TMI Tax Updates - e-Newsletter
May 25, 2020

Case Laws in this Newsletter:

Income Tax Customs Central Excise CST, VAT & Sales Tax Indian Laws

Articles

1. Exempted Service- Service Tax Regime and Exempted Supply- GST Regime

   By: Rachit Agarwal

2. GST – Retrospective amendment - Transitional credit claims of past- Disentitled now?

   By: Venkataprasad Pasupuleti

3. ITC accrued as on 30.6.2017─Curtailing the rights of assessees by carrying out the retrospective amendments in S.140 by introduction of time limit for its claiming

   By: OmPrakash jain

4. The Curious Case of Advance Rulings under GST – Are they really effective?

   By: Ankur Jain

5. Joint Development Agreement- Revenue Sharing Model

   By: Rachit Agarwal

6. MCA REVISED FAQ’S ON NAME RESERVATION AND RESUBMISSION FORMS

   By: CSLalit Rajput

News

1. Statement on Developmental and Regulatory Policies

Notifications

Customs

1. 47/2020 - dated 22-5-2020 - Cus (NT)

Appointment of CAA in case of in case of M/s Satnam Steels, Rajkot.

DGFT

2. S.O. 1605 (E) - dated 22-5-2020 - FTP

Central Government notified annual quota of 4 lakh MT for import of Urad for the year 2020-21

GST - States

3. GST-1020 /C.R. 15A / Taxation 1 - dated 21-5-2020 - Maharashtra SGST

Seeks to amend Notification No. GST. 1017/C.R. 94(B)/Taxation-1, dated 21.6.2017 (regarding sub-ordination of the officers appointed under MGST Act, 2017).

4. GST-1020 /C.R. 15 / Taxation 1 - dated 21-5-2020 - Maharashtra SGST

Seeks to authorizes the officers under MGST Act 2017, as the Revisional Authority for revision of decision or orders as referred in section 108 of MGST Act.

5. 40/2020—State Tax - dated 18-5-2020 - Maharashtra SGST

Seeks to extend the validity of e-way bills till 31.05.2020 for those e-way bills which expire during the period from 20.03.2020 to 15.04.2020 and generated till 24.03.2020.

6. F. 12(46)FD/Tax/2017 pt.V-177 - dated 18-5-2020 - Rajasthan SGST

Seeks to extend due date of compliance which falls during the period from "20.03.2020 to 29.06.2020" till 30.06.2020 and to extend validity of e-way bills.

7. F. 12(46)FD/Tax/2017 pt.V-175 - dated 8-5-2020 - Rajasthan SGST

Seeks to amend Notification No. F.12(46) FD/Tax/2017-pt.V-150, dated the 30th March, 2020

8. F. 12(46)FD/Tax/2017-Pt. V-171 - dated 1-5-2020 - Rajasthan SGST

Rule 87(13) and Form GST PMT-09 of the RGST (Fourth Amendment) Rules, 2019 shall come in to force 21.04.2020.

Circulars / Instructions / Orders

FEMA

1. 32 - dated 22-5-2020

‘Voluntary Retention Route’ (VRR) for Foreign Portfolio Investors (FPIs) investment in debt - relaxations

2. 33 - dated 22-5-2020

Import of goods and services- Extension of time limits for Settlement of import payment

DGFT

3. 06/2015-2020 - dated 22-5-2020

Inclusion of Gopalpur Port, Odisha as a Port of Registration under Para 4.37 of Handbook of Procedures, 2015-2020.

Highlights / Catch Notes

Income Tax

• Text Book Society Recognized as Educational Institution, Granted Tax Exemption u/s 10(23C)(iiiab) of Income Tax Act.

  Case-Laws - HC : Exemption u/s 10(23C)(iiiab) - Text Book Society - the assessee, which has been constituted to implement the educational policy of the State has to be treated as an educational institution and is consequently entitled to the benefit of exemption
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• Income Tax Assessment Reopened: Section 147 Invoked, Additions Made u/s 68 for Accommodation Entries via Conduit Entity.

  Case-Laws - AT : Reopening of assessment u/s 147 - additions u/s 68 on account of amount routed through for giving accommodation entries on account of the amounts received in cash as well as cheque on account of share capital - Since, the assessee is proven to be a conduit/pass through entity without any business of its own, no other addition in the hands of the assessee company is warranted.
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• Tribunal Dismisses Appeal Due to Lack of Authorization for Mr. Wells u/s 140(c) of the Act.

  Case-Laws - AT : Appeal to the appellate tribunal - According to the appeal set filed before us, Mr. Alan wells is only authorised to sign and verify the documents for filing of appeal before the coordinate bench. Therefore , it is not clear whether Mr. Alan Wells was holding a valid power of attorney from such company to verify the return of income of the assessee as provided us 140(c) of the Act or not. As this information is not available on record, we dismiss this appeal in limine.
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• Court Rejects Appellant's Claim of Rs. 5 Lakhs Cash Deposit from Savings Due to Lack of Evidence and Improbability.

  Case-Laws - AT : Unexplained investment - Apparently the withdrawals from the bank account is made for meeting the expenses and not for keeping the money at house. Hence, the explanation of the appellant that cash of ₹ 5 lakhs is deposited out of savings is not supported by any documentary evidence and against the preponderance of probability and deserves to be rejected.
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Central Excise

• Court Rules Solar Lamp Must Be Classified with Package, Not Separately, for Tax Exemption Benefit.

  Case-Laws - AT : Classification - Clearance of 2nd lamp with the set of "Solar Power Generating System" or "Solar Photovoltaic Lantern" to M/s Aura Solar Products Pvt Ltd - Benefit of Exemption - revenue has no jurisdiction to vivisect the package and classify one lantern separately. The classification of the goods need to be determined in the form and manner in which the same is cleared and not by unbundling/ vivisecting the package into individual components to determine their classification.
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VAT

• Compounding Fee Dispute: VAT Registration Needed for Site Office u/r 5(1)(a), TN VAT Act Section 38.

  Case-Laws - HC : Levy of compounding fee - Though the petitioner appears to have obtained VAT registration for its head office, it had not obtained separate registration for the site office as an additional place of business under Rule 5 (1) (a) of the Tamil Nadu Value Added Rules, 2007 read with Section 38 of the Tamil Nadu Value Added Tax Act, 2006. - the composition fee ought to have been restricted to an amount not exceeding ₹ 2000/-
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• Tamil Nadu VAT Authority Can Detain Goods and Vehicles u/s 67 for Tax Inspection and Payment Verification.

  Case-Laws - HC : Jurisdiction - detention of goods alongwith vehicle - 1st respondent as the “prescribed authority” under section 67 of the Tamil Nadu Value Added Tax Act, 2006 was competent to detain goods and vehicle and verify the records and documents which accompanied the goods. For the same reasons, the 1st respondent was also competent to demand tax at the check post, if the first respondent was of the view that the detained goods was liable to tax but no tax was paid or charged.
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• Petitioner's Input Tax Credit refund request denied; filing Form Transfer-1 insufficient under Tamil Nadu GST Act transition rules.

