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TMI Tax Updates - e-Newsletter
February 23, 2017
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Highlights / Catch Notes
Income Tax
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Business expenditure comprising of administrative expenses, marketing and selling expenses and finance expenses - even if AS-7 is applied, it nowhere suggests that assessee is required to treat all the expenses as part of the cost of project whether attributable to a project or not. - AT
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Since, the assessee is claiming DTAA exemptions on the said interest income, the onus is on the assessee to demonstrate that the assessee is not a conduit company for the benefit of any third person and also no back to back transactions are involved in the FII activities of the bank - AT
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Scope of rectification proceedings - whether the exemption granted to the assessee u/s 54 of the Act could be withdrawn in part in the proceedings u/s 154? - proceedings initiated u/s 154 of the Act to disturb the claim of exemption granted u/s 54 of the Act as bad in law - AT
Customs
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Anti Dumping Duty - When the object of both the paragraphs of the policy is looked into, that brings out difference between the two. Paragraph 4.1.1 deals with normal cases whereas paragraph 4.1.7A is very specific to deal with annual requirement of physical imports. That brought out a clear distinction between the intention of para 4.1.1 and 4.1.7A. Therefore N/N. 56/2003 was not substitute of N/N. 43/2002. - AT
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Imposition of penalty u/s 112 (a) of the Customs Act, 1962 - mis-declaration of the description of the goods - Whether deletion of penalty imposed u/s 114A justified? - Held No - HC
Indian Laws
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Prosecution of the 'Karta' of HUF when cheque issued by the HUF got dishonored - whether an H.U.F. will constitute an “association of individuals” according to the term “company” as explained in Section 141 of the N.I. Act - Held No - HUF cannot be treated as legal entity as AOP - KARTA can be prosecuted - HC
Central Excise
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SSI exemption - use of brand name by others - Mere user of the name or logo used by others which has not acquired the status of brand name or trade name within the meaning of the said expression under the said notifications cannot be a ground to deny the benefit of SSI exemption - AT
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Remission of duty - burning of tank containing molasses due to internal combustion - What is expected is reasonable care and caution to avoid the accident and not the highest degree of care - remission of duty allowed - AT
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Valuation - discount given to buyers - The first condition to avail the quantity discount that it is known prior to the clearance is fulfilled, the second condition that the same is passed on to the buyers is not fulfilled in the instant case - discount not allowed - AT
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CENVAT credit - generic medicines - the names of the medicines were created names as brand name of the buyer. Therefore, it clearly falls under the category of patent or proprietary medicines and classifiable under 3003.10 which attracts excise duty - benefit of cenvat credit allowed - AT
VAT
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Rejection of books of accounts - undervaluation of sales turnover - permissible transportation loss - there was nothing on record for the revenue to hold that the figures disclosed by the assessee were abnormally high or that it was otherwise inconceivable. - HC
Case Laws:
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Income Tax
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2017 (2) TMI 955
Additional depreciation under section 32(1)(iia) in the subsequent year of installation of the new machinery - Held that:- The assessee has installed this machinery during the financial year relevant to the assessment year 2008-09 and since the machinery was put to use for less than 180 days during the financial year 2009-08, the assessee claimed only 10% additional deduction on this account. For the year under consideration, the assessee has again claimed balance 10% additional depreciation on the said machinery which was disallowed by the AO as well as by CIT(A). An identical issue fell for the consideration in the case of CIT(A) Vs. Rittal India Pvt. Ltd. [2016 (1) TMI 81 - KARNATAKA HIGH COURT] wherein held that this provision is a beneficial legislation and should be given liberal interpretation. Accordingly, the Hon’ble High Court has upheld the decision of this Tribunal in allowing the additional depreciation being onetime benefit to encourage the industrialization in the subsequent year. - Decided in favour of assessee
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2017 (2) TMI 954
Business expenditure comprising of administrative expenses, marketing and selling expenses and finance expenses - whether should be added to work-in-progress (WIP) and should not be treated as expenditure for the year under consideration? - Applicability of AS-7 - Held that:- It is clear that AS-7 is actually applicable upon contractor whereas the assessee is a builder / developer and not a contractor. Therefore, AS-7 is not strictly applicable on the facts of the case of the assessee. But, the entire thrust of the Revenue has been based upon the premise that the assessee should have booked the expenses in accordance with AS-7, as per which the entire expenses should be debited to the cost of the project since there was one single project only. Thus, we find that entire premise of the Revenue was based on the erroneous assumption of applicability of AS-7 upon the assessee. These expenses have been included as period cost in the P & L account. It is further noted by us that the Ld. Counsel has repeatedly stated that complete books of account and all the details as were required by the AO were submitted to him to show nature of the expenses and their nexus with the project. But nothing has been brought on record by the AO to negate the claim of the assessee that none of these expenses related to any particular project. Therefore, the action of the AO in treating these expenses as part of the cost attributable to a particular project was based upon presumption, surmises and conjectures. Further, with regard to the assertion of the AO that assessee was having one single project, it has been vehemently stated by the Ld. Counsel that the assertion made by the AO is factually incorrect. It is true that assessee is developing a large integrated SEZ project, but apart from this, the assessee is having various projects/ sub-projects in hand. Even in the SEZ project, there are various small and big projects. AO’s assumption and assertions appear to be factually wrong. Under these circumstances, we find that the AO’s action in disallowing these expenses by treating them as part of the project cost is not in consonance with the facts of this case and provisions of law as discussed above. It is noted, as discussed in detail above that it is a case of a builder / developer, therefore, AS- 7 is not applicable. Alternatively, even if AS-7 is applied, it nowhere suggests that assessee is required to treat all the expenses as part of the cost of project whether attributable to a project or not. All requisite approvals have been received by the assessee, sufficient land has already been purchased, marketing brochures were issued, advance was received from the customers and taking into account the totality of the facts and circumstances of the case, it can clearly be said that business of the assessee was ‘set up’. It is well settled law that once business is set up, all the expenses that relate to the period under consideration should be allowed as business expenses of the said periodwe find that action of the AO in treating the impugned expenses as part of WIP was not justified and was contrary to law and facts. The claim made by the assessee is in line with the method of accounting consistently followed by the assessee and is in accordance with law and facts of this case. Therefore, addition made by the AO is directed to be deleted. The AO is directed to allow the expenses as have been claimed by the assessee. The consequential effect shall also be given by the AO while passing order giving appeal effect for the amount of closing WIP of the year under consideration as well as opening WIP of the immediately subsequent assessment year. - Decided in favour of assessee
