accumulation of fund u/s 11(2) - Failure to submit Form 10 - information related to accumulation and purpose for utilization of accumulated income - Exemption u/s 11 not available - However, alternate claim of exemption u/s 10(23C)(iiiad) allowed.
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Customs

• Refund Claim Challenged Due to Unjust Enrichment Despite Timing; Section 18(5) Principles Still Apply.

  Case-Laws - HC : Refund claim - unjust enrichment - inalization of provisional assessment - Merely because those applications for claim of refund were made prior to 13.07.2006, it cannot be said that, the import of sub-section (5) of Section 18 has become redundant especially in the context of unjust enrichment theory
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DGFT

• DGFT Notification Restricts Pulse Imports Starting December 18, 2019, to Manage Agricultural Commodity Regulations.

  Circulars : Restriction on import of Pulses - The Notifications comes into force with effect from 18th December, 2019.
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Indian Laws

• Arbitral Award Lacks Adequate Reasoning, Overly Dependent on Respondent's Approval; Deemed Unintelligible and Unsustainable.

  Case-Laws - SC : Requirement of reasoned arbitral award - From a perusal of the award, the inadequate reasoning and basing the award on the approval of the respondent herein cannot be stated to be appropriate considering the complexity of the issue involved herein, and accordingly the award is unintelligible and cannot be sustained.
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• High Court's appointment of sole arbitrator overturned; Clauses 64(3)(a)(ii) & 64(3)(b) of contract upheld.

  Case-Laws - SC : Appointment of an arbitrator - When the agreement specifically provides for appointment of Arbitral Tribunal consisting of three arbitrators from out of the panel serving or retired Railway Officers, the High Court was not justified in appointing an independent sole arbitrator ignoring Clauses 64(3)(a)(ii) and 64(3) (b) of the General Conditions of Contract
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• Property Declared Benami Without Procedure u/s 8; August 2017 Show Cause Notice Ruled Null and Void.

  Case-Laws - HC : Benami Transaction - acquired property - A declaration that the property was benami could not have been made unless a procedure was prescribed by rules made under Section 8 - No rules under that section were ever made - The main show cause notice dated 29th August, 2017 and the subsequent notice issued by the respondents are a nullity.
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Service Tax

• Assessees Can Benefit from Works Contract Scheme Without Written Option; No Denial Due to Lack of Format Rules.

  Case-Laws - HC : Works Contract Composition Scheme - merely because the option was not conveyed to the Department on the part of the Assessee in writing, even though the Revenue had not prescribed any format for the same, could not be a valid ground to deny the benefit to the Assessee.
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• Court Rules Service Tax Recovery Mechanism on Residential Complexes Invalid; Appellants Exempt from Payment.

  Case-Laws - AT : Recovery of service tax - construction of residential complexes and sale - As in the case of Suresh Kumar Bansal, it has been held that service tax can be levied but the mechanism of recovery of service tax has been set aside, therefore, the service tax is not payable by the appellants
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Central Excise

• Central Excise Duty: Balancing Excess and Short Payments Using CAS-4 for Accurate Transaction Value Assessment.

  Case-Laws - AT : Adjustment of excess paid duty with less paid duty - When CAS-4 is formed basis for arriving at transaction value, the overall duty liability/ short payment should have been arrived at after considering duty already paid during that financial year on such goods and the adjustments, if any.
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• EOU Accused of Miscalculating Education Cess, Facing Double Taxation Claims Under Finance Act Sections 93 & 138.

  Case-Laws - AT : 100% EOU - alleged wrong calculation of Education Cess and Higher Education Cess - double taxation - the education cess and S&H cess would be chargeable only once under Section 93 of Finance Act, 2004 and Section 138 of Finance Act, 2007 on the sum of basic customs duty and Additional customs duty.
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Case Laws:

• GST

• 2019 (12) TMI 877
  Release of confiscated goods alongwith vehicle - section 121 of CGST Act - HELD THAT:- Taking note of the said submission, it is directed that if the petitioner furnishes a bank guarantee for the amount determined in Ext.P2 notice, then the 1st respondent shall forthwith release the consignment and the vehicle to the petitioner. The respondents shall, thereafter, refer the matter for adjudication in terms of Section 130 of the CGST Act.

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• 2019 (12) TMI 876
  Reopening of portal for Filing of Form GST Tran-1 - transitional credit - HELD THAT:- The issue involved herein is no more res integra in view of the order of this Court in M/S ASIAD PAINTS LIMITED, VERTIV ENERGY PVT. LTD., M/S. WEIWO COMMUNICATION PVT. LTD. AND ORS. VERSUS UNION OF INDIA, GOODS AND SERVICE TAX NETWORK, THE COMMISSIONER OF COMMERCIAL TAXES (GST) , THE ASSISTANT COMMISSIONER OF COMMERCIAL TAXES [ 2019 (12) TMI 464 - KARNATAKA HIGH COURT] , whereby this Court has extended the period to file/revise the TRAN-1 by the registered persons under the Central Goods and Services Tax Act, 2017 by 31.12.2019. The petitioner is entitled to avail the extended period for filing/revising of TRAN-01 as aforesaid - Petition disposed off.

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• 2019 (12) TMI 875
  Detention of goods - interstate movement - demand of tax alongwith penalty - HELD THAT:- On a perusal of Ext.P13 notice, it is seen that the interstate transportation of the goods was being carried out by dealers who did not have a registration as mandated for interstate movement under the CGST Act. On a consideration of the reasons contained in Ext.P13 notice, I do not find the detention to be unjustified. The petitioner is ready to furnish a bank guarantee for the tax and penalty amount determined in Ext.P13, it is directed that if the petitioner furnishes a bank guarantee for the tax and penalty amount determined in Ext.P13 notice, then the respondent shall release the consignment and the vehicle to the petitioner. Petition disposed off.

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• Income Tax

• 2019 (12) TMI 874
  Mark to Market Loss - disallowance of loss on foreign exchange forward contract loss - whether the said loss was a notional loss and hence cannot be allowed? - petitioner, on instructions, issued by the Department of Revenue, Ministry of Finance vide F. No.390/Misc./116/2017-JC dated 22.08.2019, seeks permission to withdraw this Special Leave Petition along with pending applications therein due to low tax effect - HELD THAT:- Permission granted, subject to just exceptions. The special leave petition and pending applications are dismissed as withdrawn, leaving question of law open

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• 2019 (12) TMI 873
  TDS u/s 194C OR 194J - placement fees/carriage fees paid to cable operators/MSO/DTH operators - Short deduction of tds - Petitioner, on instructions, issued by the Department of Revenue, Ministry of Finance vide F. No.390/Misc./116/2017-JC dated 22.08.2019, seeks permission to withdraw this Special Leave Petition along with pending applications therein due to low tax effect - HELD THAT:- Permission granted, subject to just exceptions. The special leave petition and pending applications are dismissed as withdrawn, leaving question of law open.