  Case-Laws - HC : Refund of excess Input Tax Credit - Merely because the TNVAT Act, 2006 was substituted with Tamil Nadu Goods and Service Tax Act, 2017 with effect from 1.7.2017 by itself did not mean that the petitioner would be entitled to refund merely because the petitioner filed Form Transfer-1 - The petitioner cannot be found fault with
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• Tamil Nadu VAT Act 2006: Dealers Must Pay Purchase Tax on Turmeric u/s 12(1) with Input Tax Credit Benefits.

  Case-Laws - HC : Levy of purchase tax payable - purchase of turmeric - Section 12 (2) of the Tamil Nadu Value Added Tax, 2006 - There was a paradigms shift from TNGST Act, 1959 when Tamil Nadu Value Added Tax Act, 2006 was enacted. The tax regime was altered to levy tax on value addition at every point of sale with a within the State with a corresponding provision for input tax credit for being set off. It not only rationalised the rate of tax but also rendered tax paid at every point of sale within the State to be set off as input tax credit - thus, under Section 12(1) of the Tamil Nadu Value Added Tax Act, 2006, petitioner who is also a dealer is liable to pay purchase tax at the rate specified in the Schedules.
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Case Laws:

• Income Tax

• 2020 (5) TMI 518
  Admitted liability in terms of Section 245D (2A) - large-scale suppression resorted by the petitioner - HELD THAT:- The 1st respondent has accepted that the statement of 2nd respondent that it retained only 5% of the amount paid to it by BSAL as commission. Since the 2nd respondent agreed to add another amount of Rs. 1.5 crores to the aforesaid sum as undisclosed income the 1st respondent has accepted the case of the 2nd respondent. Arithmetic of the transactions disclosed before the 1st respondent Settlement Commission do not add up and clearly shows that there were large-scale suppression resorted by the petitioner not only before the assessing officer but also before the 1st respondent settlement commission. The 1st respondent Settlement Commission has accepted the case of the 2nd respondent that a sum of Rs. 20.14 crores was directly paid by BSAL by opening a LC directly in favour of the German company and that the amount was not received by the petitioner. There are several discrepancies in the manner in which the case has been allowed to be settled by the 1st respondent settlement commission. The calculations has been accepted without any deliberations do not inspire confidence. There are several disputed questions of fact which have been glossed over by the 1st respondent Settlement Commission while settling be case of the 2nd respondent vide impugned order. This court is not sitting in appeal against the impugned order of the 1st respondent Settlement Commission, find sufficient reasons to interfere with the impugned order as there are several contradictions and the 2nd respondent appears to have not disclosed truly all facts that are required for settling the case. The impugned order has accepted cases without any discussions, therefore of the view that the impugned order is not sustainable. The impugned order passed by the 1st respondent is quashed and the case is remanded back to the 1st respondent Settlement Commission to pass a fresh order after considering the objections of the petitioner filed under rule 9 of the Settlement Commission (Procedure) Rules 1997. Since the dispute pertains to the assessment years 1997-98 and 1999-2000 and the application filed by the 2nd respondent was of the year 2005, the 1st respondent Settlement Commission is requested to pass a fresh order within a period of 6 months from the date of receipt of this order after considering the report of the petitioner filed under Section 9 of the Settlement Commission (Procedure) Rules 1997 through videoconferencing, if situations so warrants on account of continuance of Covid19 pandemic.

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• 2020 (5) TMI 517
  Reopening of assessment u/s 147 - Whether the notice that has been issued to the petitioner was on account of change of opinion or on account of failure on the part of the petitioner to fully and truly disclose all material required for the assessment? - whether there was full and true disclosure by the petitioner as is contemplated under proviso to Section 147? - HELD THAT:- In this case, mere filing to the annexure by the petitioner in response to notice during scrutiny assessment by itself may or may not have been sufficient to come to the conclusion that there was full and true disclosure by the petitioner if the information furnished was neither complete nor true. Question is whether the information furnished were complete in all respect is to be decided only in a adjudicator mechanism. It is therefore best left open for the petitioner to demonstrate before the respondent that the details furnished by the petitioner meets the requirements of full and true disclosure for the Assessing Officer to drop the proceedings in terms of 1st proviso to Section 147 of the Income Tax Act, 1961. In case there is a change of opinion, the respondent cannot proceed in the light of the decision of the Hon ble Supreme Court in CIT Vs. Kelvinator of India Ltd. [ 2010 (1) TMI 11 - SUPREME COURT] In case indeed there is a mere change in opinion, the respondent will be obliged to drop the proceeding. To ascertain whether is a mere change of opinion or not first it has to be established that there was true and full disclosure by the petitioner. As mentioned above, this can be demonstrated by the petitioner only before the respondent and not in a proceeding under Art.226 of the Constitution of India as scope of judicial review is very limited and it is not possible to conduct a roving enquiry on facts and accounts. Under these circumstances, find no merits in quashing the impugned notice and the communication overruling the objection of the petitioner. Relegate the petitioner to participate in the proceedings before the respondent by filing appropriate representations/objections within a period of thirty days from the date of receipt of a copy of this order. If the circumstance do not justify invocation of proviso to Section 147, the respondent shall drop the proceedings.

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• 2020 (5) TMI 516
  Exemption u/s 10(23C)(iiiab) - denial of exemption as assessee is neither a University nor educational institution existing solely for educational purposes - Addition deleted by ITAT - HELD THAT:- The Supreme Court in ASSAM TEXT BOOK PRODUCTION AND PUBLICATION CORPORATION LTD. [2009 (10) TMI 60 - SUPREME COURT] has interpreted the definition of an educational institution and it is evident that all State controlled educational committees / boards that have been constituted to implement the educational policy of the States have to be treated as educational institutions. From enunciation of law by the Supreme Court, the assessee, which has been constituted to implement the educational policy of the State has to be treated as an educational institution and is consequently entitled to the benefit of exemption under Section 10(22) of the Act. In view of preceding analysis, the substantial questions of law framed by this court are answered against revenue.

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• 2020 (5) TMI 515
  Rectification u/s 154 - deduction u/s 80-HH - assessee argued that the issue with regard to deduction under Section 80-HH was specifically decided by CIT (A) hence the AO could not have passed order under Section 154 for rectifying the mistake - HELD THAT:- The contention raised is not well-founded. CIT (A) allowed the appeal holding that deduction under Section 80-HH should have been allowed @ 20% of the profit for the year without considering the actual amount allowable. Re-compute the deduction in respect of unit A and unit B @ 20% of the profit ultimately determined for the year, the matter was remitted back to the AO. While re-computing the deduction, the Assessing Officer considered the profit earned from non-industrial activities and also did not deducted unabsorbed brought forward losses. It was to correct this mistake apparent on the record that Section 154 was invoked. Suffice to say that the issue dealt with by the 1 st Appellate Authority was not subject-matter of proceedings under Section 154 of the Act, rather 20% of the profit earned from industrial activities was considered and deduction was allowed. There is no perversity in the order passed. Question No. 1 is answered against the assessee. Deduction under Section 80-HH - Tribunal relying upon the decision of the Supreme Court in Distributors (Baroda) Pvt. Ltd. v. Union of India and others [ 1985 (7) TMI 1 - SUPREME COURT] upheld the order of the AO reducing the unabsorbed brought forward loss from the profit of the current year for the purpose of computing deduction under Section 80-HH - Assessee has not been able to show that the decision of the Supreme Court is not applicable in the facts of the present case, hence the question is answered against the assessee.