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2017 (2) TMI 953
Long term capital gain - FMV adoption - Held that:- The AO has adopted ₹ 13.81 per sq.yd. whereas the valuation done by the assessee at ₹ 3,875/-, which are at extremes. The CIT(A) has accepted the contention of the assessee because the assessee had adopted the valuation done by a registered valuer on sales as well as FMV as on 01/04/1981. In the absence of any comparative sale during the period, the value adopted by the assessee seems to be higher side compared to the value adopted by the AO. This appeal is second round of appeal and there is no possibility of remitting back to the AO for recalculation as there will not be any benefit to either side. In our considered view, we need to find a via media so that it could be beneficial to either side. The Registered Valuer has discounted the value of sale price i.e. ₹ 45,000/- in the year 2006 to arrive at the value as at 01/04/1981 at ₹ 3,875/-. We can adopt the same discounted method to arrive the SRO value of ₹ 33,000/- in 2006 to arrive the SRO value as at 01/04/1981. It may give some relief to the assessee as well as to the department. The valuation is done as under; the resultant value comes to ₹ 2841/-. Thus In view of the above discussion, we direct the AO to adopt the FMV at ₹ 2,841/- per sq.yd. and calculate the long term capital gains accordingly. - Decided partly in favour of revenue
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2017 (2) TMI 952
Interest income earned on the debt securities - India-Maritius Tax Treaty - AO includes that the assessee being FII and unregistered as a bank in India, the interest income earned by such FII cannot be considered as earning out of bona fide business activities, thus invoked the provisions of section 11(2) of the treaty - the said interest income was proposed to be taxed u/s 115AD of the Income Tax Act, 1961 which provides for taxing such interest income of FII @ 20% - Held that:- We do not agree with the reasoning given by the DRP on the expressions relating to ‘derived from’ and ‘bona fide banking activities’. It is also not a case of the Revenue that the assessee must be doing banking activities in India. Thus, the assessee should be considered as an eligible bank, who earned interest income out of bona fide banking activities. We order accordingly. That leaves us with the other issue relating to the ‘beneficial ownership’ of the interest income earned by the assessee out of FII activities in India. As discussed by us in the preceding paras of this order, the assessee is under obligation to furnish basic data relating to the source of funds that entered into the FII activities in India, the end utilization of the interest income earned by the assessee etc. Assessee must demonstrate that the invested funds beneficially belong to the assessee and the interest income earned out of FII activities in India are also beneficially owned by the assessee. Since, the assessee is claiming DTAA exemptions on the said interest income, the onus is on the assessee to demonstrate that the assessee is not a conduit company for the benefit of any third person and also no back to back transactions are involved in the FII activities of the bank. Further also, the Assessing Officer should understand the expression ‘beneficial ownership’ relates to the international fiscal concept and it should be given such a meaning respecting the secrecy clauses of the assessee, if any. For this limited purpose, we remand this issue to the file of the AO for bringing clarity on various aspects of the issue relating to the ‘beneficial ownership’. Accordingly, Grounds raised by the assessee are allowed protanto. Levy of interest u/s 234B - Held that:- After hearing both the parties and on perusal of the said judgment DIT vs. NGC Network Asia LLC [2009 (1) TMI 174 - BOMBAY HIGH COURT] we find, the said judgment is relevant for the proposition that when a duty is cast on the payer to deduct and pay the tax at source, on payer’s failure to do so, interest u/s 234B cannot be imposed on the payee-assessee. Considering the settled position of the issue, we are of the opinion, Ground no.4 raised by the assessee should be allowed in its favour. Levy of penalty u/s 271(1)(c) of the Act, in our opinion is premature in nature and demands no specific adjudication at this point of time.
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2017 (2) TMI 951
Deduction claim raised u/s.80IB denied - whether or not the assessee is a small industrial undertaking u/s.80IB(3) of the Act in view of the fact that cost of its plant and machinery for the year under consideration comes to ₹ 92,92,711/- in excess of ₹ 60lacs? - Held that:- We find from the paper book that small scale industrial scheme comprised in pages 23 to 28 prescribe such an investment limit to be of ₹ 60lacs in the year 1991 as revised to ₹ 300lacs in December 1997. We also notice at page 14 of the paper book that assessee’s concern M/s. Nandeshwari Packaging manufacturing HDPE / P.P. bags at Vatva has already been treated as a small scale industrial undertaking by the District Industries Centre, Ahmedabad Authority. Learned Departmental Representative fails to rebut all this factual position. We thus hold that the assessee’s industrial undertaking in question is a small scale industry so as to be eligible for Section 80IB deduction in question - Decided in favour of assessee. Manufacturing and administrative expenses disallowance - Held that:- CIT(A) was correct to restrict the impugned disallowance to 10% of the telephone and vehicle expenses only as per his order in assessment year 2005-06. Both the learned representatives thus indicate that the said findings on the very issue in preceding assessment year have attained finality for want of challenge. We appreciate this fair stand to confirm the ld. CIT(A)’s action under challenge in the instant ground raised at Revenue’s and assessee’s behest. Disallowing deduction claim raised u/s.80IB - the assessee filed its audit report/form 10CCB in course of the lower appellate proceedings than that with its return - Held that:- CIT vs. Punjab Financial Corporation [2001 (12) TMI 50 - PUNJAB AND HARYANA High Court] has overruled its former decision hereinabove to conclude that such an audit report need not be mandatorily filed with a return of income. There is admittedly no other objection on part of the CIT(A) to decline the impugned deduction claim. We accept assessee’s arguments accordingly to direct the Assessing Officer to delete the impugned disallowance. Disallowance of expenditure in the nature of consumption of stores and spares - Held that:- The item of expenses to be in the nature of grooved sleeve with water cooling jacket, plastic extension spares in the nature of screw & barrel and cheese winders; respectively. We afforded ample opportunity to learned Departmental Representative to prove from the case records that the same in any way amounted to purchase of altogether new machines or the said items have resulted in increase in assessee’s production in question. He failed to point out any such material. We thus observe that the impugned items are nothing but regular wear and tear replacements to assessee’s already existing machinery liable to be treated as revenue expenditure. We accordingly accept assessee’s instant substantive ground and direct the Assessing Officer to delete the impugned disallowance.