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• 2019 (12) TMI 872
  Reopening of assessment u/s 147 - eligible reasons for reopening u/s 148 - information received from DDIT (Inv) alleging that M/s Nivyah Infrastructure Telecom Services Ltd is a penny stock listed on the Bombay Stock Exchange and that the petitioner had dealt with the same leading to escapement of income - borrowed satisfaction - non independent application of mind by AO - HELD THAT:- The tax effect in the present matter being less than two crores, in view of the CBDT Circular dated 8.8.2019, we see no reason to interfere. The special leave petition is dismissed. We however, left all questions of law open to be considered in an appropriate matter.

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• 2019 (12) TMI 871
  Penalty u/s 27(1)(c) - invocation of provisions of Section 263 - Proof of satisfaction of the Assessing Officer/Commissioner (Appeals)/ or Commissioner, recorded in the course of any proceeding under this Act for the levy of penalty - HELD THAT:- The provisions of Section 271(1) of the Act call for the satisfaction of the Assessing Officer/Commissioner (Appeals)/ or Commissioner, recorded in the course of any proceeding under this Act for the levy of penalty. Thus, while the Principle Commissioner or Commissioner could well initiate penalty under Section 271(1) if he proposed to effect modifications to the assessment itself, he cannot, in law substitute his satisfaction for that of the Assessing Officers for levying penalty in regard to the modifications to income effected in original assessment. This tantamounts to the Commissioner putting himself the shoes of the Assessing Officer who had passed the original order of assessment in 2016 and is impermissible in law. See Commissioner of Income Tax Vs. C.R.K.Swami [ 2001 (11) TMI 56 - MADRAS HIGH COURT] The order of the Tribunal holding that the addition to income was not justified, having become final, the Tribunal s order holding that the revision of assessment by the Commissioner on the ground that penalty proceedings had not been initiated was unsustainable, in the circumstances, is an order which is required to be upheld.

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• 2019 (12) TMI 870
  Revision u/s 264 - capital gains on sale of shares of an entity - One company had gone into liquidation and this Court, appointed an Official Liquidator directing to remit the capital gains on the sale of shares of the Company including the shareholdings of the petitioner in these Writ Petitions as well as four other family members and appropriate the consideration received towards meeting the claims of depositors of RPS - HELD THAT:- As the amount of capital gains has been remitted in full by the company, there can be no double demand made of the same amount, in the hands of the petitioner. Proceedings u/s 264 maintainability - where subsequent events have ensured that the entire tax demand including the amount offered to tax by the petitioner and the demand of tax payable thereon has been satisfied by the company pursuant to an order of this Court there can be no further demand on the petitioner. R1, as revisional authority, is certainly empowered, under the provisions of the Act, to consider such requests balancing the interests of the assessee as well as the Income Tax Department to ensure that the proper and appropriate of demand is satisfied and no more.

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• 2019 (12) TMI 869
  Assessment u/s 144 - addition u/s 69A - no SCN issued - no reasonable opportunity - HELD THAT:- It is ex-facie apparent that no reasonable opportunity was provided to the petitioner to put forth his explanation. Moreover, no show cause notice under Section 144 of the Act was issued to the petitioner. In such circumstances, this court is of the considered opinion that the order impugned dated 26.06.2019 at Annexure A shall be treated as show-cause notice. The petitioner shall put forth his reply/objections within a period of two weeks from the date of receipt of the certified copy of the order. On receipt of such reply/objections, the respondent-authority shall conclude the assessment after providing an opportunity of hearing to the petitioner. Demand notice which is part of Annexure A dated 26.09.2019 issued u/s 156 is set aside.

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• 2019 (12) TMI 868
  TDS u/s 194A - Addition u/s 40(a)(i) - TDS on finance charges - year of assessment - assessee submitted before the AO that though the TDS was not made, the recipient had admitted the income and filed the return of income, hence requested not to disallow the said sum u/s 40(a)(ia) - CIT-A upheld the addition and held that the assessee is entitled for benefit of deduction only in the subsequent assessment year i.e. 2014-15 - assessee argued that the benefit of deduction is to be allowed in the impugned assessment year to the assessee and it should not be postponed to the subsequent year HELD THAT:- In the instant case, the assessee has made the payment without deduction of tax at source and the recipient has filed the return of income on 28.11.2013 relevant to the F.Y. 2013-14 which is relevant to the A.Y. 2014-15. As per second proviso to sub section 40(a)(ia) of the Act, if the assessee is not deemed to be assessee in default in accordance with the provisions of Chapter XVII-B of the Act, on the said sum it shall be deemed that the assessee has deducted the TDS and paid the tax on such sum on the date of furnishing the return of income by the recipient referred to in said proviso, if the recipient has admitted the income and paid the tax thereon. In the instant case, the payee has filed the return of income on 28.11.2013 which is relevant to the A.Y.2014-15. Therefore as rightly held by the Ld.CIT(A), the assessee is entitled to claim the benefit of second proviso in the subsequent A.Y. i.e. 2014-15, but not for the A.Y. 2013-14. - Decided against assessee.

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• 2019 (12) TMI 867
  Disallowance of claim of interest expenses on assumption and presumption basis - disallowance of interest only in respect of one transaction of payment of interest @ 20% whereas the assessee has earned the interest at the maximum rate of 18% - AO has restricted the payment of interest to 18% - HELD THAT:- When the AO has not disputed the correctness of the payment and genuineness of the transaction, then merely because the payment of interest to one of the parties is higher than the average earning of interest, the same cannot be a reason for disallowing the claim of interest expenditure. The only requirement for allowing the deduction under section 57(iii) is that the expenditure has been incurred wholly and exclusively for the purpose of earning the income. Thus the purpose of expenditure is relevant and not the end result of such expenditure laid out by the assessee. When the interest expenditure was laid out by the assessee for earning the interest income, then the rate of interest for payment of interest is not relevant for the purpose of allowing the deduction under section 57(iii) of the Act. The authorities below have committed an error while disallowing the claim of interest on the ground that the payment in case of one party is at a higher rate than the interest earned by the assessee from such expenditure. The orders of the authorities below are accordingly set aside and claim of the assessee is allowed.

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• 2019 (12) TMI 866
  Maintainability of the suit as per provision of Section 293 - Bar of suits in civil courts - remedy of filing appeal under Section 246A-1 - respondent in the present revision is the legal heir of late assessee - HELD THAT:- It is apparent that by his suit, plaintiff is trying to challenge the order passed by the Income Tax authorities under the Income Tax Act. The Income Tax in itself is a complete code providing remedies with regard to orders passed under the same. The plaintiff respondent had remedy of filing appeal under Section 246A-1 (j) of Income Tax Act, 1961 with regard to orders of the Income Tax authorities, in case he felt injured from the same. Thus, the suit itself is not maintainable and the court below has wrongly rejected the application under Order 7 Rule 11 CPC filed by the revisionist. Section 293 makes an absolute bar to suit filed in Civil Courts with regard to any proceedings held under the Income Tax Act. In view of aforesaid, the revision is allowed.