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• 2020 (5) TMI 514
  Reopening of assessment u/s 147 - additions u/s 68 on account of amount routed through for giving accommodation entries on account of the amounts received in cash as well as cheque on account of share capital - HELD THAT:- From the reasons recorded, we find that the AO had no clarity as to what he considers as income escaped assessment whether the commission on the entries provided or the total amount of entries - while calculating the assessment proceedings, AO made addition of the entries which he himself has accepted that these entries have been provided to other companies as accommodation entries. In that case, there is an inbuilt contradiction in the action of the Assessing Officer while concluding the assessment proceeding. AO treats that the assessee has been utilized to provide entries to other companies wherein he treated the assessee as a conduit and also he treated the assessee as the owner of this amount. The AO mentions that the assessee is helping various beneficiaries in providing accommodation entries in relation to capital and expenses. On merits, the AO has not made any primary, independent enquiry to arrive at a conclusion to tax the amount u/s 68 of the Act. Since the Part A of the reasons recorded are clear and lucid about the method and modus of the entries being forwarded by the assessee company and not accounting the commission received thereof, and owing to the fact that the assessee has refused the opportunity of refuting the evidences gathered by revenue that Sh. Vishal Aggarwal and others has used the company as a conduit to give accommodation entries, the addition made on account of commission income earned by the assessee on the amount of the entries provided is hereby confirmed. Since, the assessee is proven to be a conduit/pass through entity without any business of its own, no other addition in the hands of the assessee company is warranted. Owing to the nature of the allegations and non-application of mind, we hold that Part B of the reasons recorded cannot be held to be valid cease to survive. Consequently, the additions made by the Assessing Officer are liable to be deleted. Appeals of the assessees are partly allowed.

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• 2020 (5) TMI 513
  Rectification u/s 154 - addition being 20% of the bogus purchases - HELD THAT:- AO as taken into consideration the material and the outcome of the enquiries received subsequent to conclusion of the assessment proceedings. It cannot be held that the action of the AO of rectifying the mistake do not emanate from the record of the AO available at the time of assessment. Ergo, it cannot be held to be a mistake apparent from the record rectifiable u/s 154. There are other provisions enshrined in the Act to bring the amounts to the tax fold which are based on the replies received for the queries raised during the assessment proceedings but such action cannot be resorted to under the provisions of Section 154. Hence, the action of the revenue is held to be legally void. As a result, the appeal of the revenue is dismissed. Capitalization of Repair Maintenance - Nature of expenses - revenue or capital expenses - HELD THAT:- AO has given no reason for disallowance of Rs. 2,14,720/-. The bills have been short listed only an amount of Rs. 5,18,000/-. The short listed bills also consist of bills for repairs, replacement of parts, custom duty, flooring and plaster. Keeping in view the nature of the expenditure, it cannot be treated as capital expenditure. The repairs to machinery and replacement of membrane filters or expenses which are regularly incurred in the manufacturing process and cannot be treated as capital expenditure in nature. Hence, we decline to interfere with the order of the ld. CIT (A) on this issue. Regarding the disallowance which are related to these revenue expenditure which were disallowed by the Assessing Officer without bringing anything on record is also hence liable to be deleted. Disallowance on account of Coal purchases - The payments have not been disputed and there was no record of any amounts or kick back received from VCM to the assessee. Since, VCM and the assessee were not related concern as per the provisions of Income Tax Act, no passing of the profits could also be attributable. In the absence of any evidence as to non-supply of the material (coal) and in the absence of any evidence that the purported excess money paid has been received back by the assessee, the amount of addition made on the difference of the amount paid by the assessee to VCM and VCM to its suppliers cannot be brought to tax treated as unexplained expenditure as per the provisions of Section 69C. The appeal of the revenue on this ground is dismissed. Addition on account of Unverifiable purchases - Assessee has submitted the entire bills and the transport vouchers before the AO alongwith the details of the trucks. The bills of various companies from which the VCM procured the coal has also been submitted before the AO alongwith the weighmentslips. In the context of disallowance of 20% of purchases, we do not find any evidence gathered by the AO to resort to such action. As per the record, there is no reason to disallow mere 20% of the purchases, if the AO believes that the purchases were bogus. The action of AO without any evidences collected either by the way of enquiry of the movement of trucks or by brining on record any evidence regarding the non-purchase/receipt of the coal cannot be held to bevalid. Assessee has furnished al l the evidences regarding the placement of purchase order, contracts, purchases, transport and delivery of the coal from Mughalsarai (UP) to Bhiwadi (Raj.). Hence, the 20% disallowance on the said purchases made by the AO in the absence of any evidences contra brought on record cannot be upheld. The order of the ld. CIT (A) on this ground is hereby confirmed.- Appeals of the revenue are dismissed.

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• 2020 (5) TMI 512
  TP Adjustment - not accepting weighted average margin considered by assessee in transfer pricing study for computing arm s length margin in case of comparables - HELD THAT:- Proviso to Rule 10 B (4) would apply only in a situation where, data relating to relevant financial year reveals facts which could influence determining transfer price. Further rule 10 B (5) gives an option of using either of the method with the proviso that at the time of determination of arm s length price of international transaction during the course of assessment proceedings for relevant assessment year in the even data for relevant financial year is available, then such data should be used irrespective of the fact that the data was not available at the time of furnishing return of income for relevant year. As we analyse transfer pricing assessment proceedings, it is noted that at the time of assessment, data for relevant assessment year was available, which was used by Ld.TPO, as against average of multiple year data used by assessee transfer pricing document. This in our view is in accordance with the rules specified. We, therefore, do not find any infirmity in analysis carried out by Ld.TPO by using relevant year data. Valid filter for assessing comparability - Assessee before us has turnover of Rs. 98.25 crores so, turnover filter of Rs. 9 crores on lower side to Rs. 980 crores on upper side, should be considered provided the functional similarities stands satisfied. We note that companies that have been pointed out by assessee is very large company that has turnover more than Rs. 1000 crores. Assessee has been categorised to be a captive service provider having turnover of 98.25 crores. Further it is noted that assessee do not own any intangibles whereas, the company alleged for exclusion by assessee by applying turnover filter owns huge brand, holding invaluable intangibles and are engaged in diversified activities. We therefore are of opinion that turnover is a valid filter for assessing comparability. Functionality - Companies functionally not comparable with a BPO service provider like that of assessee need to be deselected. Adjustment of notional interest on outstanding receivables - HELD THAT:- This Bench referred to decision of Special Bench of this Tribunal in case of Special Bench of ITAT in case of Instrumentation Corpn. Ltd. [ 2016 (7) TMI 760 - ITAT KOLKATA] held that outstanding sum of invoices is akin to loan advanced by assessee to foreign AE., hence it is an international transaction as per explanation to section 92 B. Alternatively, argued that in TNMM, working capital adjustment subsumes sundry creditors - computing interest on outstanding receivables and lones and advances to associated enterprise would amount to double taxation. Hon ble Delhi Tribunal in case of Orange Business Services India Solutions Pvt. Ltd. vs. DCIT [ 2018 (2) TMI 1151 - ITAT DELHI] as directed the TPO to study the impact of the receivables appearing in the accounts of the assessee; looking into the various factors as to the reasons why the same are shown as receivables and also as to whether the said transactions can be characterized as international transactions - we deem it appropriate to set aside this issue to Ld.AO/TPO for deciding it in conformity with the above referred judgment.

