Case BriefsTribunals/Commissions/Regulatory Bodies

Income Tax Appellate Tribunal, Delhi (ITAT): Addressing the issue, of whether mere rejection of the claim by an Assessing Officer would ipso facto make assessee liable for the penalty, the Bench of G.S. Pannu (President) and Kul Bharat (Judicial Member) held that it won’t make the assessee liable to a penalty.

Factual Matrix


An assessee had filed its return of income and the assessment under Section 143(3) of the Income Tax Act, 1961 was framed. Thereby, the income was assessed at Rs 2,13,61,910 after making additions in respect of the wrong claim of deduction under Section 24(a) of the Income Tax Act; disallowance of excess depreciation on vehicles and disallowance of interest under Section 36(1)(iii) of the Act.

A further appeal was carried out wherein the disallowance of interest under Section 36(1)(iii) of the Act was deleted.

Subsequently, the Assessing Officer issued a notice under Section 271(1)(c) of the Act to show cause why the penalty should not be levied, for which the assessee stated that deduction under Section 24(a) of the Act was claimed by the assessee through a bonafide and inadvertent error.

AO did not accept the contention of assesse that he had disclosed and furnished correct particulars of his income, hence penalty was levied.

Aggrieved with the above, the assessee preferred an appeal before the CIT (A) who sustained the penalty, therefore the assessee has appealed before this Tribunal.

Analysis and Decision


“There is no straight jacket formula to say that particular act was a bonafide error or another a deliberate act.” 

The Bench noted that the assessee in the present matter had successfully demonstrated that the claim of deduction under Section 24(a) of the Income Tax Act, was made as the rent was offered for tax under the income from house property.

Hence, in view of the Supreme Court decision in Price Waterhouse Coopers (P) Ltd. v. CIT, (2012) 11 SCC 316 the penalty imposed by the AO on the stated issue could not be sustained, therefore, AO was directed to delete the penalty.

Tribunal found merit in the contention of the assessee that,

“…merely because of a claim is rejected by the Assessing Officer, would not ipso facto make the assessee liable for penalty.”

In the Supreme Court’s decision of CIT v. Reliance Petroproducts (P) Ltd., [2010] 322 ITR 588, the levy of penalty was not justified.

Therefore, the Tribunal directed the Assessing Officer to delete the penalty.

Further, it was added that since the notice did not specify the specific charge, hence in light of the Supreme Court decision in PCIT v. Sahara India Life Insurance Company Ltd., ITA No.475/2019, the initiation of penalty proceedings was not in accordance with law.

In view of the above, the appeal of the assessee was allowed. [Agarwal Packers & Movers Ltd., ITA No. 6565/Del/2018, decided on 29-4-2022]


Advocates before the Tribunal:

For the appellant: Ruchesh Sinha, Advocate

For the respondent: Kirti Sankratyayan, Sr. Dr

Case BriefsTribunals/Commissions/Regulatory Bodies

Competition Commission of India (CCI): Noting that in respect of cases concerning cartels that are hidden or secret, there is little or no documentary evidence and may be quite fragmentary, Coram of Ashok Kumar Gupta (Chairperson) and Sangeeta Verma and Bhagwant Singh Bishnoi (Members)  imposed penalties on 7 entities and signages for bid-rigging activities and cartelization with respect to the supply of signage for branches, offices and ATMs of State Bank of India.

Factual Matrix

Present matter was taken up by the Commission suo motu pursuant to a complaint received alleging bid-rigging and cartelization in the tender floated by SBI Infra Management Solution (P) Ltd. for the supply and installation of new signages/replacement of existing signages for branches/offices/ATMs of SBI located at specified metro centres of various circles of SBI across India.

With the object of distorting the fair bidding process, certain bidders were coordinating and fixing the prices of their services as well as allocating the market amongst themselves.

As per Commission’s prima facie view, case of contravention of the provisions of Section 3(1) read with Section 3(3) of the Act was made out with respect to the Impugned Tender. Hence, DG was directed to investigate.

DG had concluded that the OP indulged in anti-competitive agreement/conduct and concerted practices to rig the Impugned Tender, as well as geographically allocated amongst themselves the circles for which the tender was issued, thereby contravening the provisions of Sections 3(3)(c) and 3(3)(d) read with Section 3(1) of the Act. The DG also identified certain individuals of the OPs to be liable in terms of Section 48 of the Act.