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2017 (2) TMI 950
Scope of rectification proceedings - whether the exemption granted to the assessee u/s 54 of the Act could be withdrawn in part in the proceedings u/s 154? - Held that:- AO had sought to disturb the claim of exemption u/s 54 of the Act in the proceedings initiated u/s 154 of the Act by resorting to verification of all the facts , investigation into the said facts vis a vis the relevant dates prescribed in the section, whether the reinvestment in AJC Bose Road Property made by the assessee would amount to purchase or construction so as to reckon the time limit prescribed in the statute. All these issues are highly debatable in nature which in our considered opinion, could not be done u/s 154 of the Act. There are both favourable and adverse decisions on the subject mentioned issue for and against the assessee respectively by various high courts as stated supra. These disputes had reached the corridors of various judicial forums and had been debated extensively and hence cannot be construed as a mistake apparent from the record warranting rectification within the meaning of section 154 of the Act. See Oriental Cotton Corporation and Mills Ltd vs CIT [1990 (10) TMI 9 - CALCUTTA High Court]. Thus we hold that the proceedings initiated u/s 154 of the Act to disturb the claim of exemption granted u/s 54 of the Act as bad in law. - Decided in favour of assessee
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2017 (2) TMI 949
Ad-hoc disallowance u/s 14A - Held that:- As said in the earlier paragraphs the assessee earned 99% dividend from only the investment was made with JSW Steel Ltd. and the rest of the 1% dividend is from the other three companies which are also group companies. In so far as the contention of the assessee that all investments are strategic investments made to have control over the business, there is no material on record to show how these investments are strategic investments and there is no intention behind these investments to earn dividend income. At the same time, we noticed that the assessee has earned this dividend income only from four companies from the investments made in the previous year but not in the current assessment year. Therefore, even assuming that there should be some expenditure which could have been incurred by the assessee in earning exempt income in the circumstances of the present case disallowing ₹ 70,00,000/- on adhoc basis out of total expenditure of ₹ 86,08,855/- debited to P&L a/c is totally unjustified. Therefore, we direct the A.O to disallow 20% of the expenditure debited to P&L a/c as the reasonable expenditure which can be said to be attributable for earning the dividend income. - Decided partly in favour of assessee.
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2017 (2) TMI 923
Accrual of income - Addition made on account of notional gain on forward contract - speculation income / gains - Held that:- From the record, we found that as per the practice followed by the assessee - company, the notional gain or loss on forward contract is debited or credited to the P&L account for the year in which the forward contract is settled. The fundamental principle of taxing income under the mercantile system of accounting is the time of accrual. It is not material whether the amount has been received at the time of accrual or not. The income is accrued when the assessee acquires the right to receive it. While deleting the addition made on account of notional gain on forward contract the CIT(A) had taken note of the fact that in case of Woodward Governor India Pvt. Ltd. (2009 (4) TMI 4 - SUPREME COURT )had dealt with the loss suffered by assessee in respect of revenue liability on account of exchange difference as on the date of balance sheet. Thereafter, considering the decision of Madras High Court in case of Indian Overseas Bank [1990 (2) TMI 43 - MADRAS High Court ] CIT(A) concluded that estimated, anticipated income arrived at on the basis of rate of exchange which prevailed on the last date of forward contract in foreign currencies only represents notional profit and could not be subject to tax. Respectfully following the proposition laid down by Madras High Court, we do not find any infirmity in the order of CIT(A) for deleting the addition made by AO on account of notional gain on forward contract. However, AO is at a liberty to verify that this gain has been offered for taxation in the subsequent years when it actually arose - Decided against revenue
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2017 (2) TMI 922
Addition of scrap sale - Assessing Officer treated as unaccounted sale - CIT-A allowed clam - Held that:- On appraisal of the said CIT-A order, it came into the notice that it is not in dispute that the generation of scrap was @ 2.91% equivalent to 124.22 metric tons. The CIT(A) has allowed the scrap sale in view of the norms prescribed by the DGFT of foreign trade wherein the normal scrap can be allowed to the extent of 5%. The scrap of the assessee was to the extent of 2.91% which was found within the limit. The scrap record was maintained by the assessee in RG 1 which was verified by the excise department. Moreover, in earlier years also the scrap was sold and accepted by DCIT u/s.143(3) of the Act in view of the order dated 30.12.2010 for A.Y.2008-09. In view of the above said reasons, we are of the view that the CIT(A) has decided this issue judiciously and correctly which is not require to be interfere with at this appellate stage. Allowance of depreciation - Held that:- CIT(A) has considered the assessment of the assessee in which the assessee submitted the details of assets along with tax audit report, the annexure of the addition to the fixed assets. The purchase has also been submitted and the record in connection with put to use in the said assessment order has also been furnished. In fact the assessee made an addition to the existing fixed asset in the building to the tune of ₹ 2,19,990/-, plant and machinery of ₹ 27,16,063/- and electrification of ₹ 65,448/- and accordingly the depreciation was claimed. The Assessing Officer declined the claim of the assessee on the basis of the finding in case M/s. Metcraft Engineering Corporation. No independent views were given for declining the claim of the assessee. In view of the said circumstances when the assessee has demonstrated his case justifiably by proceeding the record as well as working, therefore, in view of the said circumstances, we are of the view that the CIT(A) passed the order on this