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• 2020 (5) TMI 511
  Appeal to the appellate tribunal - Valid power of attorney from company to verify the return of income of the assessee as provided u/s 140(c) - verification by the person who is authorised to verify the return of income u/s 140 of the act as applicable to the assessee - HELD THAT:- According to the provisions of section 253 (6) of the act, appeal to the appellate tribunal shall be filed in the prescribed form and shall be verified in the prescribed manner. According to rule 47 (1) of The Income Tax Rules 1962, the appeal shall be signed by the persons specified in sub rule 3 of rule 45. According to that sub rule, the form of appeal shall be verified by the person who is authorised to verify the return of income under section 140 of the act as applicable to the assessee. According to the provisions of section 140(c) of the act, the first proviso says that where company is not a resident in India, the return may be verified by a person who holds a valid power of attorney from such company to do so. According to page number 225 of the appeal set filed before us, Mr. Alan wells is only authorised to sign and verify the documents for filing of appeal before the coordinate bench. Therefore , it is not clear whether Mr. Alan Wells was holding a valid power of attorney from such company to verify the return of income of the assessee as provided us 140(c) of the Act or not. As this information is not available on record, we dismiss this appeal in limine. The assessee is also granted liberty to file the proper authorization for signing form number 36 in the present case and then request for recall of the above order.

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• 2020 (5) TMI 510
  Addition showing excess agricultural income of production of kismis - assessee did not furnish any evidence of carrying out agricultural operation - AO has computed total income from sale of kismis after taking highest rate of Rs. 60 per kg reported by the Director, National Research Centre for Grapes, Pune and difference was treated as income earned from undisclosed sources - HELD THAT:- Neither the assessee has given the break up and supporting detail of different varieties and quantities of kismis produced and sold during the year at different rates and nor the assessing officer has given the detail of kind of varieties to which the rates in the range of Rs. 55 to 60 per k.g are to be applied. In view of the facts and circumstances, we observed that it will be appropriate to take average of the rate as per the rate quoted by the assessee and average rate adopted by the assessing officer at Rs. 67 per kg. (Rs. 76 + Rs. 58). After taking average of rate adopted by the assessee and average rate adopted by assessing officer at Rs. 67 per kg the total income from sale of Rs. 28,370 kg of kismis is determined at Rs. 1900790/- (28370 x67) as against sale price of kismis adopted by the assessee at Rs. 21,59,111/-, therefore, we restrict the disallowance to the extent of Rs. 2,58,321/- as against disallowance of Rs. 4,56,911/-made by the assessing officer. - Decided partly in favour of assessee.

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• 2020 (5) TMI 509
  Unexplained investment - Money paid for purchase of residential property out of own funds - incriminating material of accepting on-money from different parties - Assessee submission out of his past savings over the years, and his wife and other family member - HELD THAT:- Since no satisfactory explanation has been offered by the assessee about the nature and source of payment of cash, the value of the investment is deemed to be the income of the assessment of the relevant F.Y. and accordingly, the same was added to the hands of the assessee Details given by the appellant of the withdrawal of amount of the last 2 years clearly suggests that the appellant has even withdrawn Rs. 5,000/- for his personal need. If this cash of Rs. 5 lakhs was lying in his house, why he will withdraw such petty amount from the bank. The transactions given by the appellant clearly shows that he has good banking habit and no prudent person will keep cash of Rs. 5 lakhs in his house for any emergency in the present scenario where the money can be withdrawn from the ATM and the payments also can be made through cheque, debit card, credit card, internet etc. Further, this is also relevant that the almost entire withdrawal of the last 2 years have been claimed by the appellant as his savings then what happened for his household expenses and from where these have been met Hence, clearly these submissions are an afterthought and given by the appellant when the clinching evidence of his payment in cash of Rs. 5 lakhs was recovered by the Department during the course of search and seizure proceedings form Cosmo Group. Apparently the withdrawals from the bank account is made for meeting the expenses and not for keeping the money at house. Hence, the explanation of the appellant that cash of Rs. 5 lakhs is deposited out of savings is not supported by any documentary evidence and against the preponderance of probability and deserves to be rejected. - Decided against assessee.

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• 2020 (5) TMI 508
  Bogus purchases - addition @ 12.5% of the alleged bogus purchases and did not disturb the sales - assessee is engaged in the trading of iron and steel - HELD THAT:- CIT(A) after considering various judicial pronouncements on the issue and the facts and circumstances of the case upheld the order of the A.O. after giving detailed finding. Nothing was placed before me so as to persuade me to deviate from the findings recorded by the ld. CIT(A). Accordingly, do not find any reason to interfere in the order of the ld. CIT(A) and uphold the same. - Decided against assessee.

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• 2020 (5) TMI 507
  Reopening of assessment u/s 147 - defective approval u/s. 151 - whether approval mechanical and without application of mind? - HELD THAT:- Referring to remarks of the Addl. CIT, Range-55, New Delhi as well as Pr. CIT, Delhi-19, New Delhi, find that the approval granted by both the authorities are mechanical and without application of mind, which are not valid for initiating the reassessment proceedings, because from the aforesaid remarks, it is not coming out as to which material; information; documents and which other aspects have been gone through and examined by the Addl. CIT, Range-55, Delhi as well as Pr. CIT, Delhi-19 for reaching to the satisfaction for granting approval. Thereafter, the AO has mechanically issued notice u/s. 148 Reopening in the case of the assessee for the asstt. Year in dispute is bad in law and deserves to be quashed. See DHARMENDER KUMAR C/O RAJ KUMAR ASSOCIATES VERSUS ITO, WARD 65 (5) , NEW DELHI [ 2019 (10) TMI 736 - ITAT DELHI] - Decided in favour of assessee.

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• Customs

• 2020 (5) TMI 506
  Principles of Natural Justice - request for cross examination denied - valuation of imported goods - short duty paid goods - HELD THAT:- Though it was submitted that the statements recorded from the petitioners were retracted, there are no material on record found - Neither the petitioner nor the respondents have filed any of the statements of the persons recorded under Section 108 of the Customs Act, 1982 nor the letter of retraction. Since the primary purpose of obtaining statement under Section 108 of the Customs Act, 1962 was for investigation and not for obtaining confessional statements/admission of liability, the respondents were asked to find out whether they could proceed with the show cause proceedings based on evidence gathered without placing primary reliance on the statements recorded from any of the three persons - the object of empowering an officer of the customs department to record evidence under section 108 is to collect information of the contravention of the provisions of the Customs Act, 1962 or concealment of contraband or avoidance of duty of Excise so as to enable them to collect the evidence of the proof of contravention of the provisions of the act for initiating proceedings for further action of confiscation of the contraband or imposition of penalty under the Act etc. The adjudication proceedings under the Customs Act, 1962 cannot solely be based on the inculpatory statements of witnesses and noticee alone. Such statements can be only used for corroborating the case which the Department proposes to establish before the quasi-judicial authorities - The department is bound to prove the case based on balance of probabilities as per well-recognised principle of law in the case of departmental adjudications The 1st respondent is directed to complete the adjudication proceedings within a period of 9 months from date of receipt of this order since the dispute pertains to import made by the petitioner between 2010 and 2013 - It is for the 1st respondent to take a call as to whether it proposes to solely rely on the statements recorded under section 108 of the Customs Act, 1962 for confirming the demand in which case, the 1st respondent shall produce such persons for cross examination by the petitioners - petition dismissed.

