Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
May 4, 2015
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Articles
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Rental income from letting out of properties - Letting out of property is the main objective of the company - assessee rightly disclosed the income under the Head Income from Business. It cannot be treated as 'income from the house property' - SC
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Software licence fee has been paid towards operation as well as application software. That being the case, the rate of depreciation applicable is 60% (as applicable to computer) and not 25% - AT
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Disallowance of foreign exchange loss on account of marking to mark to market of forward contracts - "expenditure" as used in section 37 in Income Tax Act may in the circumstances of a particular case cover an amount which is a "loss" even though said amount has not been given from the pocket of the assessee. - AT
Customs
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Waiver of pre deposit - Tribunal has not rejected the application in toto , but out of total duty payable only 50% has been directed to be deposited , so also out of penalty payable only 10% penalty has been directed to be deposited. - order of tribunal sustained - HC
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Denial of refund claim - unit FOB value of the subject goods was mentioned as USD 16. 00 per piece as against the FOB price of USD 0.01 per piece - considering the fact of provisional assessment is not yet finalized, the appellant's claim for refund is premature - AT
Indian Laws
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Offence under Negotiable Instruments Act - dishonor of cheque - revision petitioner being a lady has imposed with a present sentence of nine months simple imprisonment and considering the fact that she has also levied with a compensation of ₹ 4 lakhs, sentence of imprisonment set aside - HC
Service Tax
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CENVAT Credit - re-insurance as input service - transfer of a portion of the risk of the re-insurance has to be considered as having nexus with the output service, since the re-insurance is a statutory obligation and the same is co-terminus with the Insurance Policy - credit allowed - HC
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Eligibility of CENVAT credit - non registration as Input service distributor (ISD) - whether the service rendered by the service provider for the products manufactured in Gujarat and invoices raised can be availed as CENVAT Credit at Mumbai - credit allowed - AT
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Demand of service tax - the profit earned in purchase/sale transactions cannot be subject to service tax in respect of a service rendered as a sole selling agent for the goods manufactured by the liquor manufacturer - AT
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Valuation - sale of Recharge Vouchers and SIM Cards - Respondents have discharged the service tax liability on the basis of MRP to the ultimate subscribers after the Recharge Vouchers and SIM Cards as and when sold directly to the subscribers; the respondent also discharged the service tax liability on the actual amount received by them from the distributors and dealers for the sale of Recharge Vouchers and SIM Cards from such distributors and dealers - demand set aside - AT
Central Excise
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CBEC clarifies - Clearance from DTA to SEZ is Export and eligible for rebate of duty - Central Excise
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Credit of Education Cess & SHEC can be used for payment of Excise Duty by Manufacturers - Central Excise
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For classifying a product as motor spirit both the criteria regarding flash point being below 25°C and suitability for use, either by itself or in admixture with other substance as fuel in spark ignition engine, must be satisfied by actual test.- AT
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Denial of Duty exemption under notification no.6/2002-CE - on account of hilly area between the water source and the water treatment plant, the water had to be carried to a temporary storage facility on the hill by booster pumps, the temporary water facility on the hill cannot be treated final storage facility and the benefit of the exemption notification can not be confined only to the pipes need for the supply to the temporary storage facility on the hill - AT
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Denial of CENVAT Credit - Wrong mention of unit name in invoices - Assessee's address was correctly mentioned - just for this mistake the denial of Cenvat credit is not correct. - AT
VAT
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Concessional rate of entry tax - import of coal - Section 9C of the Orissa Entry Tax Act, 1999 - whether generation of electricity is a manufacturing activity - petitioner is entitled to avail concessional rate of entry tax on coal in terms of Rule 3(4) of the OET Rules - HC
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Classification - Rice Bran Oil which is fit for human consumption can only be a different and distinct commodity from the other two commodities viz., RB Fatty Acid and RB Acid Oil as the former is fit for human consumption while the latter two commodities are only used in the process of manufacture of soaps/cattle feed. - HC
Case Laws:
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Income Tax
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2015 (5) TMI 46
Rental income from letting out of properties - Business income or Income from House property - Letting out of property is the main objective of the company - Income classification depend on the circumstances of each case - Held that:- We are of the opinion that the judgment in Karanpura Development Co. Ltd. [1961 (8) TMI 7 - SUPREME Court ] squarely applies to the facts of the present case. In this case it was held that "As has been already pointed out in connection with the other two cases where there is a letting out of premises and collection of rents the assessment on property basis may be correct but not so, where the letting or sub-letting is part of a trading operation. The diving line is difficult to find; but in the case of a company with its professed objects and the manner of its activities and the nature of its dealings with its property, it is possible to say on which side the operations fall and to what head the income is to be assigned". No doubt in Sultan Brothers (P) Ltd. [1963 (12) TMI 4 - SUPREME Court ], Constitution Bench judgment of this Court has clarified that merely an entry in the object clause showing a particular object would not be the determinative factor to arrive at an conclusion whether the income is to be treated as income from business and such a question would depend upon the circumstances of each case, viz., whether a particular business is letting or not. We are conscious of the aforesaid dicta laid down in the Constitution Bench judgment. It is for this reason, we have, at the beginning of this judgment, stated the circumstances of the present case from which we arrive at irresistible conclusion that in this case, letting of the properties is in fact is the business of the assessee. The assessee therefore, rightly disclosed the income under the Head Income from Business. It cannot be treated as 'income from the house property' - Decided in favour of assessee.