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• 2019 (12) TMI 865
  Transfer of case u/s 127 - reasons for transferring of the case from Indore to Chennai - HELD THAT:- The need of the revenue for better investigation is of paramount importance. However, the need of the revenue for better investigation of the case cannot override and supersede the statutory provisions as it is being done in the present case At no point of time, reasons recorded, if any, were communicated to the petitioner and therefore, no opportunity of hearing was granted to the petitioner on the issue of the reasons recorded by the Department. The impugned order passed by the Department transferring the case to Chennai is quashed. All consequential proceedings are also quashed.

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• 2019 (12) TMI 864
  Alternative remedy of appeal under the Act - HELD THAT:- This Court is of the considered view that it would be appropriate to relegate the petitioner to file an alternative and efficacious statutory remedy of appeal available under the Act since the disputed questions of facts and law involved herein cannot be adjudicated in the writ proceedings. Indeed, reasonable opportunity was provided to the petitioner to putforth his case. If the petitioner is aggrieved by the decision of the Assessing Officer, hierarchy of authorities provided under the Act are required to adjudicate upon the said issue. Without expressing any opinion on the merits or demerits of the case, the petitioner is relegated to file the alternative remedy of appeal under the Act. If such an appeal is preferred within a period of two weeks from the date of receipt of certified copy of the order, the same shall be considered by the Appellate Authority on merits without objecting to the aspect of limitation. All rights and contentions of the parties are left open. The Appellate Authority shall decide the matter in accordance with law in an expedite manner.

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• 2019 (12) TMI 863
  Settlement Application - Reopening of assessment - HELD THAT:- Order passed in the case of Parasmal Jain by the Settlement Commission has become final. While that being so, if the objections of the learned Standing Counsel for the respondents is to be accepted, the possibility of double taxation for one transaction may occur. As such, this Court is of the view that the issue in the case of Umed C. Mehta could be reconsidered, in the light of the subsequent development through the orders passed by the Settlement Commission in the case of Parasmal Jain. Consequently, deem it proper to refrain from addressing any other grounds raised by the petitioner, challenging the impugned proceedings in this writ petition and that any further decision could await, after final orders are passed by the Settlement Commission on remand. It would be relevant to point out herein that when Umed C. Mehta had challenged the order of the Settlement Commission passed in his Settlement Application before this Court in had set aside the order of the 1st respondent herein dated 23.10.2009 and remanded the matter back for fresh consideration. It would not be appropriate to interfere with the present impugned notice at this stage, but, it would be appropriate to await the decision of the Settlement Commission, after remand, in the case of Umed C. Mehta.

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• 2019 (12) TMI 862
  Accumulation of fund u/s 11(2) - Failure to submit Form 10 - information related to accumulation and purpose for utilization of accumulated income - alternatively claim of exemption u/s 10(23C)(iiiad) - HELD THAT:- It is pertinent to note that as per section 11 of the Act, the assessee is required to exercise option for accumulation of funds in a prescribed format as prescribed under rule 17 of the Income Tax Rules (in short the Rules ). The time limit prescribed under the rule 17 for exercising such option is the time limit as prescribed under sub-section 1 of section 139 of the Act for furnishing of return of income. Admittedly, the assessee failed to exercise this option as prescribed under the rule 17. CIT(A) has pointed out serious discrepancies in the resolution of the society for setting apart of fund. Therefore, the judgement of the Hon ble Bombay High Court rendered in the case of CIT Vs. Nagpur Hotel Owners Association [ 1992 (10) TMI 12 - BOMBAY HIGH COURT] in our considered view would not be applicable as in this case, the foundation of exercising the option itself is found to be faulty. Therefore, we do not see any reason to interfere in this finding of the Ld. CIT(A). Same is hereby affirmed. Ground No.3 of the assessee s appeal is rejected. Availability of exemption u/s 10(23C)(iiiad) - HELD THAT:- As relying on COUNCIL FOR THE INDIAN SCHOOL CERTIFICATE EXAMINATIONS VERSUS DIRECTOR GENERAL OF INCOME TAX [ 2012 (3) TMI 289 - DELHI HIGH COURT] we hereby direct the A.O. to grant exemption u/s 10(23C) of the Act and delete the addition.

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• 2019 (12) TMI 861
  Addition on account of undisclosed sale of scrap - Addition sustained by the CIT(A) without admitting the additional evidence submitted by the assessee - HELD THAT:- We find that as per RG-1, the assessee has shown various quantities of scrap with job workers. Therefore, there are entries in the RG-1 regarding the scrap with job workers and the AO has taken these quantities from the RG-1. It is not in dispute that in the Stock Register i.e. RG-1, the assessee has shown scrap with various job workers. However, complete details of job workers are not appearing in the stock register due to the format as provided under the excise rules. When the AO asked the assessee to explain the difference of the scrap of sale shown by the assessee in the books of accounts as well as the scrap shown in the RG-1, the assessee has initially explained the reasons for difference which is reproduced by the AO Excise Duty is leviable because of the reasons that the assessee is a manufacturer of the goods and not the job workers. On further show cause notice issued by the AO regarding partywise details of job work and other relevant materials on the issue, the assessee again filed the replies as well as details. We find that as per the assessment proceeding sheet, the AO has clearly stated that requisite details were filed by the assessee except against Query Nos. 9,25 26. The AO has then again asked the assessee to produce the relevant details regarding query Nos. 9,25, 26. The first query of the AO was about the details of excise duty paid on scrap and sale of scrap as per books of accounts. The second query was regarding furnishing the details of increase in purchase costs and decrease in the sale price. The second query was not related to scrap sale. As regards the first query, the details were produced by the assessee and the AO thereafter has not raised any further query and nothing is appearing in the proceeding sheet. However, the AO finally made the addition of the differential amount which assessee has claimed that the scrap remained with the job workers. When the assessee has produced all the relevant documentary evidence in support of the claim and also filed an application under Rule 46A of Income Tax Rules with the CIT(A) then rejecting the said application by the ld. CIT(A) only on the ground that the assessee has not produced the said evidence before the AO despite sufficient opportunities is not justified particularly when all the material was forwarded to the AO alongwith written submissions for the remand report. Once the AO was asked to submit the remand report then the evidence produced by the assessee was also required to be examined by the AO. In the case in hand, the AO has not submitted any remand report as pointed out by ld. CIT(A) while passing the impugned order. Therefore, non-furnishing of remand report cannot taken against the assessee rather it is a ground for taking adverse inference that the evidence produced by the assessee is not disputed by the AO. Accordingly, in view of the above facts and circumstances of the case, we set aside the orders of the authorities below qua this issue and consequently the addition made by the AO on account of unaccounted scrap sale is deleted. Disallowance u/s 14A - HELD THAT:- It is clear from the details given by the AO that during the year under consideration there is a substantial reduction in the investment in the shares. There is a sale of shares of more than Rs. 2.00 crores during the year and therefore, it is clear that the source of investment made during the year is sale proceeds of the existing investment in the shares. Assessee has sold the shares of Oil India Ltd. and purchased the shares of ONGC. The sale proceeds of shares of Oil India Ltd are much more than the investment in shares of ONGC. Further as per funds available with the assessee, it is clear that assessee s own funds are many times more than the investment in shares. Therefore, in these undisputed facts, no disallowance is called for on account of interest expenditure. As regards the disallowance of indirect administrative expenditure, we find that there is churning in the investment portfolio during the year under consideration as the assessee has sold the shares of Oil India Ltd. and purchased the shares of ONGC. Therefore, there is a process of decision making at the highest level of management of the assessee for selling the shares of Oil India Ltd. and purchase of shares of ONGC. Hence the disallowance on account of indirect administrative expenditure being 5% of average investment is justified. Accordingly, the addition made by the AO u/s 14A is sustained to the extent of Rs. 1,07,094/-.