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• Central Excise

• 2020 (5) TMI 505
  Monetary amount involved in the appeal - prosecution of appeal - Circular bearing No.F.No390/Misc/163/2010-JC dated 17.08.2011 - whether such appeal filed by the revenue against order dated 08.08.2018, which involved the tax component of Rs. 1,81,754/- could not have been prosecuted or not? HELD THAT:- By Circular dated 17th August 2011 referred herein, monetary limit fixed for the Appellate Tribunal to adjudicate the appeal had been restricted to Rs. 5 lac and above. The said monetary limit came to be enhanced upto Rs. 10 lac by Circular dated 17th December 2015. The Central Board of Excise Customs by its extent Instruction F.No.390/Misc./163/2010-JC dated 1st January 2016 has clarified that Circular dated 17th December 2015, whereunder monetary limits for Appellate Tribunal, High Courts and Supreme Court entertaining the appeal has been fixed is to be understood as also applicable to all pending appeals before CESTAT and High Courts - an appeal which was pending as on the date of 1st January 2016, within monetary limit fixed under Circular dated 17th December 2015. Then such appeals were not maintainable before CESTAT. This aspect having been noticed by Tribunal in the instant case could not have entertained the appeal by Revenue. It was required to be dismissed as monetary limit fixed was Rs. 10 lac and in the instant case, the quantum of refund, which was subject matter of appeal, was Rs. 1,81,754/-. Appeal allowed - decided against Revenue.

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• 2020 (5) TMI 504
  Classification - Clearance of 2nd lamp with the set of Solar Power Generating System or Solar Photovoltaic Lantern to M/s Aura Solar Products Pvt Ltd - Benefit of Exemption - Notification No 6/2002-CE - recovery of Central Excise duty with interest and penalty - HELD THAT:- The manner in which the goods were being cleared by the appellant was in a package comprising of two lanterns along with a solar photovoltaic panel. SPV Panel having capacity and provisions to charge both the lanterns simultaneously. The packaging and the manner of marketing the product also suggest that both the lamps in the package are marketed as solar lanterns. It is an admitted fact and a fact not in dispute that appellants do not sell the single lantern individually or separately. That being so revenue has no jurisdiction to vivisect the package and classify one lantern separately. The classification of the goods need to be determined in the form and manner in which the same is cleared and not by unbundling/ vivisecting the package into individual components to determine their classification. While the goods in the form in which it is cleared was with the SPV Panel whereas the sample was without the SPV Panel. Further the opinion clearly states that the batteries of the lamp can be charged with the solar power normally but in emergency or non availability of solar power the same can be re-charged by using the normal power source with a suitable adapter. For classifying the one of two lamps in the package revenue has relied on the fact that it can be charged with the normal power supply using suitable adaptors. While doing so they ignore the fact that the technical opinion given by the IIT Professor clearly states that the normal mode of charging the batteries in the lamps will be solar power only - Further it is not even the case of revenue that the package was being cleared with a suitable adapter to charge the batteries using normal power supply. Thus, the goods in the form and manner in which they are cleared for sale to consumers are nothing but Solar Power Generating System or Solar Photovoltaic Lantern and the exemption claimed by the appellants in respect of same under Sl No 237 of Notification No 6/2002-CE as amended (Sl No 18 of List 9) as claimed by them is admissible to the whole package. The vivisection of the package to classify a part of such package and deny exemption in respect of one lamp out of the is neither justified nor having any basis in law. Appeal allowed - decided in favor of appellant.

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• 2020 (5) TMI 503
  Valuation - inclusion of amount of sales tax paid by the appellant in the form of VAT 37B Challan in the assessable value - HELD THAT:- The matter is already been decided by this Tribunal in case of SHREE CEMENT LTD. SHREE JAIPUR CEMENT LTD. VERSUS CCE, ALWAR [ 2018 (1) TMI 915 - CESTAT NEW DELHI] where it was held that there is no justification for inclusion in the assessable value, the VAT amounts paid by the assessee using VAT 37B Challans. Appeal dismissed - decided against Revenue.

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• CST, VAT & Sales Tax

• 2020 (5) TMI 502
  Principles of Natural Justice - Evasion of tax - fake bills - stand of the petitioner is that the documents purported to have been sent vide letter dated 02.11.2011 were never received and therefore, the petitioner has not been able to file a reply - HELD THAT:- Though a detailed counter has been filed by the respondent, there is no specific denial to the allegation of the petitioner that the documents had not been served in person. Since the impugned order has been passed without furnishing the documents and the impugned order is merely based on the averments that the documents were served to one Tmt.Leelavathi on 05.12.2011, the impugned order is quashed by remitting the case back to the respondent to pass fresh orders. The petitioner is therefore directed to appear before the respondent on the 1st instance before the 1st respondent on 30.06.2020 to collect the documents specified in letter dated 02.11.2011 - petition allowed by way of remand.

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• 2020 (5) TMI 501
  Reopening of assessment - Escapement of turnover - whether the restaurant of the petitioner was part of its One Star service and whether separate registration in 2011 for the running a Bar will have any bearing on the assessment made in the impugned orders? - HELD THAT:- The registration granted to the petitioner by the Ministry of Tourism, Department of Tourism on 12.11.2009 was subject to petitioner complying with all the regulatory conditions for classification/to classification of hotels and other terms and conditions to be introduced by the Department from time to time - There is no clarity as to whether separate kitchen and dining area existed for provision of One Star Hotel Service by the petitioner independent of the restaurant with the kitchen for which the petitioner had obtained registration earlier on 19.05.2008 vide TIN No.3382242419. If the petitioner had shown the kitchen meant for the restaurant for obtaining One Star registration/classification order on 12.11.2009, certainly the petitioner would be liable to pay tax in terms of section 7(1)(a) even if the petitioner did not actually intend to treat it as a part of its One Star Hotel business/service - if the petitioner had a separate kitchen and a separate dinning area for serving food to the guest staying in the rooms based for which the aforesaid One Star classification was obtained on 12.11.2009, the respondent would not be justified in clubbing the turnovers to demand tax under section 7(1)(a) of the Act. The finding of the respondent in the impugned orders that the services in the restaurant and the bar were interlinked with each other remains unsubstantiated - there are sufficient indications to the effect that after 2011, the Commercial Tax Department also wanted to treat the service provided by the petitioner to its guest staying in its hotel rooms/visiting the bar under One Star service and the food served in the restaurant differently from 2011. However, in absence of proper discussion on facts in the impugned order and adequate materials, any categorical finding on the same could not be delivered. Impugned orders are set aside and the cases are remitted back to the respondent to pass fresh orders for the respective assessment year within a period of 6 months from date of receipt of this order - Petition allowed by way of remand.