issue judiciously and correctly which is not require to be interfere with at this appellate stage. Disallowance u/s 36(1)(iii) and disallowance of the interest expenditure incurred towards the acquisition of fixed assets - Held that:- CIT(A) has deleted the disallowance of interest of ₹ 7,21,831/- on investment of ₹ 42,00,000/- in a share of private limited company. In fact the assessee purchased the equity share of ₹ 13,50,000/- of M/s.Metacraft Engineering Pvt. Ltd. which is the subsidiary company of assessee company. The said investment was not made with the intention to not to earn the dividend income which is strategic investment and expended a sum of ₹ 30,01,501/- on account of fixed assets (dies and moulds) which were put to use immediately after acquisition and the said amount was paid out of running business. The CIT(A) allowed the interest in view of the law settled in of CIT Vs. Tulip Star Hotel [2011 (8) TMI 524 - Delhi High Court ] which does not seems wrong against law and facts. So far the expenditure incurred towards the acquisition of the fixed assets is concerned the same is capital in nature. No doubt the expenditure was in the nature of arbitrary and other expenditure but the same is capital in nature which were put to use immediately after acquisition and the amount was paid out of running business. In view of the said circumstances, we are of the view that the CIT(A) has rightly allowed the said interest/expenditure.
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Customs
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2017 (2) TMI 934
Anti Dumping Duty - benefit of N/N. 43/2002-Cus. Dated 19.4.2002 - denial on the ground that the appellant is only entitled to avail the exemption of customs duty in terms of N/N. 56/2003-Cus. dated 1.4.2003 - Held that: - The time gap between the two Notifications also indicates that both the Notifications were issued during two different periods to serve their specific purpose. While N/N. 43/2002 dated 19.4.2002 served the purpose of advance licence issued under paragraph 4.1.1 of the EXIM Policy, the N/N. 56/2003-Cus. dated 1.4.2003 dealt with the advance licence issued under para 4.1.7A of the said Policy. When the object of both the paragraphs of the policy is looked into, that brings out difference between the two. Paragraph 4.1.1 deals with normal cases whereas paragraph 4.1.7A is very specific to deal with annual requirement of physical imports. That brought out a clear distinction between the intention of para 4.1.1 and 4.1.7A. Therefore N/N. 56/2003 was not substitute of N/N. 43/2002. The appellant being governed by para 4.1.7A of the EXIM policy, fails to get anti-dumping duty exemption under N/N. 43/2002-Cus. dated 19.4.2002, Accordingly its appeal fails. So far as claim of drawback is concerned, it is left open to the appellant to approach the appropriate authority, if so advised, to claim the drawback. Appeal dismissed - decided against appellant.
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2017 (2) TMI 933
Imposition of penalty u/s 112 (a) of the Customs Act, 1962 - mis-declaration of the description of the goods - IS 1000 Fibre-Optic Endoscope Surgical System - classified under CTH 9018.90 or otherwise - Whether deletion of penalty imposed u/s 114A justified? - Held that: - the precondition to impose penalty is the determination, after Show Cause Notice that non levy or short levy of customs duty was the result of mis-declaration. The Show Cause Notice was issued under the extended period, on account of the Revenue's contention that there was willful mis-declaration. The findings of the Commissioner clearly established the nature of the mis-declaration, i.e that instead of describing the products accurately, i.e. as da Vinci Surgical System it was described as an endoscopic surgical system. The CESTAT could not have set aside the penalty, which is mandatory. What the Revenue could not have done (and in fairness, did not) was to impose penalty in addition, u/s 112 (a); this is because of fifth proviso to Section 114A which stipulates that "Provided also that where any penalty has been levied under this section, no penalty shall be levied under section 112 or section 114." Appeal allowed - decided in favor of appellant-Revenue.
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2017 (2) TMI 932
Provisional release of confiscated goods - whether the petitioner is entitled to get the goods released provisionally u/s 110 A of the Customs Act by only after complying with the conditions stipulated in the impugned order? - Held that: - t is not in dispute that the subject matter goods is not a prohibited items, so that the same can never be released either provisionally or otherwise. On the other hand, the fact remains that the respondents agreed to release the goods provisionally, however, by insisting upon the petitioner to comply with the conditions stipulated in the impugned communication. When the petitioner himself has come forward to protect the interest of the revenue by paying differential duty in full, this Court is of the view that further interest of the revenue can be protected if the petitioner furnishes a bond for a sum of ₹ 40,00,000/- and bank guarantee for ₹ 5,00,000/- instead of furnishing a bond for ₹ 16,62,974/- and bank guarantee for ₹ 20,00,000/- as sought for in the impugned order. Petition allowed - decided partly in favor of petitioner.
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2017 (2) TMI 931
Refund - The grievance of the Petitioner is that during the course of this business and the period under dispute, it supplied these goods to various licence holders who had obtained the invalidation letters from the Regional Office of the Director General of Foreign Trade without payment of CENVAT duty - Held that: - the Respondents will not be influenced by the mere recommendations of some authority in the Ministry and which recommends cancellation of the invalidation letters / EPCG licences. It will decide the controversy on the footing that when the concerned dealings and transactions took place, there was an authorization in the form of invalidation letter, there was a communication copy of which is at Annexure-A to the Writ Petition and that the Policy Interpretation Committee issued the clarification later namely, on 4th December, 2012 - they will pass a fresh speaking order after hearing the writ petitioner / their representative and pass an order uninfluenced by any of the statements made in their affidavit in reply and the communications relied upon - Petition disposed of.