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• Benami Property

• 2019 (12) TMI 840
  Benami Transaction - acquired property - it is alleged that the said property was benami under Section 2(8) of the said Act of 1988, as amended - alleged violation of Section 2(9)(D) thereof - alleged that the consideration for this transaction was provided by non-traceable fictitious/shell entities having no real business , rendering the transaction benami - HELD THAT:- The definitions of benami transaction and property are radically changed by the amending Act. So are the provisions regarding investigation of contraventions, offences etc., the consequence of it namely, confiscation, prosecution etc. The show-cause notice dated 29th August, 2017 was issued under Section 24(1) of the 1988 Act as amended. It referred to the alleged benami transaction by the appellant under Section 2(8) and 2(9)(D) thereunder. Therefore to allege contravention of the 1988 Act as amended in 2016 the contravention should have been made after the date of coming into force of the amendment - In the absence of retrospective operation of the amending Act, one cannot allege that the transaction resulting in the said contravention of the 1988 Act as amended in 2016 took place in 2011. That is exactly what the impugned show-cause notice proposed to do. The contention of the Additional Solicitor General that the provision in Section 1(2) of the said Act automatically made the amending Act of 2016 retrospective, is rejected - The 2016 amendment is a new legislation and in order to have retrospectivity it should have been specifically provided therein that it was intended to cover contraventions at an earlier point of time. That express provision is not there. Therefore this contention of the Additional Solicitor General fails. A declaration that the property was benami could not have been made unless a procedure was prescribed by rules made under Section 8 - No rules under that section were ever made. Hence, although the Act was entered in the statute book, it was an Act on paper only and inoperative. By the addition of Chapter III to the Act by the Amendment Act of 2016, an adjudicating authority and its composition, jurisdiction and powers were provided. Exercising powers under Section 28(2) read with Section 59 of the Amendment Act the Central Government by a Notification No. SO 3290E dated 25th October, 2016 notified specified Income Tax Authorities to act as Initiating Officer, Approving Authority and Administrator for benami transactions. Furthermore, by another Notification No. SO 3288E dated 25th October, 2016 Adjudicating Authority was notified. The main show cause notice dated 29th August, 2017 and the subsequent notice dated 9th October, 2017 issued by the respondents are a nullity - Appeal allowed.

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• Customs

• 2019 (12) TMI 860
  Refund claim - unjust enrichment - inalization of provisional assessment - section 18(5) of CA - Whether the Hon ble Tribunal erred in following the judgment of the Hon ble Court in Scientific Instruments (Supra) [ 2014 (12) TMI 530 - MADRAS HIGH COURT] , which is per incuriam the judgments of the Hon ble Supreme Court in Mafatlal (Supra) and Allied Photographics (Supra)? HELD THAT:- Clause (a) of sub-section (5) makes it clear that, the duty and interest if any paid by the importer can be refunded, provided if he had not passed on the incidence of such duty and interest, if any paid on such duty, to any other person. Therefore it became mandatory that, by virtue of sub-section (5) of Section 18, unless the importer is able to prove that, he has not passed on the incidence of such duty and interest, if any paid, to any other person, he would not be entitled to claim refund. In this context, it is the case of the importer / appellant as vehemently contended by the learned counsel appearing for the importer / appellant that, the said sub-section (5) of Section 18, since has application only from 13.07.2006 and as per the various decision of the High Courts as has been relied upon by him, it would not have any retrospective effect, the said provision shall not be made applicable to the case of the importer / appellant herein, since admittedly all the three applications of the importer / appellant seeking refund were made well prior to 13.07.2006. From the reading of the aforesaid Section 18(2) and (5) of the Act as well as the decision of the Scientific Instruments case ( supra ) of a Coordinate Bench of this Court, we are of the considered view that, the importer has to necessarily satisfy the unjust enrichment test before the original authority not withstanding the fact that, he has made the claim for refund in all the three cases before 13.07.2006 - Since the final assessment was not over and before which based on the provisional assessment under Section 18(1) since duty had been paid by the importer, of course under protest and thereafter consequent upon the eligibility of the importer after the Judgment of the Hon ble Apex Court in their own case in Tata Teleservices Ltd., v. Commissioner of Customs reported in [2006 (194) ELT 11 (SC)] ( cited supra ), the importer made those applications. Merely because those applications for claim of refund were made prior to 13.07.2006, it cannot be said that, the import of sub-section (5) of Section 18 has become redundant especially in the context of unjust enrichment theory - After the final assessment if the importer is otherwise eligible to get refund under any exemption given by way of notification or otherwise, the importer can make a claim for refund, at that time, certainly the Revenue would be entitled to go into the correctness of such claim by putting the test of unjust enrichment on the importer and in such case, it is the duty of the importer to establish that, he had not passed on the incidence of such duty to any other person. Therefore it is the factual matrix, that too, to the subjective satisfaction of the assessing or adjudicating authority who must come to a conclusion that, there has been no unjust enrichment on the part of the importer and then only he must allow the refund claim of the importer even though the importer already entitled to make such a claim statutorily. The Substantial Questions of Law framed in these appeals are against the importer / appellant and in favour of the Revenue - appeal dismissed - decided against appellant.