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• 2020 (5) TMI 500
  Refund of compounding amount/fee paid for release of the goods detained - levy of compounding fee - contention of the respondent is that since the petitioner did not have registration for the site office, the transportation was improper and without payment of duty - HELD THAT:- The goods in question were directly dispatched by the manufacturer to the Petitioner s site in Tirunelveli for being installed along with the other wind energy equipment at a later point time - The petitioner had not affected any sale of the goods when the goods was detained by the 1st respondent at the Paranoor Check Post near Chengalpet. It is at a later stage, a sale would have taken place by the petitioner to its customer. The detention of the goods on the assumption that the petitioner had already effected sale and that no tax was paid when the goods were in transit was is purely based on the assumption, presumption and conjecture. As and when the petitioner effects sale, the petitioner would be liable to pay tax. There was an error in assumption of jurisdiction by the 1st respondent Commercial Tax Officer namely the Check Post officer on the ground that the goods had not suffered tax as the manufacturer had indeed charged tax in the invoice raised on the petitioner. The 1st respondent not only erred in demanding tax at the Check Post from the petitioner after wrongly detaining the goods but also erred in asking the petitioner to opt for compounding of the alleged offence under section 72(1)(a) of the Tamil Nadu Value Added Tax Act, 2006 by asking the petitioner to pay the aforesaid amount of Rs. 2,74,048/-. Indeed, no case was made for detaining the goods in transit on the assumption that no tax was paid - Though the petitioner appears to have obtained VAT registration for its head office, it had not obtained separate registration for the site office as an additional place of business under Rule 5 (1) (a) of the Tamil Nadu Value Added Rules, 2007 read with Section 38 of the Tamil Nadu Value Added Tax Act, 2006. While upholding the invocation of Section 72(1) of the Tamil Nadu Value Added Tax Act, 2006, the composition fee ought to have been restricted to an amount not exceeding Rs. 2000/-under Section 72(1)(b) of the aforesaid Act - Petition allowed in part.

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• 2020 (5) TMI 499
  Levy of compounding/composition fees - release of detained goods - It is the case of the petitioner that the 1st respondent erred in passing the impugned order which are titled as Notice by calling upon the petitioner to pay the aforesaid amounts as compounding/composition fee in lieu of prosecution as the 1st respondent has no jurisdiction to pass such orders under section 72 of the Tamil Nadu Value Added Tax Act, 2006 - HELD THAT:- As per Section 67(4) of the Act, if the tax is paid or the security is furnished, then the goods so detained shall be released forthwith. Thus, the officers at the check post/barriers are the proper officers empowered to call upon the driver or the person in charge of the vehicle/boat to pay tax or to furnish adequate security in such form and in such manner and to such authorities as may be prescribed, on behalf of the person liable to pay tax. It is only on payment of such tax, the detained goods can be released - In fact the petitioner or the purported owner who importer as the case may be ought to have paid the tax and got the goods released. There is no necessity to file a writ petition. Instead, the petitioner espoused the cause of the purported owner (importer) by filing a writ petition directly before this court. It was altogether unnecessary in the light of the fact that the authorities acting under the act are duty bound to release the goods on payment of tax as per section 67 (4) Of the Tamil Nadu Value Added Tax Act, 2006. There is no difficulty in concluding that the 1st respondent was competent to not only detained the goods under section 67 of the Tamil Nadu Value Added Tax Act, 2006 but also was competent to issue notice/order under section 72 of the aforesaid Act. There is no illegality - Petition dismissed.

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• 2020 (5) TMI 498
  Compounding of tax - sale of purchased goods - Ceramic Tiles - violation of Section 71(3) (a), 71(3)(d) and 71(7) of the TNVAT Act, 2006 - HELD THAT:- The respondent is the prescribed authority under Section 67 of the Tamil Nadu Value added tax Act, 2006. Therefore, it is for the petitioner to take advantage of the aforesaid option given by the respondent. If the respondent do not prosecute the petitioner for the violation of the provisions of the Act, the option given in the impugned proceeding is redundant.. In any event, the goods at the time of their detention at Vikravand Check post had accompanied the relevant invoice evidencing the sale and the tax payable thereon by the petitioner. Therefore, the respondent was in detaining the goods at the Check Post and in demanding the tax from the petitioner - there are no merits in the present writ petition on the ground that the petitioner had no jurisdiction to. Considering the value of the goods and the fact that the petitioner may be involved in in the transaction for the 1st time, the revenue can take sympathetic view and not initiate any prosecution proceedings - petition dismissed.

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• 2020 (5) TMI 497
  Maintainability of petition - recovery of input tax credit availed by the petitioner on the strength of invoices issued by dealers whose registrations were retrospectively cancelled - discharge of burden to prove - TNVAT Act - HELD THAT:- The issue with regard to maintainability of petition is answered in favour of the petitioner even though the petitioner has an alternate remedy before the Appellate Deputy Commissioner by way of appeal under section 51 of the Tamil Nadu Value-Added Tax Act, 2006 as it would be unfair to dismiss the writ petition straightaway after having admitted it in 2016 - this is a fit case for making certain observations on merits. Recovery of input tax credit availed by the petitioner on the strength of invoices issued by dealers whose registrations were retrospectively cancelled - HELD THAT:- The issue is no more res-integra - the court in ASSISTANT COMMISSIONER (CT) , PRESENTLY THIRUVERKADU ASSESSMENT CIRCLE, KOLATHUR, CHENNAI VERSUS INFINITI WHOLESALE LTD. [ 2016 (9) TMI 1431 - MADRAS HIGH COURT ] has taken a categorical view in the following cases that input tax credit cannot be denied to a purchasing dealer if the VAT registration of the supplier dealer who supplied the goods is cancelled retrospectively after the sale was affected to such a purchasing dealer - the issue is answered in favour of the petitioner. Burden to prove - HELD THAT:- Since the volume of purchase covered by each is invoice is not mentioned and since the petitioner has also not explained the details invoice wise in the objections filed by the petitioner, the petitioner has not sufficiently discharged the burden of proof so as to regularise the input tax credit availed by the petitioner - These details can be furnished by the petitioner. If indeed the quantity of individual purchases through each of the invoices were of comparatively smaller quantity which could be easily transported through bullock cart and/or tricycle, the petitioner could have produced the details with a proper explanation and tabulation. The case is remitted back to the respondent to pass fresh orders preferably within a period of 3 months from date of receipt of this order - Petitioner is required to file a consolidated final reply to all the notices for the respective assessment years together with such evidence as may be available with the petitioner to substantiate the claim for input tax credit - petition disposed off by way of remand.