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2017 (2) TMI 924
Locus of the respondent to file the writ petition before the Delhi High Court - Levy of Anti-dumping Duty on USB Flash Drives - validity of investigation and findings of the Designated Authority (DA) - Sub section (5) of Section 9A of the Customs Tariff Act, 1975 - the decision in the case Sandisk International Ltd. Versus The Designated Authority & Ors. [2015 (9) TMI 402 - DELHI HIGH COURT], contested upon - Held that: - the respondent - M/s Sandisk International Ltd., subject to its locus, and all other aggrieved parties should be left with the option of challenging the final notification dated 22nd May, 2015 before the appellate authority by means of an appeal u/s 9C of the Customs Tariff Act, 1975. If such an appeal is filed we would request the Appellate Tribunal to consider and dispose of the same as expeditiously as possible - petition disposed off.
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Service Tax
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2017 (2) TMI 948
Condonation of delay - renting of immovable property - appellant is a statutory body under the UP Krishi Utpadan Mandi Adhiniyam, 1964 - when the authority performs a service, which is not in the nature of actually statutory and the same is undertaken for a consideration not in the nature of statutory free or levy, then in such cases whether the service tax would be leviable, if the activity undertaken falls within the ambit of a taxable service? - Held that:- The issue herein is squarely covered by the precedent order of this Tribunal being Final Order No.70969/2016 dated 02/06/2016 wherein in the case of another similarly situated appellant, also a statutory body under the same Act, this Tribunal was pleased to condone the delay in filing the appeal and allowed the appeal. Extended period of limitation - levy of penalty - Held that: - the issue herein is squarely covered by the precedent order of this Tribunal, wherein in the case of another similarly situated appellant M/s Krishi Utpadan Mandi Samiti Versus Commissioner of Central Excise & S. Tax, Kanpur [2016 (12) TMI 793 - CESTAT ALLAHABAD], which is also a statutory body under the same Act, this Tribunal was pleased to condone the delay in filing the appeal and allowed the appeal in part holding that there is no contumacious conduct under the facts and circumstances hence the extended period of limitation is not invocable and further was pleased to delete all the penalties - There is no contumacious conduct and/or suppression of facts on the part of the appellant, which is a statutory body - appeal allowed by way of remand.
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2017 (2) TMI 947
Commission - services provided in Nepal and Bangladesh - whether taxable or not? - Held that: - the demand of ₹ 27,629/- has been confirmed on account of an error of fact on the part of Commissioner (Appeals) - the demand for 01.07.2003 to 19.11.2003 pertains to the commission received in respect of services provided in Nepal and Bangladesh and not to J & K - the order of Commissioner (Appeals) to the extent it pertains to confirmation of demand of ₹ 27,629/- is set aside - appeal allowed - decided in favor of appellant.
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2017 (2) TMI 946
Refund claim - N/N. 41/2007-ST dated 06.10.2007 - denial on the ground that the conditions of the Notification had not been complied - Held that: - Both the Adjudicating Authority as well as first Appellate Authority erred in examining the claims in term of 41/2007-ST ibid - In an identical matter, the Tribunal in the case of Gaurav International Vs. C.S.T. Delhi [2014 (4) TMI 1070 - CESTAT NEW DELHI] remanded the matter to the original Adjudicating Authority for verification of the documents and satisfaction of the conditions of Notification - appeal allowed by way of remand.
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2017 (2) TMI 945
Maintainability of appeal - pre-deposit - Held that: - the approach as is evident is hypertechnical. Tribunals are meant to render justice. They are not established to shut out parties on hypertechnicalities. Once the technicalities have to take a back seat on such issues and which have larger repercussions, then, the Tribunals would be well advised not to go ahead and insist on compliance with their procedural directions or their interim orders to such an extent as would make it impossible for the appellants to have disposal of their appeals on merits. Even now what we have found is that the Tribunal insists that, pre-deposit as mandated by Section 35F of the Central Excise Act, 1944 is an order prevailing and binds the assessee. It cannot be recalled even when there are subsequent developments. The Tribunal should be aware that just as it has power to impose conditions while passing interlocutory or interim orders, equally there is an inherent and implicit power to modify them in the event the changed circumstances so demand - appeal to be restored.
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Central Excise
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2017 (2) TMI 944
MODVAT credit - whether the Respondent No.1 were using pinion distance of 415 mm Rolling stand for manufacture of 6 mm dia rods or not? - Held that: - respondent no. 1 was not using pinion distance of 415 mm Rolling stand for manufacture of 6 mm dia rods - Revenue's allegation that respondent utilized the modvat credit and recovered the same from their customers is not based on any documentary and other evidence to established the fact that the respondent received back the duty credit utilized by them from their customers in cash. Credit allowed - Appeal dismissed - decided against Revenue.
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2017 (2) TMI 943
SSI exemption - use of brand name by others - Recovery of duty - duty not paid on the ground of being eligible for exemption from duty as small scale units - the products manufactured by the appellant bear the mark ‘MULTIPLEX’ under which M/s Multivision Electronics Pvt Ltd also manufactures the same goods - Held that: - The exemption notification supra denies the benefit only if the brand does not belong to the user and the statements of key functionaries do not admit that the brand has been borrowed from any other. The contention of Revenue that brand does not belong to appellants merely because it is used by someone else is also not borne out and the absence of such evidence was noted in Minimax Industries v. Commissioner of Central Excise, Delhi-II [2010 (1) TMI 1040 - CESTAT NEW DELHI] where it was held that Mere user of the name or logo used by others which has not acquired the status of brand name or trade name within the meaning of the said expression under the said notifications, in our considered opinion cannot amount to violation of condition No. 4 of the said notification. Appeal allowed - decided in favor of appellant.