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• Corporate Laws

• 2019 (12) TMI 859
  Siphoning/defalcation/diversion of funds - Vacation of restraint on related party to transfer, selling or alienating of the properties purchased - related party companies - intermediate companies - sister concern - HELD THAT:- There has been siphoning off of funds from Respondent No.1. The balance sheet for the period ending 31.12.2009 also reflects that inter-corporate deposits have been written off by Respondent No. 1. Appellants, thus, have a good ground to say that the amounts invested by them were diverted by Respondent No. 1 to Intermediate Companies which were further diverted to Related Party Companies who have purchased the subject land. The Related Party Companies have a nexus with Dr. Rajesh Aeren, the Managing Director of Respondent No. 1. There is also material on record to prima facie show that in all Related Party Companies, AEZPL and Dr. Rajesh Aeren were the beneficiaries. In fact, the annual return of Aeren R. Enterprises Pvt. Ltd., reflects that Dr. Rajesh Aeren, his wife and his son and daughter are the shareholder and the ultimate beneficiaries. The Related Party Companies have entered into various transactions with Respondent No.1. Therefore, it cannot be ignored that there is a trail of money which ultimately results into the purchase of subject land by Dr. Rajesh Aeren through sister concerns of Respondent No. 1 in the names of the sister concerns. There is sufficient material on record which, prima facie, shows that there has been siphoning off of funds from Respondent No.1. The balance sheet for the period ending 31.12.2009 also reflects that inter-corporate deposits have been written off by Respondent No. 1. Appellants, thus, have a good ground to say that the amounts invested by them were diverted by Respondent No. 1 to Intermediate Companies which were further diverted to Related Party Companies who have purchased the subject land - The Related Party Companies have entered into various transactions with Respondent No.1. Therefore, it cannot be ignored that there is a trail of money which ultimately results into the purchase of subject land by Dr. Rajesh Aeren through sister concerns of Respondent No. 1 in the names of the sister concerns. The routing of funds is central to the scheme of layering the tainted money, which is always a challenge for unearthing fraud and tracing the source and the trail. The volume of funds pushed into purchase and acquisition of properties in question can only be estimated at this stage with the existing information. It will, of course, require detailed scrutiny of accounts to reach to a definite conclusion. The arms of the law are long enough to chase the fraudulently, ill gotten wealth, and to chase the fraudsters, even after they change their faces/identities by resorting to transfer of funds/layering. There seems to be no justification for Respondent No. 1 not utilizing the funds collected by it from different sources for the Project Mall , and for diversion of the funds into the Intermediate Companies. There is no basis for the writing off of the advances made. Clearly, the promoters/management of Respondent No. 1 acted fraudulently, and were charitable towards the Intermediate Companies at the expense of, inter alia, the investors, including, the Appellants. The interim directions/orders are required to be passed under Section 339, since it is reasonable to assume on the basis of the facts shown to us that Dr. Rajesh Aeren had a direct nexus with the Related Party Companies which emerges from the pattern/trail of funds which has been discovered by the Investigating Agency - appeal allowed.

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• Service Tax

• 2019 (12) TMI 858
  Works Contract Composition Scheme - works contract services of Supply and Installation of Electrical Equipments - abatement under N/N. 1/2006-ST dated 01.03.2006 - HELD THAT:- There is nothing in the order of the learned Tribunal, which could deny the benefit of the Composition Scheme to the Assessee and therefore, the order of remand passed by the learned Tribunal on 01.06.2018 directing the Assessee to go for regular assessment instead of Composition Scheme merely because the option was not conveyed to the Department on the part of the Assessee in writing, even though the Revenue had not prescribed any format for the same, could not be a valid ground to deny the benefit to the Assessee. The failure on the part of the learned Tribunal to do so resulted in miscarriage of justice and unnecessary litigation brought before this Court firstly in the form of writ petition, which upon the objection raised from the side of the Revenue, which also cannot be appreciated much, had to be converted into a regular appeal under the provisions of Section 35G of the Act. Matter remanded to the learned Tribunal with a request to pass fresh orders in accordance with law - appeal allowed by way of remand.

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• 2019 (12) TMI 857
  Penalty - Assessee has admittedly paid the service tax with interest, but the delay in payment of the said service tax occurred on account of financial crisis of the respondent Assessee - HELD THAT:- The fact that the Assessee paid the service tax along with the interest in question, soon upon getting information from the Department, as noted by the Tribunal, setting aside of the penalty on the ground of delay in depositing the penalty was justified and therefore, the learned Tribunal has not erred in setting aside such penalty imposed upon the Assessee. Appeal dismissed - decided against Revenue.

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• 2019 (12) TMI 856
  Recovery of service tax - construction of residential flats - renting of immovable property service - HELD THAT:- Considering the fact that there is no stay has been granted by the Hon ble Apex Court in the case of SURESH KUMAR BANSAL ANUJ GOYAL ORS. VERSUS UNION OF INDIA ORS. [ 2016 (6) TMI 192 - DELHI HIGH COURT] wherein it has been held that there is no mechanism of recovery of service tax from the appellant; in that circumstance, the service tax is not payable by the appellant - the appellant is not liable to pay service tax under the category of construction of residential complex - Demand as well as penalty set aside. Further, the appellant has conceded the demand of service tax of Rs. 3,24,992/-. The same is confirmed along with interest and penalty under Section 78 of the Finance Act, 1994 is also confirmed on the said demand as per law. Appeal allowed in part.

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• 2019 (12) TMI 855
  Recovery of service tax - construction of residential complexes and sale - demand of service tax alongwith interest and penalty - When appeal has been filed against the order of SURESH KUMAR BANSAL ANUJ GOYAL ORS. VERSUS UNION OF INDIA ORS. [ 2016 (6) TMI 192 - DELHI HIGH COURT] by Revenue before the Hon ble Apex Court can the said decision be relied on or not? HELD THAT:- The said issue came up before the Hon ble High Court of Delhi in the case of PRINCIPAL COMMISSIONER OF C. EX., DELHI-I VERSUS SPACE TELELINK LTD. [ 2017 (3) TMI 1599 - DELHI HIGH COURT] , wherein the Hon ble High Court has held that if the order of High Court has not been set aside by the Hon ble Apex Court, till date the order of the Hon ble High Court is to be followed. Admittedly, neither stay has been granted nor the order in the case of Suresh Kumar Bansal has been set aside by the Hon ble Apex Court, therefore, in the light of the decision of Space Telelink Ltd.we are bound to follow the decision of Suresh Kumar Bansal. As in the case of Suresh Kumar Bansal, it has been held that service tax can be levied but the mechanism of recovery of service tax has been set aside, therefore, the service tax is not payable by the appellants. Appeal allowed - decided in favor of appellant.