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• 2020 (5) TMI 496
  Demand of tax and compounding/composition fee - Section 72 of TNVAT Act - detention of goods alongwith vehicle - It is the case of the petitioner that the exercise of power under section 72 of the Tamil Nadu Value Added Tax Act, 2006 for alleged violation of section 71 of the said Act was arbitrary and illegal and without jurisdiction - HELD THAT:- Mere entry of the goods from another state into Tamil Nadu ipso facto does not attract levy under the provisions of the Tamil Nadu Value Added Tax Act, 2006 unless there was a prior sale within the State of Tamil Nadu and no tax was paid or charged - Therefore 1strespondent as the prescribed authority under section 67 of the Tamil Nadu Value Added Tax Act, 2006 was competent to detain goods and vehicle and verify the records and documents which accompanied the goods. For the same reasons, the 1st respondent was also competent to demand tax at the check post, if the first respondent was of the view that the detained goods was liable to tax but no tax was paid or charged. 1st respondent as the prescribed authority under section 67 of the Tamil Nadu Value Added Tax Act, 2006 was competent to detain goods and vehicle and verify the records and documents which accompanied the goods. For the same reasons, the 1st respondent was also competent to demand tax at the check post, if the first respondent was of the view that the detained goods was liable to tax but no tax was paid or charged. The 1st respondent as an officer in charge of the Check Post is also the prescribed authority for the purpose of section 72 of the Tamil Nadu Value Added Tax Act, 2006. Therefore, 1strespondent was competent to issue impugned draft compounding notices dated 24.7.2013 for compounding of the of the offences specified in Section 71 of the Act. There are however several disputed questions of fact on several counts - while upholding the exercise of power by the 1st respondent, the impugned order is set aside in so far as it seeks to demand compounding/composition fee - case remitted back to the 2nd respondent to pass appropriate order on merits in accordance with law. Appeal allowed by way of remand.

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• 2020 (5) TMI 495
  Refund of excess Input Tax Credit - refund of claim denied on the ground that the petitioner was still in business and was adjusting the amount regularly - Sections 19(17) and 19(18) of the TNVAT Act, 2006 - whether in the light of changed scenario after the implementation of TNGST Act, 2017, the petitioner is entitled to refund? - HELD THAT:- As per the Rules prescribed, excess of Input Tax Credit has to be refunded back to the dealer. There was no provision for carrying forward of such Input Tax Credit for adjustment of tax liability for the subsequent period - merely because the petitioner was a going concern by itself did not mean that the petitioner was not entitled to such refund of the excess of Input Tax Credit which the petitioner accumulated over a period of time. Merely because the TNVAT Act, 2006 was substituted with Tamil Nadu Goods and Service Tax Act, 2017 with effect from 1.7.2017 by itself did not mean that the petitioner would be entitled to refund merely because the petitioner filed Form Transfer-1 - The petitioner cannot be found fault with. It did not mean that the petitioner was not entitled to refund of the accumulated Input Tax Credit which was lying unutilised after due adjustment. The impugned order passed by the respondent cannot be sustained and same is liable to be quashed with consequential direction to refund the amount lying unutilised after adjustment at the beginning of each financial year - Petition allowed.

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• 2020 (5) TMI 494
  Levy of purchase tax payable - purchase of turmeric - Section 12 (2) of the Tamil Nadu Value Added Tax, 2006 - contention of the petitioner is that that turmeric purchased by the petitioner from dealers, who were exempted from payment of tax in terms of Section 15 read with Item 18, Part B of the 4th Schedule of the Tamil Nadu Value Added Tax Act, 2006 were also exempted in the hands of the petitioner and therefore the petitioner cannot be saddled with tax liability under Section 12(1) of the Tamil Nadu Value Added Tax Act, 2006. HELD THAT:- While under Section 7A of the TNGST Act,1959, tax was payable at the rate mentioned in Section 3 or 4 as the case may be of the Act. However, under Section 12(1) of the Tamil Nadu Value Added Tax Act,2006, tax is payable at the rate specified in the Schedules to this Act - Both Section 8 of the TNGST Act, 1959 and Section 15 of the Tamil Nadu Value Added Tax Act, 2006 provide for exemption. They exempted a dealer from payment of tax whose turnover in respect of items mentioned does not exceed Rs. 300 crores in a year. Merely because they read identically, the interpretation given by the Courts earlier for levy of purchase tax under Section 7A of the TNGST Act, 1959 and exemption cannot be straight away imported for levy of purchase tax under Section 12 of the Tamil Nadu Value Added Tax Act,2006 in view of few differences in the language in Item 16,III Schedule to the TNGST Act, 1959, and Item 18, Part B IV Schedule to the Tamil Nadu Value Added Tax Act, 2006 - Item 16, III Schedule to the TNGST Act, 1959 was to be read along with Section 8 of the TNGST Act, 1959. Similarly, Item 18, Part B IV Schedule to the Tamil Nadu Value Added Tax Act, 2006 has to be read along with and Section 15 of the said Act, 2006. Though they gave to dealers of the goods enumerated therein exemption from payment of tax upto Rs. 300 Crores, yet the consequence under the respective enactments are different as far as levy of purchase tax are concerned. There are few but very important differences in the Tamil Nadu Value Added Tax Act, 2006 which distinguishes the levy under Section 12 of the Act from levy under Seciton 7A of the TNGST Act,1959. Though the levy under Section 7A of the TNGST Act, 1959 and 12 of the Tamil Nadu Value Added Tax Act, 2006 get attracted under similar circumstances, the rate of tax are different - Under Section 7A of the TNGST Act, 1959 tax is payable at the rate prescribed in Section 3 and 4 of the said Act. Where as, under Section 12 of the Tamil Nadu Value Added Tax Act, 2006 tax is payable at the rate specified in the Schedules to the Act. Therefore, the Petitioner would be liable to pay tax only at the rate specified in the Schedules to the Tamil Nadu Value Added Tax Act, 2006. There was a paradigms shift from TNGST Act, 1959 when Tamil Nadu Value Added Tax Act, 2006 was enacted. The tax regime was altered to levy tax on value addition at every point of sale with a within the State with a corresponding provision for input tax credit for being set off. It not only rationalised the rate of tax but also rendered tax paid at every point of sale within the State to be set off as input tax credit - thus, under Section 12(1) of the Tamil Nadu Value Added Tax Act, 2006, petitioner who is also a dealer is liable to pay purchase tax at the rate specified in the Schedules. If the total turnover of the petitioner during the relevant year did not exceed Rs. 300 crores as per Section 12(1) of the Tamil Nadu Value Added Tax Act, 2006 the Tax payable by the petitioner would be at the rates specified in the Schedules to this Act which would mean the rate specified in Entry 18, Part B, IV Schedule to the Tamil Nadu Value Added Tax Act, 2006 - If however on the other hand, the turnover of the petitioner had exceeded Rs. 300 crores, the petitioner would be liable to pay tax at the rate prescribed in Item 52, Part B, I Schedule to the Tamil Nadu Value Added Tax Act, 2006 as that would be the rates specified in the Schedules to this Act . This is a factual matter which would require a proper determination by the respondent. Case remitted back to the respondent with the direction to the respondent to pass a speaking order within a period of 3 months from date of receipt of this order in terms of the above observation as far as levy of purchase tax under Section 12 (1) of the Tamil Nadu Value Added Tax Act, 2006 is concerned - petition allowed by way of remand.

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• 2020 (5) TMI 493
  Rejection of Stay application - application for waiving the mandatory 1/3rd deposit - applicant states that the substantial question of law involved in the Revision is that an Appellate Court could not have rejected a Stay Application as cursorily as it had done in the present case - HELD THAT:- This Court is of the view that simply depositing 1/3rd of the mandatory deposit would not mean that the applicant was economically sound. Further the fact that the prima-facie case was not looked into by the Tribunal also can be seen from the order itself. The contention of learned counsel for the applicant in the Revision has force. The applicant in the Revision has made the deposit which was required to be made. The appeal shall now be disposed of within a period of three months from the date of presentation of a certified copy of this order and till the disposal of the appeal, no coercive action shall be taken against the applicant - Revision allowed.