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2015 (5) TMI 45
Transfer pricing adjustment - Determination of Arm's length price in international Transactions with AEs - Determination of ALP of management fee and licence fee paid to AE as Nil - Non consideration of other receipts as part of operating revenue for computing the margin - Rejection / Selection of comparables - Disallowance of expenses related to operating software and application software - Non consideration of claim of deduction u/s 10A as per the revised return of income - Held that:- Determination of ALP of management fee and licence fee paid to AE as Nil - Similar view was also expressed by ITAT in assessee s own case [2015 (3) TMI 92 - ITAT HYDERABAD] for AY 2009-10 dt. 13/02/2015. As the issue in dispute is materially same, respectfully following the aforesaid decisions of coordinate bench in assessee s own case, we remit the issue back to the file of the AO/TPO to determine the quantum of management fee and licence fee with reference to agreement between the parties. This ground is allowed for statistical purposes. Non consideration of other receipts as part of operating revenue for computing the margin - In the objections raised before ld. DRP assessee claimed that the other income shown are also from the operations of the business, hence, should be treated as part of operating revenue. Ld. DRP after considering the submissions accepted assessee s claim and directed TPO to treat the other income shown by assessee as part of operating revenue. However, the directions of ld. DRP were not implemented by AO in the final assessment order. In our view, when ld. DRP has specifically directed TPO to treat the other income shown by assessee as part of operating revenue for computing PLI, AO/TPO are duty bound to comply to the directions of ld. DRP. That being the case, we direct AO/TPO to compute PLI by treating the other income as part of the operating revenue. Selection of certain companies as comparables by TPO - Acropetal Technologies Ltd. - We find merit in the submissions of ld. AR. On a perusal of the annual report of the company, it is found that during the year the company has made acquisitions which might have impacted the profit making of the company. - Cosmic Global Ltd - TPO while applying filters for selection of comparable have excluded companies having less than 1 crore turnover from BPO services, revenue earned by this company from BPO services is only ₹ 19.63 lakhs, as claimed by assessee, then, this company cannot be considered as a comparable. - Eclerx Services Ltd - Company cannot be treated as comparable to assessee not only due to the fact that it is involved in high end (KPO) services but it also earned super normal profits due to extraordinary event. - Genesys International Corporation Ltd - Company being totally different in its functionality cannot be a comparable to assessee. - HCL Comnet Systems and Services Ltd - Assessee s claim of functional difference of the companies requires examination, matter is remitted back to AO/TPO for examining afresh after due opportunity of being heard to assessee. - Infosys BPO Ltd - The Hon ble Delhi High Court in case of Agnity India Technologies pvt. Ltd., [2013 (7) TMI 696 - DELHI HIGH COURT] has held that Infosys cannot be treated as comparable to other small companies. Rejection of certain companies by TPO - Accurate Data Convertors Pvt. Ltd.- We are of the view that the issue of comparability of the aforesaid company requires examination considering assessee s claim that as per the information submitted in response to the notice u/s 133(6), the company satisfies all the filters applied by TPO. We, therefore, restore the matter back to the file of the TPO to examine the issue after due opportunity of being heard to assessee. - Informed Technologies Ltd. - As neither TPO nor DRP have examined the aforesaid aspects while rejecting the aforesaid company as comparable, we think it appropriate to restore the issue of comparability of this company to AO/TPO for considering afresh after due opportunity of being heard to assessee. We make it clear, if on examining the information available on record TPO finds that this company satisfies all the filters applied by him, then, he may consider this company as a comparable. Non consideration of claim of deduction u/s 10A as per the revised return of income - There is no dispute to the fact that assessee has filed a revised return of income before AO revising the claiming deduction u/s 10A of the Act. Further, during the assessment proceeding assessee has also submitted a revised Form 56F. In our view, AO without examining assessee s claim of deduction u/s 10A as per the revised return could not have proceeded to allow the claim as per the original return when he does not dispute the fact that the revised return is a valid return as per the provisions of section 139(5) of the Act. In course of hearing, ld. AR brought to our notice that assessee has also filed a petition u/s 154 of the Act raising the very same issue before AO, which is still pending. Considering the aforesaid facts, we are inclined to remit this issue back to the file of AO with a direction to consider assessee s claim as per revised return and in accordance with law after due opportunity of being heard to assessee. This ground is allowed for statistical purposes. Disallowance of expenses related to operating software and application software - We have considered the submissions of the parties and perused the materials on record. It is very much evident from record that the software licence fee has been paid towards operation as well as application software. That being the case, the rate of depreciation applicable is 60% (as applicable to computer) and not 25% as allowed by AO. Moreover, this issue is more or less covered in favour of assessee by the decision of the coordinate bench in assessee s own case [2015 (3) TMI 92 - ITAT HYDERABAD] for the AY 2009-10. In view of the above, we direct AO to allow depreciation @ 60% on the software licence fee. This ground is partly allowed. - Decided partly in favour of assessee.
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2015 (5) TMI 44
Application for rectification or order u/s 254(2) - Disallowance of short term capital loss on account of sale / purchase of shares - AO treated the transaction as Sham - it was held by the Tribunal in these cases that it cannot be accepted that any loss was incurred during this period from 07/12/2007 to 15/12/2007 and therefore, the claim of the assessee regarding short term capital loss is not allowable. However, it was held by the Tribunal as per Para 6 of the impugned Tribunal order that since the assessee was also holding old shares on 07/12/2007, the loss incurred by the assessee should be held to be allowable as long term capital loss having been incurred on sale of these old shares. Now in these Misc. Applications, this is the argument of the assessee as per Para 20 of the Misc. Application, as reproduced above, that the issue regarding long term capital loss was not before the Tribunal and therefore, the direction of the Tribunal in this regard is beyond the authority of the Tribunal. Held that:- As per above discussion, we have seen that none of the objections raised by the assessee in the Misc. Application is having any merit and therefore, this Misc. Application is liable to be dismissed. - Decided against the appellants.
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2015 (5) TMI 43