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• 2019 (12) TMI 854
  Refund of unutilised CENVAT Credit - Input services - construction services - telephone services - canteen services - housekeeping services - group health insurance - the disputed period is prior to 01.04.2011 - HELD THAT:- The definition of input services included the words activities relating to business . Various decisions of the tribunal has held that the services availed for activities relating to business are eligible for credit/refund. In the appellant s own case COMMISSIONER OF CUSTOMS, CENTRAL EXCISE AND SERVICE TAX HYDERABAD-IV COMMISSIONERATE VERSUS M/S HYUNDAI MOTOR INDIA ENGINEERING (P) LTD. [ 2015 (3) TMI 1049 - ANDHRA PRADESH HIGH COURT] , the credit in respect construction services has been allowed. Further the credit in respect of telephone services, canteen services, house keeping services and group health insurance services has been allowed by the department for different periods. The rejection of refund claim in respect of the services is unjustified - appeal allowed - decided in favor of appellant.

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• 2019 (12) TMI 853
  Rectification of Mistake - penalty amount was reduced to 25% of the tax remained unpaid after issue of show cause notice - Revenue s contention in the present application is that the deposit made by the appellant was not to the extent of Rs. 77,40,572/- - HELD THAT:- There is finding on the issue of absence of any malafide on the part of the assessee. By observing so, penalty stands reduced to 25% of the remaining amount. The Revenue s only contention is that instead of Rs. 77,40,572/-, the appellant had only deposited Rs. 75,12,865/- thus the remaining amount is not Rs. 4,34,511/-, as held in the said order. The said contention of the Revenue would not require recalling of the said order of the Tribunal. If the appellant had deposited less amount and thus the remaining amount to be deposited is more, the penalty of 25% would be of the remaining tax amount - This calculation can be made by the Revenue, after intimating the assessee and giving them a chance to contest the said deposits, if so desired. ROM application disposed off.

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• Central Excise

• 2019 (12) TMI 852
  Permission for withdrawal of SLP - Maintainability of appeal - appeal dismissed for non-payment of interest - HELD THAT:- The special leave petition is dismissed as withdrawn.

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• 2019 (12) TMI 850
  Adjustment of excess paid duty with less paid duty - the short payment of duty is during the month of July and August, 2016 - there has been simultaneous excess duty paid during the other months which is much more than the alleged short paid duty - provisional assessment - Rule 7 of Central Excise Rules, 2002 - HELD THAT:- After a final assessment order is passed, if the duty paid in terms of provisional assessment is less than the duty payable after the final assessment, the assessee is liable to pay the interest on the short fall. In the entire scheme of Rule 7, there is no indication that when an assessee is permitted to pay duty in pursuance of a provisional assessment order, if he is dealing with more than one goods, they have to be treated separately - Even though the duty payable under the Act is to be calculated under each head of each case ultimately it is the total duty payable for all the goods which are the subject matter of the provisional assessment and final assessment which is to be taken into consideration. In the present case, it is an admitted fact that duty of Rs. 4,42,65,588/- has been paid by the appellant in excess for the period from April 2016 to June, 2016 and September 2016 to March, 2016. However, there is short payment of duty of Rs. 1,20,75,019/- during July and August, 2016. In view of above provision, the appellant was entitled for refund of Rs. 4,42,65,588/-. This is also an admitted fact that the sister concerns (smelter units of the appellants) to whom the goods were supplied have already filed the cenvat credit in respect of the duty paid on the said goods. The refund has rightly not been claimed by the appellant - where the goods are supplied to the sister concern for captive consumption, the adjustments of excess duty towards short payment in the subsequent period should not have been denied. In the present case, the net duty is for the financial year 2016-17 as was paid on provisional assessment basis. The short payment for two months of the same year is, therefore, to be adjusted against the excess paid during the another period of the same financial year. Revenue neutrality - HELD THAT:- It has already been held in the case of COMMISSIONER OF CENTRAL EXCISE, CUSTOMS SERVICE TAX, VAPI VERSUS M/S TARAPUR GREASE INDIA PVT. LTD., VINOD VYAS, BHARAT VYAS, M/S STANDARD GREASE, M/S STANDARD OIL AND GREASE [ 2015 (11) TMI 1168 - BOMBAY HIGH COURT] that once the goods have been delivered only at the factories of the assessee from the associated Companies then no loss occurs to the Revenue - The assessee would drive no benefit by not reversing the cenvat credit on inputs when sister concerns are also eligible to take cenvat credit. The doctrine of principle of revenue neutrality is duly applicable to such cases. When CAS-4 is formed basis for arriving at transaction value, the overall duty liability/ short payment should have been arrived at after considering duty already paid during that financial year on such goods and the adjustments, if any. Accordingly the findings of the authority below denying the adjustment of excess duty paid towards the short payment of same financial year are held to be untenable - Appeal allowed - decided in favor of appellant.

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• 2019 (12) TMI 849
  Imposition of penalty u/r 26 (1) of Central Excise Rules, 2002 - Clandestine removal - supply of polyester metalizing on job work basis under the cover of Job work challan - alleged evasion of duty - benefit of N/N. 214/86-CE - HELD THAT:- The Riva Exports Ltd. Wherein the present appellant is working as Accounts Manager has supplied the films for job work under the cover of job work challan. This is more than sufficient compliance for transaction of the goods. Since Riva Exports Ltd.is not a manufacturer and not registered under Central Excise there is no charge by the revenue that Rivaa Export Ltd. is required to be registered. The supply of goods for job work was admittedly made under challan is in order. Procedure of Notification 214/86-CE followed or not - HELD THAT:- Since M/s. Rivaa Export Ltd. is not registered and it is also a fact that they have not filed undertaking as required under Notification 214/86-CE, there is no obligation on M/s. Rivaa Export Ltd. to follow any procedure of notification 214/86-CE. In such case the entire responsibility to discharge Excise Duty if any leviable, is on M/s. MGM Metalizers Ltd. as has been held by Larger Bench of this tribunal in the case of THERMAX BABCOCK AND WILCOX LTD., THERMAX LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, PUNE-I [ 2017 (12) TMI 266 - CESTAT MUMBAI] . Therefore, if there was any non-payment of duty by MGM neither M/s. Rivaa Export Ltd. nor its employee can be made responsible. The charge of abatement for evasion of duty by MGM has no basis against the present appellant. It is also observed that once M/s. MGM Metalizers Ltd. has discharged Service Tax there is no intention of evasion of duty. Even the department was aware the fact that MGM Metalizers are paying Service Tax on their activity which claimed by the department as manufacture. For this reason also no mala fide is proved against anyone. It can be concluded that penalty was wrongly imposed against the present appellant - appeal allowed - decided in favor of appellant.

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• 2019 (12) TMI 848
  CENVAT credit - input services - GTA services - case of appellant is that sale is on FOR basis, freight amount is inclusive in the assessable value - HELD THAT:- Since to decide the admissibility of the Cenvat credit certain facts have to be verified such as whether the sale is on FOR basis, freight is borne by the assessee, whether the freight is included in the assessable value on which the excise duty was discharged and no freight was recovered from the buyer separately, then only the appellant will be eligible for the Cenvat credit on GTA, the matter needs to be reconsidered by verifying the above facts on the basis of the records already submitted/ to be submitted by the appellant, if required - appeal allowed by way of remand.