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2017 (2) TMI 942
Refund claim - rejection on the ground that against the order of determining the annual capacity of production passed by the Commissioner, the appellant did not file any appeal - Held that: - the appellant has not challenged the order of the Commissioner determining the number of chambers and the duty thereof. Unless until the order of the Commissioner is set aside or modified as per the claim of the appellant, the refund claim is not matured. In fact the appellants have not challenged the order of the Commissioner, they are not entitled for the refund - appeal dismissed - decided against appellant.
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2017 (2) TMI 941
Remission of duty - burning of tank containing molasses due to internal combustion - denial on the ground that the appellant did not follow any fixed schedule for cooling the tanks and pipes - Held that: - What is expected is reasonable care and caution to avoid the accident and not the highest degree of care - Further, there is nothing in the report to conclude that if the cooling and cleaning of tanks as suggested by the institute was resorted by the appellant the incident would not have happened at all. It is pleaded by the appellant that they have adopted reasonable methods for cooling the tank by using water sprays and coils and have been following these methods for many years. That appellant was under bonafide belief that all these methods are sufficient to sustain any mishap. The rejection for request of remission of duty is unjustified - appeal allowed - decided in favor of appellant.
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2017 (2) TMI 940
Revocation of permitted remission of duty - revocation on the ground of failing to comply with subsequent direction to reverse MODVAT credit taken on inputs - Held that: - The relevant provision for availment of credit was Central Excise Rules, 1944 and it did not incorporate a provision for recovery of credit upon settlement of claim by insurer. Neither a subsequent circular nor a decision delivered much after the sanction of remission permits such recovery. The Assistant Commissioner concerned has erred in resorting to an instruction of the Central Board of Excise & Customs that was issued after the remission was ordered in the present dispute. Appeal dismissed - decided against Revenue.
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2017 (2) TMI 939
Imposition of penalty u/s 11AC of the Act - zinc alloy - job-work - Held that: - no positive evidence has been shown by the Revenue to establish that appellants were having malafide intentions not to pay duty or undervalue the job worked goods - when the appellant has paid duty along with interest on pointing out by the Audit, in that circumstances, if Revenue wants to issue the SCN, the same was required to be issued but within the prescribed time limit, but the same has not been done by the Revenue. Extended period of limitation - Held that: - relying on the decision of Orissa Bridge & Construction Corpn. Ltd. vs. CCE Bhubaneswar [2008 (8) TMI 585 - SUPREME COURT OF INDIA], it is held that extended period of limitation is not invokable for issuance of SCN. Penalty set aside - appeal allowed - decided in favor of appellant.
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2017 (2) TMI 938
Valuation - discount given to buyers - whether the quantity discount availed by the appellant in respect of clearance made to their own depot, allowed? - Held that: - Quantity discount is an admissible discount provided the same is known prior to clearance or removal and if it is passed on to the buyers in terms of Section 4 of the Central Excise Act, 1944 and the discount have been passed on. The first condition to avail the quantity discount that it is known prior to the clearance is fulfilled, the second condition that the same is passed on to the buyers is not fulfilled in the instant case - discount not allowed - appeal dismissed - decided against appellant.
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2017 (2) TMI 937
Quality control samples - whether taxable or not? - Held that: - duty on quality control samples cannot be demanded where the record of control samples is maintained - The appellants have been maintaining records of control samples - the duty is not chargeable on the control samples drawn by the appellant - appeal allowed - decided in favor of appellant.
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2017 (2) TMI 936
CENVAT credit - generic medicines - whether classifiable under 3003.10 or not? - Held that: - as per the definition of patent or proprietary medicaments, the product which bears the name other than the name of the appearing in the pharmacopeia, it will classify as patent or proprietary medicines - In the present case, the names of the medicines are Indosam, P500 and Ampi Cloxa which are the names which are not appearing in any of the pharmacopeia. These names were created names as brand name of the buyer. Therefore, it clearly falls under the category of patent or proprietary medicines and classifiable under 3003.10 which attracts excise duty - appellant is entitled for Cenvat Credit - appeal allowed - decided in favor of appellant.
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2017 (2) TMI 935
Smuggling - Red Sanders - penalty - Held that: - it can be seen that while the charges (i) of show-cause notice is not established, in so far as the appellant was not aware of the content of the containers, the charges (iii) that he took delivery of the container containing Red Sanders also cannot be held against him as his knowledge about the identity of the containers has not been established. So far the charges (ii) and (iv) are concerned, it is seen that he has admitted that he was aware that there was some mis-declaration happening and he had assisted in the process by giving false identity. Penalty of ₹ 5 lakhs imposed upon the appellant is excessive - penalty of ₹ 5 lakhs is reduced to ₹ 2 lakhs - appeal disposed off - decided partly in favor of appellant.
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CST, VAT & Sales Tax
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2017 (2) TMI 930
Rejection of books of accounts - rejection on the ground that turnover in the books of account is higher than the amount in return is concerned - Shortage of goods - loss in transit - Held that: - in a series of judgment of this Court, it is clearly held that Books of Account cannot be rejected merely on the ground that the turnover disclosed in the Books of Account is higher than the turnover disclosed in the return. Wastage/ shortage of transportation at the rate of 4% - Tribunal has allowed only 2% - Held that: - There is no basis for the Tribunal to determine or arrived at a conclusion that losses upto 4% could not have occurred. The assessing authority and the Tribunal cannot fix any figure for loss caused during the transportation on surmises. There was nothing on record for the revenue to hold that the figures disclosed by the assessee were abnormally high or that it was otherwise inconceivable. In the absence of any other specific material, the Tribunal was not justified in discarding figures of loss due to transportation at 4% in the facts of the present case. With regard to the loading and unloading figures disclosed by the assessee being lower, I find that except for a solitary instances there was no material before the authority to doubt that assessee had not sold coal at the railway side itself - rejection not justified. With regard to the contention that the assessee has sold goods at a rate lesser than what was the market rate, there is nothing on record to indicate that the assessee has deliberately disclosed a lesser figure in the books of account and that Coal was actually sold at a higher rate. The revenue has, otherwise, not investigated the transaction so as to suggest that the price of coal was, otherwise, higher - rejection not justified. Tribunal was not justified in discarding the revisionist's books of account - appeal allowed - decided in favor of appellant.