Contravention of section 40(a)(ia) - Whether CIT(A), has erred in deleting the addition made by the AO on account of expenses not deductible - Held that:- A sum ₹ 10,66,200/- was paid by the assessee to the sub-contractors on which the assessee had deducted TDS but the same was deposited to the credit of the central government before the due date of filing of return under section 139(1) of the Act. The disallowance of the expenditure of ₹ 10,66,200/- was made by the AO invoking the provisions of section 40(a)(ia) on the ground that the amendment made by the Finance Act, 2010 which allowed payment of TDS within due date of filing of return under section 139(1) without inviting invocation of provisions of section 40(a)(ia) was prospective and applicable w.e.f. 1.4.2010 only, and not applicable for the year under consideration i.e. Asstt.Year 2005-06. The CIT(A) has allowed appeal of the assessee by following decisions of the Tribunal as quoted above in this order and held that the amendment was retrospective in nature. - payment of TDS has been made before the due date of filing of the return under section 139(1) of the Act, and therefore, the CIT(A) was fully justified in deleting the addition made by the AO by following the decisions of the Tribunal. Hence, we confirm the order of the CIT(A)
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2015 (5) TMI 42
Denial of exemption being an income of mutual concern - Principle of mutuality - Income from the transaction of non members is outside the purview of the mutuality - Treatment of reimbursement cost as income - Estimation of profits at 5% of gross amount recovered from non-members - Applicability of provisions of section 44C - Interest u/s 234B of the Act - Held that:- The ld. A.R. has placed on record order of the ITAT in assessee’s own case [2015 (5) TMI 113 - ITAT MUMBAI] for A.Y. 2006-07 dated 14-11-2012 wherein exactly similar issue has been decided by the Tribunal in favour of assessee. Our attention was also invited to the grounds raised by the Revenue in the appeal for A.Y. 2006-07 which are exactly same. Following the earlier order of this Tribunal, we hold that the assessee is covered by the principle of mutuality to the extent of its transaction with the members only and the income from the transaction of non members is outside the purview of the mutuality. Treatment of reimbursement cost as income - The ld. A.R. placed on record order of the Tribunal in [2015 (5) TMI 113 - ITAT MUMBAI] for A.Y. 2006-07 dated 14-11-2012 wherein exactly similar issue has been decided against the assessee holding that reimbursement cost is income. The ld. A.R. also placed on record order of the Tribunal in [2014 (1) TMI 1227 - ITAT MUMBAI] for A.Y. 2007-08 dated 22-1-2014 wherein this issue has been decided against of the assessee at para 7 to 9 at page No. 10 to 13 of the order. As the facts and circumstances during the year under consideration are same, respectfully following the order of the Tribunal in assessee’s own case we hold that reimbursement of cost was not income of assessee. Estimation of profits at 5% of gross amount recovered from non-members - The ground raised with regard to estimating the profit of the assessee company at 5% of gross amount recovered from non-members is covered against the assessee by the order of the Tribunal in [2015 (5) TMI 114 - ITAT MUMBAI] for A.Y. 2008-09 dated 31-01-2013. As the facts and circumstances during the year was same, respectfully following the order of Tribunal in assessee’s own case, we uphold the action of lower authorities estimating the profit of assessee company at 5% of gross amount recovered from non-members. Applicability of provisions of section 44C - We find that this issue is also covered against the assessee by the order of the Tribunal in [2015 (5) TMI 113 - ITAT MUMBAI] for A.Y. 2006-07 dated 14-11-2012. Exactly similar issue has been decided by the Tribunal in A.Y. 2007-08 in [2014 (1) TMI 1227 - ITAT MUMBAI] dated 22-01-2014 against the assessee. As the facts and circumstances during the year under consideration are same, we hold that provisions of section 44C of the Act apply to the assessee company in respect of expenses incurred at Head Office level. Accordingly ground No. 3 of the C.O. is dismissed. Principle contended in Article 7(1)(a) of the India Belgium Tax Treaty - We find that this issue is also covered by the order of the Tribunal in assessee’s own case in [2015 (5) TMI 114 - ITAT MUMBAI] for A.Y. 2008-09 order dated 31-01-2013 vide para 10 on page 11 which reads as under:- “10. It has been admitted by the learned counsel for the assessee that grounds No. 3 to 8 will render academic in view of the findings given in grounds No. 1 and 2. Consequently, these grounds are also treated as dismissed.” Interest income as covered by the principle of mutuality - The ld. A.R. fairly conceded that this ground also covered against the assessee by the order of the Tribunal in assessee’s own case for assessment years 2007-08 and 2008-09. Respectfully following the order dated 22-1- 2014 and 31-1-2013 for assessment years 2007-08 and 2008-09 of the Tribunal in assessee’s own case, we dismiss ground No. 9 taken in the C.O. by the assessee. Interest u/s 234B of the Act - The DDIT held that the entire income of the assessee company is subject to tax and accordingly levied interest u/s 234B of the assessee. We find that this issue is covered in favour of the assessee by the order [2012 (11) TMI 948 - ITAT MUMBAI] dated 26- 9-2012 of the Tribunal for A.Y. 1996-97. Respectfully following the above order of Tribunal in assessee’s own case [2012 (11) TMI 948 - ITAT MUMBAI], we allow this ground in favour of the assessee. - Decided against the revenue.
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2015 (5) TMI 41
Penalty u/s 271(1)(c) of Income Tax Act, 1961 - Concealment of particulars of income or furnished inaccurate particulars of income - Claim of non-allowable expenses - Held that:- We have noted that so far as disallowance of long-term capital loss is concerned, the only basis for the said disallowance is an Inspector’s report, but then the Inspector’s report, prima facie, by itself cannot be a reason enough to disregard the sale consideration on the basis of documents on record. While we refrain from making any observation on merits, it is sufficient to say that by no stretch of logic this Inspector’s report can be reasonably and legally sustainable foundation for holding that the assessee concealed any particulars of income or furnished inaccurate particulars of income. Whatever sale consideration has been stated by the assessee is admittedly supported by the sale deed etc. and the Assessing Officer has not even called the same into question. In these circumstances the learned CIT(A) was quite justified in deleting the impugned penalty so far as long term capital loss is concerned. As regards the disallowance of expenditure in respect of car hire charges, it is an undisputed position that the assessee did produce Memorandum of Understanding in support of the claim of expenditure but then the Assessing Officer was swayed by other considerations such as non deduction of tax at source which was wholly irrelevant so far as assessment year 2004-05 was concerned since the provisions of section 40(a)(ia) has been brought to statute w.e.f. 1st April, 2005. Therefore, whether the tax was deducted at source while making payments of car hire charges or not, prima facie, could not have any legally sustainable implications in the disallowance with respect to the expenditure in question. Even on this issue as we refrain from making any observation on merits, we are clearly of the view that the facts on record did not justify or warrant imposition of penalty in respect of this quantum disallowance. Finally as regards the partial disallowance of depreciation on software, it is an undisputed position that all the relevant facts were before the Assessing Officer and incorrectness of the claim, even if that be so, cannot by itself lead to or result in imposition of penalty u/s. 271(1)(c). In view of these observations and also bearing in mind entirety of the case, we are not inclined to disturb the well reasoned findings of the CIT(A). We confirm the same and decline to interfere in the matter. - Decided against the revenue.