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• 2019 (12) TMI 847
  CENVAT credit - input services - Insurance taken for the vehicles owned by the appellant Company - period March to November, 2010 - HELD THAT:- The issue is squarely covered by the Tribunal decision in the case of M/S. JAYESH ELECTRICALS PVT LTD VERSUS C.C.E. S. T- VADODARA-II [ 2019 (10) TMI 1099 - CESTAT AHMEDABAD] where it was held that The period involved is prior to amendment of definition dated 01.04.2011 of inputs service i.e. January, 2009 to February, 2009 and thus Credit allowed on service of Insurance taken for the vehicles is allowed - credit allowed - appeal allowed - decided in favor of appellant.

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• 2019 (12) TMI 846
  CENVAT credit - fake invoices - alleged supply of invoices without supply of goods - credit denied relying on various statements from which the Commissioner (Appeals) contended that M/s Shah Foils Ltd. only issued the invoices but the goods were not supplied - HELD THAT:- There is no dispute that the goods invoiced under eight invoices were transported and the same was received by M/s Sun Textile Engineer. The physical receipt of the goods have not been questioned in the entire case. The goods have been recorded in the books of M/s Sun Textile Engineers. The payment against the supplies were shown in the books, even though it is partly or otherwise. No investigation was carried out with M/s Sun Textile Engineer regarding the receipt of the goods, accounting in the books, use in the manufacture of final product and the clearance of final product on payment of duty, therefore, the said facts are not in dispute. The finding given by the Learned Commissioner (Appeals) has no leg to stand - demand set aside - appeal allowed - decided in favor of appellant.

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• 2019 (12) TMI 845
  100% EOU - alleged wrong calculation of Education Cess and Higher Education Cess - double taxation - demand of differential amount alongwith interest and penalty - HELD THAT:- The issue of levy of Edu. Cess and Higher Edu. Cess thrice time in computing the applicable customs duty as per provisions of Section 3(1) of the Central Excise Act, 1944 in relation to clearance made by a 100% EOU in DTA is no more res integra and covered by the Larger Bench of this Tribunal in the case of KUMAR ARCH TECH PVT LTD VERSUS COMMISSIONER OF CENTRAL EXCISE, JAIPUR-II [ 2013 (4) TMI 482 - CESTAT NEW DELHI] where it was held that the education cess and S H cess would be chargeable only once under Section 93 of Finance Act, 2004 and Section 138 of Finance Act, 2007 on the sum of basic customs duty and Additional customs duty. Demand set aside - appeal dismissed - decided against Revenue.

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• CST, VAT & Sales Tax

• 2019 (12) TMI 844
  Rejection of rectification application - input tax credit on TDS amount - HELD THAT:- The issue involved herein is more related to the factual aspects which necessarily requires to be adjudicated by the Appellate Authority. Moreover, the petitioner has not challenged the assessment order in the present proceedings. The endorsement issued by the respondent No.1 rejecting the rectification application filed under Section 69[1] of the Act is under challenge. It is well settled law that the scope of rectification is very limited. If the authority is satisfied that there is any mistake apparent from the record, the provisions of Section 69 can be invoked to rectify such mistake. Any mistake said to have been committed by the learned Chartered Accountant in filing VAT Form240 would not be construed as the mistake apparent from the record to attract Section 69[1] of the Act - Since the factual aspects involved in the case are analyzed and the certificate is issued by the learned Chartered Accountant, such mistakes, if any in the VAT Form 240 ought to have been brought to the notice of the prescribed authority at the time of the assessment proceedings. Indisputably, no such attempts have been made by the petitioner to seek rectification of the VAT Form 240 before the conclusion of the assessments by the prescribed authority. Section 69[1] of the Act would attract when there is any mistake from the record while concluding assessment proceedings by the Prescribed Authority, the Appellate Authority or Revising Authority. The petitioner is permitted to file the statutory appeal before the Appellate Authority. If such an appeal is preferred within a period of two weeks from the date of receipt of certified copy of the order, the same shall be considered by the Appellate Authority on merits without objecting to the period of limitation. Petition disposed off.

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• Indian Laws

• 2019 (12) TMI 851
  Shifting of Liquor shops from one region to another - contravention of Rules 163 and 209 of the Excise Rules - whether the permission granted by Respondent Nos. 2 to 4 Excise Authorities to transfer the licensed shop from one region to another in the Union Territory of Puducherry was permissible under the Excise Act and Rules? HELD THAT:- Rule 209 permits shifting of the liquor shop from one place to another, subject to approval by the Licensing Authority on the terms and conditions contained therein - The proviso to Rule 209 states that the Licensing Authority may permit shifting of the licensed premises, subject to the fulfillment of the conditions of license, and payment of 1/4th of the license fee for such shifting. There is no restriction or prohibition either in the Excise Act or Rules on the Licensing Authority from granting permission to shift the licensed shop from one region to another, subject to the conditions being complied with - A fortiori, a licensee can shift a liquor shop from one region to another within the Union Territory of Puducherry, subject to the prior approval of the Competent Authority. The expression from one place to another is not restrictive, and does not curtail the power of the Licensing Authority to grant permission for shifting the licensed shop from one region to another in the Union Territory of Puducherry so long as the conditions stipulated by the Excise Act and Excise Rules, as also the conditions for grant of a license are complied with. The shifting should not result in the increase in number of liquor shops beyond the maximum number of licenses which may be fixed for a particular area under Rule 122 of the Excise Rules. In the present case, the Licensing Authority i.e. the Deputy Commissioner (Excise) vide Letter dated 07.06.2018 has granted permission to shift the F.L.1 Licensed premises of the Appellant from Mahe to Karaikal, subject to compliance with the conditions laid down in Rule 209 of the Excise Rules - also it has been informed by the Counsel for the Appellant and the State that all conditions under the Excise Act and Rules have complied with. There are no prohibition in the Excise Act or Rules for shifting the F.L.1 Licensed premises from one place to another. The permission dated 07.06.2018 for shifting the licensed shop from Mahe to Karaikal granted by Respondent No. 3 is legal and valid - appeal allowed.