Conclusion

An ‘agreement’ as given in Section 2(b) of the Act, requires, inter alia, any arrangement or understanding or action in concert, whether or not formal or in writing or intended to be enforceable by legal proceedings.

Definition under Section 2(b) of the Act covers even those situations where the parties act on the basis of a nod or a wink. 

Further, it was observed that there is rarely direct evidence of action in concert, Commission must determine whether those involved in such dealings had some form of understanding and were acting in co-operation with each other.

“Since the prohibition on participating in anti-competitive agreements and bid rigging and the penalties which the infringers may incur are well-known, it is normal for such practices and agreements to take place in a clandestine fashion, for meetings to be held in secret and for associated documentation to be reduced to a minimum.”

 Commission held that OP-1 to OP-7 had entered into an agreement resulting in geographical market allocation as well as bid-rigging in the Impugned Tender.

“…cartelisation, including bid-rigging, is a pernicious form of competition law contravention.”

Additionally, Coram also added that, any collusive or concerted conduct amongst competitors by way of exchange of commercial information resulting in inter alia determining price or geographical allocation of provision of services etc., itself stands captured within the prohibition imposed and is presumed to have AAEC, by virtue of provisions of Section 3(1) of the Act read with Section 3(3).

Liability under Section 48

Commission held that it is no longer res integra that the Commission can simultaneously proceed against individuals of a company under Section 48 of the Act along with the company and the same has been settled by various decisions of the Courts.

Section 48(1) of the Act is a deeming provision, which implies that when contravention of any provision of the Act (say Section 3) is committed by a company, then, an individual(s) who was in-charge of and responsible to the company for the conduct of its business at the time of contravention, shall be deemed to be guilty of such contravention.

Section 48(2) of the Act, all individuals that play an active role in the illegal conduct of a company, are made liable in addition to the company.

Commission decided to impose penalty @1% of the average of individual’s incomes, for the three financial years. Though Commission decided to grant to OP-4 and its individuals, the benefit of reduction in penalty by 90% (per cent) in terms of Regulation 4(a) of the Lesser Penalty Regulations.

Lastly, the Coram directed entities/persons to deposit their respective penalty amounts within 60 days of the receipt of the present order.[Alleged anti-competitive conduct by various bidders in supply and installation of signages at specified locations of State Bank of India across India, In Re., 2022 SCC OnLine CCI 16, decided on 3-2-2022]


Advocates before the Commission:

For Diamond Display Solutions Pvt. Ltd. and its individuals:

Mr. Rajshekhar Rao, Senior Advocate with Ms. Ameyavikrama Thanvi and Mr. Siddharth H. Raval, Advocates and Mr. R.G. Venkatesh (in-person)

For AGX Retail Solutions Pvt. Ltd and its individuals:

Ms. Shivanghi Sukumar, Advocate, Mr. Arjun Reddy and Mr. Ritanshu Mohan (both in-person)

For Opal Signs Pvt. Ltd. and its individuals:

Mr. Anandh Venkatramani, Advocate and Mr. Ramesh Bharadwaj (in-person)

For Avery Dennison India Pvt. Ltd. and its individuals:

Mr. Rudresh Singh, Advocate

For Amreesh Neon Pvt. Ltd. and its individuals:

Mr. Anjaneya Mishra, Advocate

For Macromedia Digital Imaging Pvt. Ltd. and its individuals:

Mr. Rajshekhar Rao, Senior Advocate with : Mr. Nithin Chowdary Pavuluri, Advocate and Mr. Naresh Kumar Dasari (in-person)

For Hith Impex Pvt. Ltd. and its individuals:

Ms. Rohini M. Amin, Advocate

Case BriefsHigh Courts

Calcutta High Court: Md. Nizamuddin, J. decided on a petition which was filed challenging the impugned order of the appellate commissioner confirming the original order passed by the adjudicating authority under section 129 of the West Bengal Goods and Services Act, 2017 for detention of the goods in question on the grounds that the e-way bill relating to the consignment in question had expired one day before, i.e. in the midnight of September 8, 2019, and that the goods was detained in the morning of September 9, 2019 on the grounds that the e-way bill has expired which is even less than one day and extension could not be made and petitioner submits that delay of few hours even less than a day of expiry of the validity of the tenure of the e-way bill was not deliberate and willful and was due to break down of the vehicle in question and there was no intention of any evasion of tax on the part of the petitioner.