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2015 (5) TMI 40
Disallowance of foreign exchange loss on account of marking to mark to market of forward contracts - Disallowance of foreign exchange loss on account of forex derivative contracts - Business loss or Speculation loss - Disallowance of Professional fees - Disallowance of sharing of common marketing expenses u/s 40A(2)(b) - Held that:- Disallowance of loss on mark to market Forward Contracts - We find that the issue relating to mark to market loss in forward contracts in foreign exchange has come up for consideration before the coordinate bench of this Tribunal and has been decided vide order dated 12.2.2014 in the case of M/s S. Rajiv & CO. [2015 (5) TMI 38 - ITAT MUMBAI]. It may be further observed that the Hon'ble Supreme Court in the case of Woodward Governor India (P.) Ltd. [2009 (4) TMI 4 - SUPREME COURT ], while dealing with the question as to whether the additional liability arising on account of fluctuation in the rate of exchange can be allowed to be adjusted pending actual payment of the varied, has observed that "expenditure" as used in section 37 in Income Tax Act may in the circumstances of a particular case cover an amount which is a "loss" even though said amount has not been given from the pocket of the assessee. While dealing with the issue of the nature of forward contracts in commodity derivatives, the co-ordinate bench of the Tribunal in the case of Kotak Mahindra Investment Ltd. [2013 (7) TMI 355 - ITAT MUMBAI ] relating to A.Y. 2008-09, has observed that such type of forward contracts are not purely contingent in nature rather loss or profit is somewhat ascertainable in such type of contracts because of constant watch on daily market rates. The quantum of profit or loss though not actually ascertainable can be anticipated in view of the trends of the market. The difference between the predetermined price and market price is settled daily on mark-to-market basis. In such type of contracts, it is not the stock value which is subject matter of the contract rather the contract itself is the stock in trade. Contracts in such type of cases can be squared off before the arrival of actual performance of date of contract, as the profit and loss are calculated on daily basis and the margins are settled accordingly. We may further observe from the guidelines issued by the Reserve Bank of India relating to general principles to be observed for forward foreign exchange contracts that the banks have been permitted to enter into such contracts after thorough verification of documentary evidences etc. about the genuineness of the underlying foreign currency exposure and the need of hedging of the loss. Further the maturity of the hedge should not exceed the maturity of the underlying transaction. In view of the above discussions, it can be safely held that in case of import/export business, where the transactions are demonetarized in the foreign currencies and for the purpose of hedging of the anticipated loss resulting from such import-export business and not otherwise, if the assessee enters into a forward contract in foreign exchange, then such forward contracts are to be treated as integral part or incidental to the business of export/import and cannot be said to be the speculative contracts attracting the provisions of section 43(5) of the Act. The loss from such hedging transactions would be treated as business loss eligible to be set off against the profits and gains of business and profession. It is held accordingly that the foreign exchange loss incurred by the assessee on account of entering into forward contracts with the banks for the purpose of hedging the loss in connection with his import/export business cannot be held to be a speculative loss rather a business loss which can be set off against profit and gains of business subject to the condition that the assessee will have to satisfactorily prove that the maturity of the hedge did not exceed the maturity of the underlying transaction. The findings of the CIT(A) given vide impugned order are therefore set aside and the issue is restored back to the file of the AO to decide the same accordingly after giving proper opportunity to the assessee to represent its case. Disallowance of Professional fees - The AO in the case in hand has disallowed the expenditure incurred/paid to AASL being excessive or not relating to the business activity of the assessee, the department on the other hand had made the additions in the hand of AASL on the ground that the income/ consideration for services provided by AASL to the assessee in this case was less and therefore adhoc addition had been made in the case of AASL. Thus the department has taken a contradictory stand. Under such circumstances it is difficult to believe that the payment made by the assessee to AASL for the services obtained was excessive or that it was not relating to the business of the assessee. This ground is accordingly allowed in favour of the assessee. Disallowance of sharing of common marketing expenses - As per the agreement, the assessee has been made liable to pay 60% of the expenses incurred by the VGIL in market/promotion of the products. It is not a case of reimbursement of actual expenses incurred by the VGIL on behalf of the assessee. Whereas it is a case of composite agreement as per which the assessee has been made liable to pay 60% of the total and expenses incurred by the VGIL for marketing of its own products and that of assessee, which means that the assessee has been paying service charges to the VGIL who has been providing marketing services to the assessee. Further, it has been specifically provided in clause 8 of the agreement that the VGIL shall at all times be an independent contractor and nothing contained in the agreement shall in any way imply employer-employee relationship, principal agent relationship or a commercial-agent relationship. These clauses in the agreement prove beyond doubt that the VGIL has been providing the services to the assessee as an independent contractor. Hence, the assessee was liable to deduct tax at source as per the provisions of chapter XVII-B of the Act and therefore disallowance was attracted in this case under section 40(a)(ia) of the Act. Adhoc disallowance - So far the issue relating to the adhoc disallowance @20% of the expenses is concerned, we do not find any justification for the same on the part of the lower authorities. We hold that if the claim of the assessee, otherwise will be found to be eligible for deduction in view of our findings given above relating to the alternate contention of the assessee, then no disallowance will be called for on adhoc basis. - Decided partly in favour of assessee.
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2015 (5) TMI 39
Prior period items - Disallowance of salary expenses for earlier years - TDS on salary was depoited during the current year - assessee failed to furnish a copy of challan of payment of tax deducted at source - Held that:- The case of the assessee is that the TDS challan was lost because of change in accountants. However, the assessee obtained confirmation from OLTAS, a copy of which is placed on page 12 of the paper book, which transpires that tax at source to the tune of ₹ 18,50,514/- was received on 15.06.2006. Page No.17 of the paper book is a copy of the assessee’s bank account which also evidences a payment of ₹ 18,50,514/- on 13th June, 2006. This confirmation also divulges the nature of payment as `Pay of employees other than Govt. employees’. In the absence of the availability of challan, one thing is clear that the assessee did deposit tax amounting to ₹ 18,50,514/- on 15.06.2006 and the nature of payment given by OLTAS is undoubtedly `Salaries’. These facts make it abundantly clear that the assessee did deposit tax at source amounting to ₹ 18,50,514/- after making deduction from salaries. However, the only shortcoming is about the establishment of nexus of this amount of tax with the salary of ₹ 55,47,237/- for which deduction has been claimed during the year - Matter remanded back - Decided in favour of assessee.
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Customs
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2015 (5) TMI 52
Waiver of pre deposit - quantum of amount of pre-deposit ordered by the tribunal - Export benefit by way of Duty Entitlement Pass Book - Whether the Tribunal ought to have waived the predeposit of duty and penalty under Section 129E of the Act as calling upon the Appellant to deposit the same or part of the same would cause undue hardship to the Appellant in view of financial difficulty of the Appellant - Held that:- case of the Revenue in nutshell is that the appellants have inflated the value of the products which were exported for obtaining a higher export value so that they can get an inflated DEPB credit which can be sold in the market. The material on record would reveal that while authorities were considering the cases of similar units namely M/s S.S. Enterprises, M/s Neel Impex and M/s Agarwal Traders, it was found that the exported goods were overvalued to get undue DEPB benefit. It was further found that the appellants-firms were having transactions with the aforesaid three firms. Though the appellants had specifically denied the relationship with the said three firms, it was found from the material on record that there were various bank transactions between the appellants and/or their subsidiaries and the said three firms. From the samples taken from the consignments of the said three firms and the market enquiry, it was found that the Exporter had declared inflated value of motor parts and availed undue DEPB credit and on the said basis DEPB Scripts were obtained and were sold in the open market. - Tribunal has taken into consideration all the three factors i.e. prima facie case, undue hardship and interest of the Revenue. The learned Tribunal has not rejected the application in toto , but out of total duty payable only 50% has been directed to be deposited , so also out of penalty payable only 10% penalty has been directed to be deposited. As such it cannot be said that the discretion exercised by the CESTAT is exercised in a perverse or impossible manner. In that view of the matter, we find no error could be found in the view taken by the learned Tribunal. - Decided against assessee.
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2015 (5) TMI 51
Denial of refund claim - unit FOB value of the subject goods was mentioned as USD 16. 00 per piece as against the FOB price of USD 0.01 per piece - Non production of relevant documents - bill of entries were only provisionally assessed and are still pending before the department - Held that:- As admitted by the appellant, these two subject bill of entries which were provisionally assessed not yet finalized so far. As such, they could not furnish the bill of entry before the assessing authority and also the appeal was pending before this Tribunal. Except for producing copy of the Certificate of Foreign Inward Remittances, the appellant failed to produce any other evidences in support of their claim for erroneous pricing of Screw Tapping of parts no.935605602000 of Invoice No.KDB-86817 - 4000 pieces - was mentioned as USD 16. 00 per piece as against the FOB price of USD 0.01 per piece. The appellant could not produce any documents to show that the price of Screw Tapping is Re.0.015. Therefore, considering all the above facts and also considering the fact of provisional assessment is not yet finalized, the appellant's claim for refund is premature - Decided against assessee.