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• 2019 (12) TMI 843
  Encashment/Honour of Bank Guarantee - advance against supply of plant and equipment - It is alleged that the work had to be abandoned due to which 1st respondent suffered huge losses and damages - HELD THAT:- The settled position in law that emerges from the precedents of this Court is that the bank guarantee is an independent contract between bank and the beneficiary and the bank is always obliged to honour its guarantee as long as it is an unconditional and irrevocable one. The dispute between the beneficiary and the party at whose instance the bank has given the guarantee is immaterial and is of no consequence. There are, however, exceptions to this Rule when there is a clear case of fraud, irretrievable injustice or special equities. The Court ordinarily should not interfere with the invocation or encashment of the bank guarantee so long as the invocation is in terms of the bank guarantee. The guarantees in the instant case were unconditional, specific in nature and limited in amount. The terms of the guarantee categorically covered money which the 1st respondent had advanced against supply of the plant and equipment by SCIL. The said guarantees covered any loss and damage caused to or suffered by the 1st respondent-plaintiff in due performance of the contract for supply of plant and equipment - From the correspondence that has been exchanged by and between them pertaining to invocation of the said guarantees, it clearly manifests that the initial letter of invocation written by the 1st respondent-plaintiff dated 6th November, 1998 indeed was per se inadequate and did not enumerate any condition for invocation of said guarantees save and except a reference to a substantial amount to be recovered from SCIL . Once the demand was made in due compliance of bank guarantees, it was not open for the appellant Bank to determine as to whether the invocation of the bank guarantee was justified so long as the invocation was in terms of the bank guarantee. The demand once made would oblige the bank to pay under the terms of the bank guarantee and it is not the case of the appellant Bank that its defence falls in any of the exception to the rule of case of fraud, irretrievable injustice and special equities - In absence thereof, it is not even open for the Court to interfere with the invocation and encashment of the bank guarantee so long as the invocation was in terms of the bank guarantee and this what has been observed by the Division Bench of the High Court in the impugned judgment and that reflected the correct legal position. Appeal dismissed.

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• 2019 (12) TMI 842
  Requirement of reasoned award and the cautionary tale for the parties - claim for payment of compensation for the losses suffered due to unproductive use of machineries - premature termination of the contract - Section 34 (4) of the Arbitration Act - HELD THAT:- There is no dispute that Section 34 of the Arbitration Act limits a challenge to an award only on the grounds provided therein or as interpreted by various Courts. We need to be cognizant of the fact that arbitral awards should not be interfered with in a casual and cavalier manner, unless the Court comes to a conclusion that the perversity of the award goes to the root of the matter without there being a possibility of alternative interpretation which may sustain the arbitral award. Section 34 is different in its approach and cannot be equated with a normal appellate jurisdiction. The mandate under Section 34 is to respect the finality of the arbitral award and the party autonomy to get their dispute adjudicated by an alternative forum as provided under the law. If the Courts were to interfere with the arbitral award in the usual course on factual aspects, then the commercial wisdom behind opting for alternate dispute resolution would stand frustrated. There is no gainsaying that arbitration proceedings are not per se comparable to judicial proceedings before the Court. A party under Indian Arbitration Law can opt for an arbitration before any person, even those who do not have prior legal experience as well. In this regard, we need to understand that the intention of the legislature to provide for a default rule, should be given rational meaning in light of commercial wisdom inherent in the choice of arbitration - The mandate under Section 31(3) of the Arbitration Act is to have reasoning which is intelligible and adequate and, which can in appropriate cases be even implied by the Courts from a fair reading of the award and documents referred to thereunder, if the need be. The aforesaid provision does not require an elaborate judgment to be passed by the arbitrators having regards to the speedy resolution of dispute. In case of absence of reasoning the utility has been provided under of Section 34(4) of the Arbitration Act to cure such defects. When there is complete perversity in the reasoning then only it can be challenged under the provisions of Section 34 of the Arbitration Act. The power vested under Section 34 (4) of the Arbitration Act to cure defects can be utilized in cases where the arbitral award does not provide any reasoning or if the award has some gap in the reasoning or otherwise and that can be cured so as to avoid a challenge based on the aforesaid curable defects under Section 34 of the Arbitration Act - Interestingly, the factual narration is coupled with the claimant s argument, which is bundled together. A close reading of the same is required to separate the same wherein the Arbitral Tribunal has mixed the arguments with the premise it intended to rely upon for the claimant s claim. Further, it has reduced the reasons for respondent s defense. In spite of our independent application of mind based on the documents relied upon, but cannot sustain the award in its existing form as there is a requirement of legal reasoning to supplement such conclusion. In this context, the complexity of the subject matter stops us from supplementing such legal reasoning and we cannot sustain the aforesaid award as being reasoned. From a perusal of the award, the inadequate reasoning and basing the award on the approval of the respondent herein cannot be stated to be appropriate considering the complexity of the issue involved herein, and accordingly the award is unintelligible and cannot be sustained.

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• 2019 (12) TMI 841
  Appointment of an arbitrator without reference to the clauses of General Conditions 64 (3)(a)(ii) and 64 (3)(b) of the Contract - HELD THAT:- Clause 64(3)(b) of GCC deals with appointment of arbitrator where applicability of Section 12(5) of the Act has not been waived off. The modified Clause 64(3)(b) inter alia provided that the arbitral tribunal shall consist of a panel of three retired railway officers not below the rank of SAO officer as arbitrator. For this purpose, the Railway will send a panel of at least four names of retired railway officer(s) empanelled. The contractor will be asked to suggest to the General Manager at least two names out of the panel for appointment as the contractor s nominee and the General Manager shall appoint at least one out of them as the contractor s nominee. The General Manager will also simultaneously appoint the balance number of arbitrators from the panel or from outside the panel. After coming into force of the Arbitration and Conciliation (Amendment) Act, 2015, when Clause 64 of the General Conditions of Contract has been modified inter alia providing for constitution of Arbitral Tribunal consisting of three arbitrators either serving or retired railway officers, the High Court is not justified in appointing an independent sole arbitrator without resorting to the procedure for appointment of the arbitrator as prescribed under Clause 64(3)(b) of the General Conditions of Contract. In the present matter, after the respondent had sent the letter dated 27.07.2018 calling upon the appellant to constitute Arbitral Tribunal, the appellant sent the communication dated 24.09.2018 nominating the panel of serving officers of Junior Administrative Grade to act as arbitrators and asked the respondent to select any two from the list and communicate to the office of the General Manager. By the letter dated 26.09.2018, the respondent conveyed their disagreement in waiving the applicability of Section 12(5) of the Amendment Act, 2015 - There is an express provision in the modified clauses of General Conditions of Contract, as per Clauses 64(3)(a)(ii) and 64(3)(b), the Arbitral Tribunal shall consist of a panel of three Gazetted Railway Officers [Clause 64(3)(a)(ii)] and three retired Railway Officers retired not below the rank of Senior Administrative Grade Officers [Clause 64(3)(b)]. When the agreement specifically provides for appointment of Arbitral Tribunal consisting of three arbitrators from out of the panel serving or retired Railway Officers, the appointment of the arbitrators should be in terms of the agreement as agreed by the parties - That being the conditions in the agreement between the parties and the General Conditions of the Contract, the High Court was not justified in appointing an independent sole arbitrator ignoring Clauses 64(3)(a)(ii) and 64(3) (b) of the General Conditions of Contract and the impugned orders cannot be sustained. Impugned order set aside - appeal allowed.

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