Counsel for the petitioner relied on an unreported judgment of the Supreme Court in Assistant Commissioner (ST) v. M/s Satyam Shivam Papers Pvt. Ltd., Special Leave Appeal (C) No(s). 21132/2021, dated 12-01-2022.Advocate appearing for the respondent could not make out a case against the petitioner that the aforesaid violation was willful and deliberate or with a specific material that the intention of the petitioner was for evading tax.

The Court set aside the impugned order and held that the petitioner will be entitled to get the refund of the penalty and tax paid on protest subject to compliance with all legal formalities.[Ashok Kumar Sureka v. Assistant Commissioner, WPA No.11085 of 2021, decided on 01-03-2022]


For the petitioner:        Mr Ankit Kanodia

                                    Mr Himangshu Kumar Ray

For the respondent:     Mr A. Ray

                                    Md. T.M. Siddiqui

                                    Mr Debasish Ghosh


Suchita Shukla, Editorial Assistant has reported this brief.

Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Appellate Tribunal, New Delhi (NCLAT): The Coram of Justice Ashok Bhushan (Chairperson) and Dr Alok Srivastava (Technical Member) held that if the Intervention Application was filed under the IBC, then, any penalty to be imposed should have been under the provisions of IBC and not Companies Act.

Appellant filed the present appeal under Section 61 of the Insolvency and Bankruptcy Code 2016, assailing the order passed by the Adjudicating Authority.

Factual Matrix

An application under Section 9 of the IBC was admitted vide the order of the Adjudicating Authority and CIRP was initiated against the Corporate Debtor along with the appointment of Interim Resolution Professional.

During the pendency of the Corporate Insolvency Resolution Process, the IRP moved two applications under Section 19(2) and Section 60(5) of the IBC alleging that the appellant had withdrawn a sum of Rs 32 lakhs during the moratorium period during the CIRP though the appellants claimed that they had given a post-dated cheque to Kewal Kishan as repayment of the loan and the said cheque was not given by them during the ongoing CIRP.

Adjudicating Authority had imposed a penalty of Rs 5 lakhs on each of the two ex-directors to be deposited in the account of the Government of India, Ministry of Corporate Affairs.

Since the ex-directors of the corporate debtor did not provide the records and other financial information to the Resolution Professional under Section 19(2), the Adjudicating Authority invoked Section 128(6) of the Companies Act and levied a penalty of Rs 5 lakhs each on the appellants 1 and 2, therefore the present appeal was filed seeking to set aside the impugned order.

Analysis and Decision

Tribunal on noting that the appellants not only did not provide the records and financial documents relating to the corporate debtor to the erstwhile resolution professional and the liquidator despite multiple requests, they also did not comply with the Adjudicating Authority’s orders.

Hence such acts of carelessness in complying with the requirements of law, amounting to defiance and disrespect of the legal process, could not eb condoned and needed to be dealt with strictly in accordance with the provisions of Chapter VII: “OFFENCES AND PENALTIES” of the IBC.

“…we are of the view that since the IA No. 1253/2020 was filed under the provisions of IBC, it would have served the requirement of law if any order regarding the penalty was imposed under the provisions of IBC. Moreover, it would have served the cause of natural justice if the Appellants were given an opportunity to be heard before imposition of any penalty. Chapter VII of the IBC which lays down “Offences and Penalties” under which officers of the Corporate Debtor can be penalized and/or punished with imprisonment is relevant in this regard.”

Therefore, Tribunal directed that the case be remanded to the Adjudicating Authority for taking a decision under the provisions of IBC after giving an opportunity to the appellants to present their case.

In view of the above discussion, the impugned order was set aside. [Ashish Chaturvedi v. Sanjay Kapoor, Company Appeal (AT) (Insolvency) No. 1103 of 2020, decided on 14-2-2022]


Advocates before the Tribunal:

For Appellants:

Mr. Manoj Kumar Garg, Advocate.

For Respondents:

Mr. K.D. Sharma and Mr. Anuj Kumar Pandey, Advocates for R-3.