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2015 (5) TMI 50
Confiscation of Indian Currency - attempt of export of Indian currency as baggage - Held that:- In such nature of case the appeal does not lie before this Tribunal in terms of Section 129A - From the clause (a) of first proviso to Section 129A, it is clear that in case of any goods of import and export as baggage, the appeal does not lie before this appellate Tribunal. However, the appellant was supposed to file Revision Application before the Revisionary Authority of Government of India under Section 129DD of Customs Act, 1962. - present appeal is not maintainable before this Tribunal - Decided against assessee.
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Corporate Laws
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2015 (5) TMI 49
Application for Scheme of Amalgamation - Dispensation of meeting of their equity shareholders, secured and unsecured creditors - Held that:- All the equity shareholders of all three transferor companies have given their consents/no objections in writing to the proposed Scheme of Amalgamation. Their consents/no objections have been placed on record. They have been examined and found in order. In view thereof, the requirement of convening the meeting of the equity shareholders of the transferor companies to consider and, if thought fit, approve, with or without modification, the proposed Scheme of Amalgamation is dispensed with. There is no secured or unsecured creditor of the transferor companies, as on 16th February, 2015. The transferee company has 11 equity shareholders and 07 unsecured creditors. All the equity shareholders and all the unsecured creditors have given their consents/no objections in writing to the proposed Scheme of Amalgamation. Their consents/no objections have been placed on record. They have been examined and found in order. In view thereof, the requirement of convening the meetings of the equity shareholders and unsecured creditors of the transferee company to consider and, if thought fit, approve, with or without modification, the proposed Scheme of Amalgamation is dispensed with. There is no secured creditor of the transferee company, as on 16th February, 2015. - Scheme of Amalgamation approved.
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Service Tax
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2015 (5) TMI 68
CENVAT Credit - Whether the CENVAT credit availed and utilized by the assessee on the Service Tax paid for imported "Reinsurance Services" is an "input service' within the meaning of Rule 2 (l)(i) of the CENVAT Credit Rules, 2004 for the output services, i.e., Service of insurance the assessee was providing - Held that:- The process of issuance of an Insurance Policy by the Insurer and subsequent procurement of re-insurance policy from another company (which is a statutory requirement) is an integral part of the total process. The process of insurance does not come to an end merely on the issuance of the Insurance Policy by the Insurer. In fact, it continues till the existence of the term of the policy. The re-insurance is taken by the Insurer immediately after the insurance policy is issued, as is required under Section 101A of the Insurance Act, 1938. Since re-insurance is a statutory obligation, and the same is co-terminus with the Insurance policy issued by the respondent, we are of the opinion that the stand taken by the Tribunal is correct that the transfer of a portion of the risk of the re-insurance has to be considered as having nexus with the output service, since the re-insurance is a statutory obligation and the same is co-terminus with the Insurance Policy. Service Tax is levied for certain service rendered and the provision of giving the CENVAT credit is so that there may not be double taxation. If a person has collected service tax, no doubt the same has to be deposited, but if in the process of the same transaction he has paid some service tax, which is necessary for its business, then he is entitled to the CENVAT credit to the extent of service tax which has been paid by it. In the present case, if the entire Service Tax which is collected by the Insurer, while selling its insurance policies, has to be deposited without being given the credit of the tax which is paid by it while procuring a policy of reinsurance as (mandatorily required in law), the same would be against the ethos of CENVAT credit policy, as the same would amount to double taxation, which is not permissible in law. - no interference is called for with the order of the Tribunal - Decided against Revenue.
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2015 (5) TMI 67
Eligibility of CENVAT credit - non registration as Input service distributor (ISD) - Business Auxiliary Services - whether the service rendered by the service provider for the products manufactured in Gujarat and invoices raised can be availed as CENVAT Credit at Mumbai - Held that:- there is no dispute as regards the services received by the appellant for the activity and service tax liability having been discharged by the service provider, omission to take registration as an Input Service Distributor is to be considered as procedure irregularity - decisions in the cases of Mangalore Refinery and Petrochemicals (2013 (9) TMI 326 - CESTAT BANGALORE) Market Creators Ltd. (2014 (7) TMI 704 - CESTAT AHMEDABAD) relied on by learned A.R. have rendered by the Single Member Bench. The judicial discipline, Division bench decision needs to be followed giving precedence over decision of Single Member Bench. Accordingly, the decision in the case of Doshion Ltd. (2012 (10) TMI 952 - CESTAT AHMEDABAD) of Division Bench is binding on me and following the same I find that the impugned order is liable to be set aside and I do so. - Decided in favour of assessee.
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2015 (5) TMI 66
Demand of service tax - amount received towards cost of the packing materials - Business Auxiliary Service - Held that:- Appellant is undertaking two functions - one as a sole selling agent promoting the sale of the country liquor manufactured for which he receives incentives @ ₹ 5/- per box on which service tax liability is discharged. The second transaction which the appellant undertakes is procuring raw materials and packing materials for the country liquor manufacturer on which he has discharged VAT liability; thereafter, he has sold these packing materials and raw materials to the country liquor manufacturer on a profit, again discharging VAT liability on the sale price. We have perused both the purchase invoices and also the sale invoices in respect of these transactions and these documents clearly shows payment of VAT /sales tax. Thus, the profit earned is in respect of a trading transaction in respect of packing materials and raw materials and has nothing to do with the activity of sole selling agent. In fact, these two transactions could have been performed by two separate entities. Merely because one entity has performed both transactions, the distinct and different nature of the transactions does not get obliterated. Therefore, the profit earned in purchase/sale transactions cannot be subject to service tax in respect of a service rendered as a sole selling agent for the goods manufactured by the liquor manufacturer. - impugned demands are clearly unsustainable in law - Decided in favour of assessee.
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2015 (5) TMI 65
Valuation - sale of Recharge Vouchers and SIM Cards - whether the respondent is required to discharge the service tax liability on the amount which they have received from the distributors and dealers or on the MRP on which the subscribers purchases Recharge Vouchers and SIM Cards from the distributors or dealers. - Held that:- Respondents have discharged the service tax liability on the basis of MRP to the ultimate subscribers after the Recharge Vouchers and SIM Cards as and when sold directly to the subscribers; the respondent also discharged the service tax liability on the actual amount received by them from the distributors and dealers for the sale of Recharge Vouchers and SIM Cards from such distributors and dealers. - Following decision of BPL Mobile Cellular Ltd. [2007 (6) TMI 107 - CESTAT, CHENNAI] - Decided against Revenue.