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• Indian Laws

• 2020 (5) TMI 492
  Smuggling - Cocaine - applicability and compliance of of Section 50 of the NDPS Act - HELD THAT:- Admittedly, Laya was searched. Thus, plainly, provisions of Section 50 of the NDPS Act would be applicable notwithstanding that the recovery was made from the bag carried by her. The question whether provisions of Section 50 have to be complied with in case a search of a person is carried is no longer res integra. In Raju @ Abdul Haque @ Jagga v. State of West Bengal [ 2018 (9) TMI 845 - SUPREME COURT ], the Supreme Court had reiterated the above. The Court also referred to the Constitution Bench decision in Vijaysinh Chandubha Jadeja v. State of Gujarat [ 2010 (10) TMI 934 - SUPREME COURT ], wherein the Court had held that provisions of Section 50 of the NDPS Act are mandatory. The court held that the concept of substantial compliance is not borne out from the language of the said Section, therefore, strict compliance with Section 50(1) of the NDPS Act is required. Whether provisions of Section 50 have been complied with? - HELD THAT:- The fact that Laya was not searched in presence of a Magistrate or a Gazetted Officer does not ipso facto mean that provisions of Section 50 were not complied with - but, merely because Laya was not searched in the presence of a Gazetted Officer or a Magistrate, would not invalidate her search or the recovery of the contraband from her bag. In the present case, all of the witnesses present at the Airport had deposed that Laya was handed over a notice under Section 50 of the NDPS Act. PW-1 and PW-3 had testified that Laya was duly informed of her rights of being searched in presence of a Magistrate or a Gazetted Officer. She had, thereafter, desired to be searched by a lady officer and did not want her search to be conducted before a Magistrate/Gazetted Officer - It is established that Laya is familiar with the English language and the notice clearly informed her of her rights to be searched before a Gazetted Officer or a Magistrate, if she so desires. In view of the above, this Court is unable to accept that provisions of Section 50 of the NDPS Act were not complied with. Whether there was any infirmity in the search conducted by the NCB officials? - HELD THAT:- The fact that the seizure memo bears the signatures of the independent witnesses is quite meaningless in view of the fact that (a) none of them have testified that they had signed the same at the spot but testified contrary to the case of the prosecution that all documents (apart from the notice) were prepared at the NCB office; (b) that neither of the public witnesses were proficient in English; (c) that the testimony of PW-12 regarding the recovery of contraband from cardboard boxes is contrary to the facts as stated in the seizure memo; and (d) the alleged statement made in Hindi by PW-14, is not on record - All of these assertions are inconsistent with the Prosecution s case. Whether there was any infirmity in drawing the samples of the contraband and whether there is any doubt that the integrity of the samples was maintained? - HELD THAT:- The official witnesses have testified that contraband was recovered and the samples were taken at the spot. PW-1 had testified that on opening the blue bag, seven silver-coloured pouches were found. The said pouches were opened and they were found to contain transparent polythene packets. On cutting the same, white-coloured powder was recovered. He testified that he took out a small quantity from each of the packets and all of them tested positive for cocaine. Because all the packets had tested positive for cocaine, they mixed the contents of all the pouches and made one packet and took out two samples from the same. These samples were marked as A-1 and A-2. PW-1 testified that he sealed the said two samples in a white envelope. Paper slips, which were signed by Laya as well as the two public witnesses, were affixed to the two samples marked as A-1 and A-2. The said paper slips were also signed by PW-1. These were then sealed with the seal of Narcotics Control Bureau DZU-5 - this Court is unable to accept that there is any apparent infirmity with the procedure of drawing of the samples as adopted by NCB. Whether it is established that the integrity of the sample was maintained? - HELD THAT:- There is break in the chain of custody of the samples. It is well settled that the prosecution is required to establish the complete chain as to the movement of the sample in order to establish that the same had remained intact. In the present case, this chain had not been established as there is no material or evidence to indicate as to how PW-10 came in possession of the said sample. This does raises some doubts in the matter. Whether there is any evidence on record to establish beyond reasonable doubt that Laya and Okafor had entered into a conspiracy committing an offence punishable under the NDPS Act? - HELD THAT:- There is a raging debate whether any statement made to officials of NCB would be admissible in evidence. It is contended that officials of NCB are police officers for all intents and purposes; therefore, any confessional statements made before them would be inadmissible in evidence. The NCB contends that their officials are not police officers and therefore, the confessional statements made before them and recorded under Section 67 of the Act would be admissible in evidence - The consequential question whether the statement recorded under Section 67 of the NDPS Act is required to be treated as a statement under Section 161 of the CrPC or whether it is in the nature of the statement made under Section 164 of the CrPC, has also been referred to a larger bench. A statement, which is made and signed by a person before any officer empowered under Section 53 of the NDPS Act for investigation of offences during the course of any inquiry or proceeding by such officer, it would be relevant for proving in any prosecution, the facts contained therein. However, this is subject to certain conditions. There is no dispute that powers under Section 53 of the NDPS Act have been conferred on certain NCB officials and such signed statements are admissible in evidence provided the conditions as set out in Section 53A of the NDPS Act are met. Concededly, these conditions are not in this case. However, NCB does not seek to rely on the provisions of Section 53A of the NDPS Act but Section 67 of the NDPS Act. In the present case, there is little doubt that the statement of Laya had been recorded while she was in effective custody of the officials of NCB. Although it had been suggested that she was served with the notice under Section 67 of the NDPS Act and had voluntarily come to the office of the NCB, it is obvious that this contention is without any merit. There is no doubt that Laya had little choice in the matter. She had been apprehended at the airport and had been served with the summons (allegedly) to appear before the NCB officials forthwith - In the first part of her statement, which is stated to have been concluded at around 3:30 PM, Laya had disclosed the name of Okafor and his address. PW-6 had testified that during recording of the statement he did not give any information to the IO. However, after conclusion of the statement, Laya was arrested and her second part of the statement was recorded after she had identified Okafor, who had been produced before her. This Court has serious doubts whether the statement of Laya can be stated to be voluntary. She had been apprehended at the airport and there is no doubt that she was compelled to accompany the officials of NCB to their office. She had been allegedly searched earlier. She was accompanied by Savitri Jaswani and she remained in the presence of at least two other NCB officials, namely, Insp. Akhilesh Kumar Mishra (PW-6) and IO Vikash Kumar. She had also been interrogated while she was in the vehicle on the way to the airport to the NCB office - prosecution s case regarding Laya s disclosure of Okafor and his address and their actions are also inconsistent. This Court is unable to sustain the conviction of Okafor. He is, accordingly, acquitted of the charges for which he was convicted (commission of an offence under Section 29 of the NDPS Act). Accordingly, Laya is also acquitted of committing an offence under Section 29 of the NDPS Act and her conviction is set aside - Laya s conviction for commission of an offence punishable under Section 21(c) of the NDPS Act also cannot be sustained, as there was no charge framed against her for committing the said offence - there is considerable doubt as to the manner in which the contraband was recovered and the chain of custody of samples has also not been established. The possibility of tampering with the same also cannot be ruled out. Thus, her conviction for committing of an offence punishable under Section 23(c) of the NDPS Act also cannot be sustained. The appeals are allowed - The appellants are acquitted.

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