Case BriefsTribunals/Commissions/Regulatory Bodies

Customs, Excise and Services Tax Appellate Tribunal (CESTAT): The Coram of Sulekha Beevi, C.S. (Judicial Member) and P. Anjani Kumar (Technical Member) decided on an appeal which was filed in the matter of non-compliance with the pre-deposit.

It was alleged that M/s. Sri Vasavi Gold and Bullion Pvt. Ltd. (the main appellant) in the course of its business had imported articles of jewellery from Thailand as per Notification No. 85/2004-Cus dated 31.8.2004. During the investigation, the DRI unearthed incriminating documents relating to the import by which it appeared that the M/s. Sri Vasavi Gold and Bullion Pvt. Ltd. had been wrongly availing the benefit of exemption under the said Customs Notification No. 85/2004 dated 31.8.2004 r/w Notification No. 101/2004-Cus. (NT) dated 31.8.2004.

The notice proposed to deny the exemption benefit in respect of 48 bills of entry and also raised differential duty of Rs.19,03,19,798/- along with interest. The appellant herein was also issued a Show Cause Notice as to why penalty should not be imposed upon him under Sections 112(a) and 114AA of the Customs Act, 1962.

The Tribunal perused Section 129E of the Customs Act, 1962 and analyzed that unless the appellant has deposited 7.5% of the penalty when the penalty is in dispute, the appeal cannot be entertained by the Tribunal. The Tribunal has no power to waive the mandatory requirement of predeposit. On perusal of the impugned order, separate penalty has been imposed upon the business entity and the appellant herein.

Tribunal further clarified that there was no document produced by the business entity that the pre-deposit made by them can be stretched and applied for compliance of mandatory pre-deposit of the appeal filed by the appellant therein and in these circumstances, the request made by the counsel for appellant to waive the mandatory pre-deposit was not considered.[P. Seetharam v. Commr. Of Customs, 2022 SCC OnLine CESTAT 30, decided on 04-02-2022]


Suchita Shukla, Editorial Assistant has reported this brief.

Case BriefsTribunals/Commissions/Regulatory Bodies

Competition Commission of India (CCI): Coram of Ashok Kumar Gupta (Chairperson) and Sangeeta Verma and Bhagwant Singh Bishnoi (Members) in view of a deliberate design on the part of Amazon to suppress the actual scope and purpose of the Combination, levied the maximum penalty of INR One Crore each under the provisions of Sections 44 and 45 of the Competition Act. Due to failure to notify combination under Section 6(2) of the Act, Section 43A of the Act, a penalty was imposed.

Purpose of this Order

The present order shall govern the disposal of the proceedings initiated against the Amazon.com NV Investment Holdings LLC (Amazon) under Sections 43A, 44 and 45 of the Competition Act, 2002 in relation to its acquisition of 49% shareholding in Future Coupons Private Limited (FCPL) in pursuance of the show cause notice based on application dated 25-3-2021 of FCPL.

CCI had approved the Combination under Section 31(1) of the Act upon competition assessment of the overlapping business activities of Amazon, FCPL and their group entities and after arriving at the opinion that the Combination is not likely to cause any appreciable adverse effect on competition in India.

 Initiation of proceedings under Sections 43A, 44 and 45 of the Act

 FCPL filed an application stating that Amazon had initiated arbitration proceedings in relation to transfer of assets of FRL, a company in which FCPL holds 9.82% of the shareholding and there are related litigations pending before the constitutional courts.

It was alleged that Amazon took completely contradictory stands in the arbitration proceedings and constitutional courts with respect to its investments in FCPL as compared to the representation and submissions made before the Commission. Such contradictions were said to establish false representation and suppression of material facts before the Commission.

Commission was of prima facie view that

(a) Amazon failed to identify and notify FRL SHA as a part of the Combination, in terms of Regulation 9(4) and Regulation 9(5) of the Combination Regulations;

(b) Amazon had concealed its strategic interest over FRL; and

(c) Amazon had made false and incorrect representations and concealed/suppressed material facts in contravention of the provisions of the Act.

In view of the above, Commission issued SCN under Sections 43A, 44 and 45 of the Act to Amazon, on 4th June, 2021.

Commission received a letter on 20-10-2021 from Amazon inter alia intimating that it has shared with Future Group, the Response to SCN and related correspondence with the Commission.

Later, Commission decided to hear both FCPL and Amazon on 4-1-2022.

Question for Consideration:

Whether alleged conduct (s) of Amazon is in contravention of the provisions of Sections 43A, 44 and 45 of the Act?