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2015 (5) TMI 57
Denial of refund claim - whether the order passed by the Commissioner (Appeals) allowing refund of input services under Notification No. 41/2007 in respect of terminal handling services and Bill of Lading fees is eligible or not - Held that:- lower appellate authority has relied on the Board's circular dated 12.3.2009 (Sl. No. VII), which has already been reproduced by the Commissioner (Appeals). I also find that the various Benches of the Tribunal have allowed refund relying on the Board's circular dated 12.3.2009. Further, the Hon'ble Gujarat High Court also in the case of Commissioner Vs. Adani Enterprise (2014 (11) TMI 973 - GUJARAT HIGH COURT) has allowed refund relying on the Board's circular dated 12.3.2009 - Following the same - Decided against Revenue.
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Central Excise
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2015 (5) TMI 60
Abatement under sub-section (3) of Section 3A of the Central Excise Act, 1944 - Closure of factory - Held that:- As per sub-clause (a) of the Rule 96ZO (2), manufacturer has to inform, in writing, about the closer of factory to the Assistant Commissioner, Central Excise with a copy to the Superintendent, Central Excise, either prior to the date of closer or on the date of closer. - There is no material available on the record that intimation for closer of the factory was sent and got received in the office of Assistant Commissioner, Central Excise and in the office of Superintendent of Central Excise either on 01.09.1997 or prior to 01.09.1997. - Undisputedly, fax was sent and received in the office of Assistant Commissioner, Central Excise on 02.09.1997, however, factory, according to the petitioner, was closed with effect from 01.09.1997, it means that intimation about the closer of the unit was sent and received after the closer of the unit. Therefore, petitioner has not made compliance of clause (a) of Rule 96ZO (2). - This is the settled position of law to take benefit of concession/abatement, manufacturer is duty bound to follow the strict procedure given under the Act or Rules which admittedly petitioner has not done - Decided against assessee.
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2015 (5) TMI 59
CENVAT Credit - appellant, did not pay its duty though the duty payable has been declared in the ER-I Return - According to the appellant non-payment of duty was due to clerical mistake - Held that:- In the circumstances of the case, this was not a case of default, as in the ER-I return for September, 2001 filed by the appellant while the appellant had showed duty payable as ₹ 1,29,541/- they had also shown the cenvat credit balance which was more than sufficient to discharge the duty liability and therefore, there is merit in the appellants plea that non-payment of duty, which is a small amount for such a big company, was due to bonafide mistake. In any case, when the provisions of Rule 8 (3A) of Central Excise Rules requiring an assessee to pay duty through PLA without utilizing the credit during the period of default beyond the period of one month have been declared as unconstitutional, impugned order itself would not be sustainable. In any case, we do not understand, as to why the Commissioner in respect of the show cause notice dated 02.09.2013 for the period from October, 2012 to June 2013 has confirmed the demand of ₹ 69,06,534/- which had been paid through PLA and has included this amount while imposing penalty of ₹ 69,91,429/-. Prima-facie the order has been passed without any application of mind at all - requirement of pre-deposit of the duty demand, interest and penalty is, therefore, waived for hearing of the appeal and recovery thereof stayed - Stay granted.
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2015 (5) TMI 58
Classification of goods - Whether the goods, in question, are classifiable as "composite organic solvent, not elsewhere specified" covered by heading 3814 of the Central Excise Tariff, or whether the same are classifiable as motor spirit underheading 27101119 - Held that:- Chemical examiner's report while mentioning the flash point as below 25°C is totally silent about the other factor as to whether the product either by itself or in admixture with other substance is suitable for use as a fuel in spark ignition engines. Therefore, in our view, in view of inconclusive chemical report the product, in question, cannot be classified under heading 27101119. - for classifying a product as motor spirit both the criteria regarding flash point being below 25°C and suitability for use, either by itself or in admixture with other substance as fuel in spark ignition engine, must be satisfied by actual test. In view of this, we hold that while the order in original dated 31.08.2009 passed by the Commissioner is not sustainable, there is no infirmity in the orders - Decided in favour of assessee.
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2015 (5) TMI 56
Availment of CENVAT Credit - Clearance of goods without payment of duty under Notification No. 29/2004-CE and Notification No. 30/2004-CE both dated 9/7/2004 - Held that:- Documents only gives the quantity and value of the goods exported and cleared in the domestic market and goods cleared under Notification No. 29/2004 and 30/2004 dated 9/7/2004. Further, the appellant/assessee has given the data relating to packaging material on which, they have availed the Cenvat credit and packaging material on which they have not availed Cenvat credit. In our view the benefit of Notification No. 30/2004 and 9/7/2004 is available only when no credit on inputs is taken by them. Thus for availing exemption from payment of duty, it is incumbent part of the appellant/assessee to produce record/evidences that they have not availed or utilized packaging material (on which credit of duty was taken) in the manufacture of exempted goods. It is only when such record/evidences is available that benefit of Notification No. 30/2004 can be extended. In case they have availed the credit of duty on the packaging material which in turn is used for packaging of exempted goods, benefit of Notification No. 30/2004 will not be available. Appellant has not produced the said data. Original authority has also not gone into such details. - Rule is not relevant as exemption itself is subject to the condition of non-availment of Cenvat Credit on inputs - Matter remanded back - Decided in faovur of assessee.
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2015 (5) TMI 55
CENVAT Credit - Whether during the period of default in discharge of monthly duty liability for a particular month beyond the period of one month from the due date, the assessee is required to pay duty without utilising the Cenvat credit as per the provisions of Rule 8 (3A) - held that:- Madras High Court in the case of Unirols Airtex vs. Assistant Commr. of C. Ex., Coimbatore (2013 (12) TMI 1398 - MADRAS HIGH COURT) has held that during the period of default beyond the period of one month from due date, the assessee as per the provisions of Rule 8 (3A) is required to discharge the duty liability without utilising the Cenvat credit, Hon'ble Gujarat High Court in the case of Indsur Global Ltd. vs. Union of India [2014 (12) TMI 585 - GUJARAT HIGH COURT] has gone into the constitutionality of the provisions of Rule 8 (3A) and has held in clear terms that the condition contained in sub-Rule (3A) of Rule 8 for payment of duty during the period of delay beyond the period of one month from the due date without utilising the Cenvat credit, till the Assessee pays the outstanding amount is constitutional. In view of this, the requirement of pre-deposit of the duty demand, interest and penalty is waived for hearing of the appeal and recovery thereof is stayed. - Stay granted.