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2017 (2) TMI 929
Delay in filing declarations - whether the delay can be condoned? - Held that: - the Rule itself encapsulates the principle that, if, declarations are filed, they should be accepted unless the request made is delayed beyond reasonable time and without sufficient cause. Acceptance of genuine declarations should be the norm and not an exception, so that, the dealers are not put to unnecessary trouble and deprived of their legitimate benefits. The impugned assessment order and the notices dated 22.12.2016 and 23.01.2017 for each of the assessment years, are set aside, with a direction that the authorised representative of the petitioner will appear before the respondent on 28.02.2017 at 11.00a.m - petition allowed - decided in favor of petitioner.
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2017 (2) TMI 928
Benefit of concessions provided by G.O.Ms.No.500 - benefit to industrially backward Taluks - later, Instead of declaring a Taluk as a backward or most backward area, the Government decided to declare a block comprising several Taluks as backward or most backward - the Government and the Secretary to Government, by communication dated 30.09.1996, has referred to this anomaly and in order to alleviate the hardships, had directed that the units in backward Taluks which had commenced production on before 18.09.1997 will be entitled to 9 years interest free sales tax deferral. Unfortunately, the petitioner commenced his production in December 1997 and therefore, the petitioner's unit became disentitled to the benefits of 9 years interest free sales tax deferral, whereas, he was given 5 years interest free sales tax deferral - whether the petitioner who was taking steps to develop a Taluk, will be entitled for the benefit for 9 years? Held that: - This writ petition was admitted in the year 2003 and more than 9 years have lapsed. After lapse of 9 years, the petitioner has paid the sales tax to a tune of ₹ 1,50,97,285/- to the Department. Thus, in effect, even without any Government Order, the petitioner has availed the benefits of the interest free deferral scheme. In the light of the above, nothing survives in this writ petition. However, there is some justification in the contention of the petitioner that after having invested so much of money on the assurance given by the Government in G.O.Ms.No.500, he cannot be suddenly denied the benefits of the said Government Order on the ground that he had not started production on 18.09.1997. Petition closed.
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Indian Laws
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2017 (2) TMI 927
Prosecution of the 'Karta' of HUF when cheque issued by the HUF got dishonored - whether an H.U.F. will constitute an “association of individuals” according to the term “company” as explained in Section 141 of the N.I. Act - legal entity - Liability of authorized signatory to be prosecuted under Section 138 of the Negotiable Instruments Act - Held that:- A H.U.F. will not constitute an “association of individuals” within the meaning of Section of 141 of the N.I. Act. A H.U.F. is not a legal entity distinct and separate from that of the members who constitute it. although the H.U.F. in the case at hand may be engaged in a business and is running a firm in the name of M.S. Traders and may be having a common purpose, yet what is missing is the element of free will and volition. A mere combination of individuals will not constitute an “association of individuals” . To make it as an “association of individuals”, in terms of Section 141 of the N.I. Act, it is absolutely necessary that the combination of individuals must be on their own free will and volition. Secondly, it is also necessary that such combination of individuals must be with a common purpose. There may be a common purpose to be carried forward by an H.U.F., but an individual becomes a member of the H.U.F., not on his own free will and volition, but by status and birth. The principles laid down by the Supreme Court in the case of Aneeta Hada (2012 (5) TMI 83 - SUPREME COURT OF INDIA ) will not apply in the case of a H.U.F. - Decided against the petitioner.
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2017 (2) TMI 926
Possession of disproportionate assets / surplus income by former Chief Minister of the State of Tamil Nadu and the co-accused - Charge under Sections 120B and 109 of Indian Penal Code, 1860 read with Sections 13(1)(e) and 13(2) of the Prevention of Corruption Act, 1988 against A1 confiscation of properties, both movable and immovable as per Trail court set aside by HC [2015 (5) TMI 463 - KARNATAKA HIGH COURT] - Held that:- The offences at the trial were under Sections 13(1)(e), 13(2) of the Act, Sections 109 and 120B of the Indian Penal Code encompassed within paragraphs 4A and 5 of the Schedule to the Ordinance. These offences were unimpeachably within the contours of the Act and triable by a special Judge thereunder. Having regard to the frame and content of the Act and the limited modifications to the provisions of the Code of Criminal Procedure, in their applicability as occasioned thereby and the authorisation of the special Judge trying the offences thereunder to exercise all the powers and functions invocable by a District Judge under the Ordinance, we are of the opinion that the order of confiscation/forfeiture of the properties standing in the name of six companies, as involved, made by the Trial Court is unexceptionable. In any view of the matter, with the peremptory termination of the criminal proceedings resultant on this pronouncement, the direction of the Trial Court towards confiscation/forfeiture of the attached property, as mentioned therein, is hereby restored and would be construed to be an order by this court as well After analyzing the facts and circumstances of this case and after taking into consideration all the evidence placed before us and the arguments put forward by all the parties, we are of the unhesitant opinion that the impugned judgment and order rendered by the High Court is untenable and is thus set aside. We have considered the facts of this case and in our opinion, the percentage of disproportionate assets as 8.12% as computed by the High Court is based on completely wrong reading of the evidence on record compounded by incorrect arithmetical calculations, as referred to herinabove. In view of the regnant evidence on record, unassailably proving the disproportionateness of the assets, as contemplated in Section 13(1)(e) of 1988 Act, it is inessential as well to resort to any arithmetic to compute the percentage thereof. Noticeably, the respondents accused accepted all the findings of the High Court. We have analyzed the evidence adduced by the parties and we come to the conclusion that A1 to A4 have entered into a conspiracy and in furtherance of the same, A1 who was a public servant at the relevant time had come into possession