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2015 (5) TMI 54
Denial of Duty exemption under notification no.6/2002-CE (Sl.No.196 A) as amended by notification no.47/2002-CE dated 6.9.2002 - Held that:- Both the sides agree that the present issued stands decided by the Tribunal in favour of the appellant in the case of CCE, Kolkata-III Vs. Electrosteel Casting Ltd. reported in [2008 (10) TMI 424 - CESTAT, KOLKATA] and the Revenue's appeal against this order was dismissed by the Apex Court vide judgement reported in [2009 (8) TMI 1123 - SUPREME COURT]. Even otherwise also, since the exemption notification exempts the pipes needed for delivery of water from its sources to the water treatment plant and from there to the storage facility and since in this case, on account of hilly area between the water source and the water treatment plant, the water had to be carried to a temporary storage facility on the hill by booster pumps, the temporary water facility on the hill cannot be treated final storage facility and the benefit of the exemption notification can not be confined only to the pipes need for the supply to the temporary storage facility on the hill. In view of this, the impugned order is not sustainable - Decided in favour of assessee.
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CST, VAT & Sales Tax
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2015 (5) TMI 64
Benefit of amnesty scheme - Held that:- AGP has stated at the bar, under instructions from Shri H.R. Varma, Assistant Commissioner Commercial Tax, Unit -15, Ahmedabad, that the application of the petitioner dated 19/06/2012 for availing the benefit of Amnesty Scheme, which was prevailing at the relevant time, shall be considered on merits. It is submitted that within a period of three months, the petitioner shall be communicated and / or informed the tax component for the relevant years for which the demand is raised. - In this view, the impugned order passed by the appropriate authority rejecting the application of the petitioner for availing the benefit of the Amnesty Scheme is hereby quashed and set aside. - Decided in favour of appellant.
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2015 (5) TMI 63
Reopening of assessment - Cancellation of assessment orders - Held that:- Considering the language and the provisions of S.63 A of the KVAT Act, once the order of cancellation of the assessment order had been passed by the Revisional Authority, it could not proceed to pass a fresh assessment order but could only direct the Assessing Officer to pass a fresh assessment order. - With the coming into force of the amendment made with effect from 1.4.2013 in the KVAT Act whereby the word 'or’ has been substituted by 'and’, after which it is now provided under the Act to the effect that the Revisional Authority can cancel the assessment order and direct fresh assessment, which would clearly mean that the same has to be read in conjunction and not separately. With this amendment, it is further fortified that after cancelling or setting aside the order of assessment, the Revisional Authority can only direct for a fresh assessment and not proceed to pass an order of reassessment. Thus, we are of the firm opinion that this is a case where the Revisional Authority has clearly exceeded its jurisdiction in proceeding to reassess the case and to that extent, the order passed by the Revisional Authority is wholly unjustified in law and liable to be quashed - earlier part of the order which relates to the reasons for cancellation or setting aside the assessment order is affirmed and is not being interfered with. - Decided partly in favour of assessee.
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2015 (5) TMI 62
Concessional rate of entry tax - Section 9C of the Orissa Entry Tax Act, 1999 - petitioner is engaged in business of generation of electricity and distribution thereof in the State of Odisha - whether generation of electricity is a manufacturing activity. - Held that:- Court in the case of Orient Paper & Industries Ltd. (1989 (1) TMI 138 - HIGH COURT OF ORISSA) while interpreting Section 2(b) of the Central Excise and Salt Act, 1944 has held that generation of electricity for the purpose of Central Excise and Salt Act is "manufacture or production of electricity", since the term "manufacture or production" is to be given a wide meaning. - In view of the definition of 'manufacture' as provided in Section 2(28) of OVAT Act read with Rule 2(1)(c) of the OET Rules and Section 2(q) of the OET Act and all the above judicial pronouncements of the Hon'ble Supreme Court and High Court, we are of the considered view that the activity of generating electricity in thermal power plant by using coal would qualify as a manufacturing activity. Whether coal is a raw-material for generation of electricity in thermal power plant - Held that:- When the processes that are involved in manufacturing/ generation/production of electricity in a thermal plant as narrated in the preceding paragraph is considered in the light of the above observation of the Hon'ble Supreme Court, it can safely be concluded that coal is a raw material for production/generation of electricity. - perusal of the impugned assessment order reveals that before the Assessing Authority, the petitioner produced the expert opinion obtained from IIT, Kharagpur, wherein, it has been opined that coal is a raw material which results in the emergence of electricity. Whether the reasons given by the learned Assessing Authority for disallowing the petitioner's claim to avail concessional levy of entry tax in terms of Rule 3(4) of the OET Rules are legally valid - Held that:- it extreme difficult to accept the above reasons given by the Assessing Authority to hold that coal is not a raw material for generation/production of electricity in thermal power station and that generation of electricity is not a manufacturing activity and therefore the petitioner is not entitled to avail concessional rate of entry tax as provided under Rule 3(4) of the OET Rules. - by no stretch of imagination, it can be said that the findings/observations of this Court that 'coal is a raw material for generation of electricity' are unnecessary for the decision of that case or it does not relate to the material facts in issue. Therefore, the learned Assessing Authority is wholly unjustified to hold that the observation of this Court in Bhusan Power and Steel Ltd. (2012 (11) TMI 696 - ORISSA HIGH COURT) that "coal is a raw material for generation of electricity" is a cursory remark, i.e., obiter dicta. Even though the petitioner has filed a written submission in course of the assessment proceeding as evident from the impugned assessment order relying on various statutory provisions, the Supreme Court judgments, judgments of the High Court in support of its contention, the Assessing Authority without dealing with the contention of the petitioner with reference to the judgments relied upon by it passed the assessment order raising huge tax and penalty amounting to ₹ 7,22,44,608/-. Thus, the impugned order shows complete non-application of mind which ultimately amounts to judicial indiscipline and impropriety. The Assessing Authority, who is Joint Commissioner of Sales Tax, Sambalpur Range, Sambalpur, being a fairly senior officer is always expected to take note of various decisions of the Hon'ble Supreme Court/High Court placed before him by the assessee before passing any order. It may not be appropriate to say that competent and efficient Assessing Authorities are to be posted because the fate of litigants is dependent upon their proper adjudication. - petitioner is entitled to avail concessional rate of entry tax on coal in terms of Rule 3(4) of the OET Rules - Decidedin favour of assessee.
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2015 (5) TMI 61
Classification - Whether RB Acid Oil and RB Fatty Acid can be considered as distinct and different from Rice Bran Oil - Held that:- When un-refined raw rice bran oil is subjected to a process of refining, two distinct and different commodities namely RB Fatty Acid and RB Acid Oil had also emerged. Therefore, the manufacturing process had altered the identity of one commercial commodity and new commercial commodities had emerged. The law of sales tax is also concerned with goods of various descriptions. It cannot be disputed that the two commodities namely RB Fatty Acid and RB Acid Oil, which are of commercially different category and description, had emerged during the process of manufacture of Rice Bran Oil. The principle which is fairly well settled is that the words or expressions under the statute must be construed in the sense in which they are understood in the trade, by the dealer and the consumer because it is they who are concerned with it and it is the sense in which they understand it that constitutes the definitive index of the legislative intention when the Statute was enacted. Therefore, the test is how the product is identified by the class or section of people dealing with or using the product. Rice Bran Oil which is fit for human consumption can only be a different and distinct commodity from the other two commodities viz., RB Fatty Acid and RB Acid Oil as the former is fit for human consumption while the latter two commodities are only used in the process of manufacture of soaps/cattle feed. It is pertinent to note that RB fatty acid and RB acid oil and Rice Bran oil are considered as distinct and different commodities for the purpose of levy and collection of excise duty. - As a sequel we find that the order of the respondent, which is impugned, is in accordance with the law and does not brook interference - Decided against assessee.
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Indian Laws
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2015 (5) TMI 48
Offence under Negotiable Instruments Act - dishonor of cheque - Revision petition - Trial court convicted with sentenced of rigorous imprisonment for 9 months, compensation of ₹ 4 lakhs within three months from the date of the order, with default sentence of three months simple imprisonment under Section 138 read with section 142 of the Negotiable Instruments Act - Held that:- It is the specific case of the respondent/complainant that when the cheques were presented on earlier occasion and get dis-honoured and immediately they contacted the revision petitioner/accused, who prayed for six months time to settle the amount and subsequently voluntarily came forward to alter the year of the cheques from 1995 to 1996. Though it is the specific case of the revision petitioner/accused that it amounts to material alteration, as already pointed out in criminal complaint lodged, in this regard, has become final, as the jurisdictional police has closed the case as 'Mistake of Fact' and no further steps have been taken either to reopen the case or to file a private complaint. The Courts below had recorded the concurrent findings as to the guilt on the part of the revision petitioner/accused for the commission of offence under Section 138 of the Negotiable Instruments Act and this Court, on an independent application of mind to the entire material placed before it, is of the considered view that there is no error apparent or infirmity on the findings rendered by the Courts below. At this juncture, the learned counsel for the revision petitioner/accused made alternately that the revision petitioner being a lady has imposed with a present sentence of nine months simple imprisonment and considering the fact that she has also levied with a compensation of ₹ 4 lakhs, sentence of imprisonment may be set aside and on the said submission, the Court heard the submission of the learned counsel for the respondent/private complainant also and this Court, after considering the said plea and taking into consideration of the fact that now the revision petitioner is aged about 62 years, is of the view that sentence of imprisonment awarded by the trial Court as confirmed by the lower appellate Court is to be set aside, instead, the default sentence is to be imposed in the event of non payment of compensation. - In the result, the criminal revision is dismissed confirming the conviction of the revision petitioner/accused under Section 138 read with 142 of the Negotiable Instruments Act, which has been upheld by the lower appellate Court.
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2015 (5) TMI 47
Respondent took housing loan from financial institution - on default in payment of installments, account treated as non-performing asset - recovery - Authorities of financial institution, issued notice to borrowers under section 13(2) of the SARFAESI Act. - Respondent filed several litigations and also criminal complaint against appellants, consequent to which an FIR was registered against appellants - Held that:- Present case, as we find, exemplifies in enormous magnitude to take recourse to Section 156(3) Cr.P.C., as if, it is a routine procedure. That apart, the proceedings initiated and the action taken by the authorities under the SARFAESI Act are assailable under the said Act before the higher forum and if, a borrower is allowed to take recourse to criminal law in the manner it has been taken it, needs no special emphasis to state, has the inherent potentiality to affect the marrows of economic health of the nation. It is clearly noticeable that the statutory remedies have cleverly been bypassed and prosecution route has been undertaken for instilling fear amongst the individual authorities compelling them to concede to the request for one time settlement which the financial institution possibly might not have acceded. That apart, despite agreeing for withdrawal of the complaint, no steps were taken in that regard at least to show the bonafide. On the contrary, there is a contest with a perverse sadistic attitude. Whether the complainant could have withdrawn the prosecution or not, is another matter. Fact remains, no efforts were made. Magistrate, as we find, while exercising the power under Section 156(3) Cr.P.C. has narrated the allegations and, thereafter, without any application of mind, has passed an order to register an FIR for the offences mentioned in the application. The duty cast on the learned Magistrate, while exercising power under Section 156(3) Cr.P.C., cannot be marginalized. - Magistrate has to remain vigilant with regard to the allegations made and the nature of allegations and not to issue directions without proper application of mind. He has also to bear in mind that sending the matter would be conducive to justice and then he may pass the requisite order. The present is a case where the accused persons are serving in high positions in the bank. We are absolutely conscious that the position does not matter, for nobody is above law. But, the learned Magistrate should take note of the allegations in entirety, the date of incident and whether any cognizable case is remotely made out. It is also to be noted that when a borrower of the financial institution covered under the SARFAESI Act, invokes the jurisdiction under Section 156(3) Cr.P.C. and also there is a separate procedure under the Recovery of Debts due to Banks and Financial Institutions Act, 1993, an attitude of more care, caution and circumspection has to be adhered to. At this stage it is seemly to state that power under Section 156(3) warrants application of judicial mind. A court of law is involved. It is not the police taking steps at the stage of Section 154 of the code. A litigant at his own whim cannot invoke the authority of the Magistrate. A principled and really grieved citizen with clean hands must have free access to invoke the said power. It protects the citizens but when pervert litigations takes this route to harass their fellows citizens, efforts are to be made to scuttle and curb the same. Stage has come in this country where Section 156(3) Cr.P.C. applications are to be supported by an affidavit duly sworn by the applicant who seeks the invocation of the jurisdiction of the Magistrate. That apart, in an appropriate case, the learned Magistrate would be well advised to verify the truth and also can verify the veracity of the allegations. This affidavit can make the applicant more responsible. We are compelled to say so as such kind of applications are being filed in a routine manner without taking any responsibility whatsoever only to harass certain persons. That apart, it becomes more disturbing and alarming when one tries to pick up people who are passing orders under a statutory provision which can be challenged under the framework of said Act or under Article 226 of the Constitution of India. But it cannot be done to take undue advantage in a criminal court as if somebody is determined to settle the scores. We have already indicated that there has to be prior applications under Section 154(1) and 154(3) while filing a petition under Section 156(3). Both the aspects should be clearly spelt out in the application and necessary documents to that effect shall be filed. The warrant for giving a direction that an the application under Section 156(3) be supported by an affidavit so that the person making the application should be conscious and also endeavour to see that no false affidavit is made. It is because once an affidavit is found to be false, he will be liable for prosecution in accordance with law. This will deter him to casually invoke the authority of the Magistrate under Section 156(3). Magistrate should have kept himself alive to the aforesaid provision before venturing into directing registration of the FIR under Section 156(3) Cr.P.C. It is because the Parliament in its wisdom has made such a provision to protect the secured creditors or any of its officers, and needles to emphasize, the legislative mandate, has to be kept in mind. - Decided in favour of appellant.
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