of assets disproportionate to the known sources of her income during the check period and had got the same dispersed in the names of A2 to A4 and the firms companies involved to hold these on her behalf with a masked front. Furthermore, the the charge of abetment laid against A2 to A4 in the commission of the offence by A1 also stands proved. The Trial Court held that even private individuals could be prosecuted for the offence under Section 109 of I.P.C. and we find that the Trial Court was right in coming to the conclusion relying on the decision of Nallammal (1999 (8) TMI 953 - SUPREME COURT) , wherein it was observed that acquisition and possession by a public servant was capable of being abetted, and observed that Under Section 3 of the 1988 Act, the Special Judge had the power to try offences punishing even abetment or conspiracy of the offences mentioned in the PC Act and in our opinion, the Trial Court correctly held in this matter that private individuals can be prosecuted by the Court on the ground that they have abetted the act of criminal misconduct falling under Section 13(1)(e) of the 1988 Act committed by the public servant. Furthermore, the reasoning given by the Trial Court in respect of criminal conspiracy and abetment, after scrutinizing the evidence of this case, is correct in the face of the overwhelming evidence indicating the circumstances of active abetment and conspiracy by A2 to A4 in the commission of the above offences under Section 13(1)(e) of the 1988 Act. This would be evident from the following circumstances:- (i) A1 had executed a General Power of Attorney in favour of A2 in respect of Jaya Publications marked as Ex.P-995. The circumstance of executing the power of attorney in favour of A2 indicates that with a view to keep herself secured from legal complications, A1 executed the said power of attorney knowing fully well that under the said powers, A2 would be dealing with her funds credited to her account in Jaya Publications. (ii) Constitution of various firms during the check period is another circumstance establishing the conspiracy between the parties. It has come in evidence that 10 firms were constituted on a single day. In addition, A2 and A3 started independent concerns and apart from buying properties, no other business activity was undertaken by them. The circumstances proved in evidence undoubtedly establish that these firms are nothing but extentions of Namadhu MGR and Jaya Publications and they owed their existence to the benevolence of A1 and A2 (iii) The aforesaid firms and companies were operating from the residence of A1 and it cannot be accepted that she was unaware of the same even though she feigned ignorance about the activities carried on by A2 to A4. They were residing with A1 without any blood relation between them. (iv) Although A2 to A4 claims to have independent sources of income but the fact of constitution of firms and acquisition of large tracts of land out of the funds provided by A1 indicate that, all the accused congregated in the house of A1 neither for social living nor A1 allowed them free accommodation out of humanitarian concern, rather the facts and circumstances proved in evidence undoubtedly point out that A2 to A4 were accommodated in the house of A1 pursuant to the criminal conspiracy hatched by them to hold the assets of A1. (v) Ex.D.61 reveals that before the Income Tax Authorities, the representative of A1 himself had put forth an argument that ₹ 1 crore was advanced by A1 to Sasi Enterprises towards share capital and further it was submitted that on the security of the said amount, loan was borrowed by A1, and thus she cannot claim noninvolvement with the firms. (vi) The flow of money from one account to the other proves that there existed active conspiracy to launder the illgotten wealth of A1 for purchasing properties in the names of the firms. (vii) The conspiracy among the accused persons is also proved by the evidence of Sub-Registrar, North Beach, Sub-Registrar office-PW.159 and the evidence of PW.71 Radha Krishnan, Horticultural officer. In our opinion, the Trial Court correctly came to the conclusion on such reasoning and we hereby uphold the same. Accordingly, in view of the reasoning recorded hereinabove in the preceding paragraphs, we set aside the judgment and order of the High Court and affirm and restore the judgment of the Trial Court in toto against A2 to A4. However, though in the process of scrutiny of the facts and the law involved and the inextricable nexus of A1 with A2 to A4, reference to her role as well as the evidence pertaining to her had been made, she having expired meanwhile, the appeals, so far as those relate to her stand abated. Nevertheless, to reiterate, having regard to the fact that the charge framed against A2 to A4 is proved, the conviction and sentence recorded against them by the Trial Court is restored in full including the consequential directions. Respondents A2 to A4, in view of this determination and the restoration of their conviction and sentence, would surrender before the Trial Court forthwith. The Trial Court is hereby also ordered to take immediate steps to ensure that the respondents A2 to A4 serve out the remainder of sentence awarded them and take further steps in compliance of this judgment, in accordance with law.
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2017 (2) TMI 925
Dishonour of cheques - Summon for offences punishable under Section 138 of the NI Act - grounds taken by the petitioners seeking quashing of the complaint that neither at the time of the settlement nor at the time of issuance of the cheques nor at the time when the cheque in question was dishonoured, the petitioners were the directors of the company much less responsible for the day-to-day affairs of the company Held that:- It is not disputed that the petitioners have been summoned only for offences punishable under Section 138 of the NI Act. The factum that the two petitioners ceased to be the Directors of the company with effect from 7th August, 2013 and 15th March, 2013 respectively has not been denied. Thus, at the time when the cheque in question was dishonoured, the petitioners were not the Directors of the company and were not even liable when the cause of action arose i.e. non-payment within 15 days of the receipt of the legal notice. Moreover, the petitioners have placed on record impeccable evidence in the form of copy of Form-32 filed before the Registrar of Companies showing their resignation from the dates as noted above. The petitioners have not been summoned for offences under Section 420/120B IPC or dishonour of the earlier cheque. Hence for dishonour of the cheque in question vicarious liability cannot be fastened on the petitioners. Petitions and applications are disposed of quashing the order to the extent it summons the petitioners for offence punishable under Section 138 read with Section 142 NI Act.
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