Whether Amazon has made misrepresentation, false statement or suppression/concealment of material facts in relation to the scope and purpose of the Combination and failed to identify and notify FRL SHA as an inter-connected part of the Combination, in terms of Regulations 9(4) and 9(5) of the Combination Regulations?

Analysis and Discussion

Commission noted the contract summary and internal e-mail dated 19th July, 2019 of Amazon Group with the subject ‘Request for APPROVAL for Project Taj [Future]…’, which elaborated the business summary and summary of key terms of the Combination (Approval Request). This e-mail was sent by Mr Rakesh Bakshi to Mr Jeff Bezos, seeking approval to sign definitive documents in relation to the Combination.

As per the internal communications and negotiations between the parties relating to the Combination, wherein Amazon initially planned to partner with Future Group, being a key player in the offline retail market, by acquiring 9.99% shareholding in FRL as well as entering into a business commercial framework to build and accelerate ultra-fast delivery services across the top-20 cities in India, leveraging the national footprints of Future Group.

The Approval Request dated 18th July, 2019 suggests that, in view of certain developments relating to foreign investments in India, instead of directly acquiring 9.9% shareholding in FRL, Amazon would use a twin-entity investment structure to invest in FRL i.e., Amazon would acquire 49% shareholding in FCPL which, in turn would hold 8 – 10% of the shareholding in FRL.

Coming to the Notice, it required the notifying party to disclose ‘Economic and Strategic purpose (including business objective and rationale for each of the parties to the combination and the manner in which they are intended to be achieved) of the Combination’.

Further, the Internal Correspondence of Amazon made it abundantly clear that Amazon was all along focussed/interested in FRL. The Internal Correspondence of Amazon did not speak about the business potential of FCPL, as had been claimed and projected in the Notice and in the responses to the letters of the Commission. Similarly, the Notice presented the rationale of indirect rights over FRL, as protection to investment in FCPL.

The expressions used by Amazon to describe the rationale behind the indirect rights over FRL varied from time to time: ‘strategic rights’ in its Internal Correspondence; ‘protection to investment in FCPL’ in the Notice given to Commission; and ‘rights derived from FRL SHA are to protect the interest of the investor [Amazon]’ in the response to SCN.

Commission observed that, in every case of investment, the acquirer would want to protect the value of its investment and the returns.

The purpose of securing strategic interest over FRL and commercial partnership with FRL is much different from FRL, a company with strong financials and futuristic outlook, being merely taken as an element of financial strength and protection to the investment in FCPL.

How has the Suppression of fact continued?

The Internal Correspondence of Amazon clearly showed different purposes for envisaging the Combination (i.e., ‘foot-in-door’ in the Indian retail sector, secure rights over FRL that are considered as strategic by Amazon and Commercial Arrangements between the retail business of Future Group and Amazon).

Amazon in its responses to the letters of the Commission, continued to suppress the actual purpose of the Combination. It was obvious that the purpose of Amazon to pursue the Combination was not the potential of the gist and loyalty card business of FCPL, as had been claimed in the Notice. Rather, FCPL was envisaged only as a vehicle in the Combination to which no value or purpose is ascribed in the Internal Correspondence.

In Commission’s opinion the present matter was a clear, conscious and wilful case of omission to state the actual purpose of the Combination despite the disclosure requirement under Item 5.3 of Form I read with Regulation 5 of the Combination Regulations and Section 6(2) of the Act.

Amazon failed to provide any material or plausible explanation in its response to the SCN and in the subsequent submissions to demonstrate that its disclosures against Item 5.3 are correct and that business potential of FCPL was consideration for Amazon to pursue the Combination.

Adding to the above, Coram also stated that Amazon, in addition to the omission to state the purpose of the Combination, has misrepresented the Commission by stating that the purpose of the Combination is an opportunity arising from the business potential of FCPL and to add credibility to FCPL’s financial position, FCPL invested and proposed to further invest in FRL, a company with strong financials and futuristic outlook.

Amazon had misled the Commission to believe, through false statements and material omissions, that the Combination and its purpose were the interest of Amazon in the business of FCPL.

Further, the Coram added in respect to disclosure against Item 8.8 of Form I that,  True and complete disclosure against Item 8.8 enables the Commission to determine the appropriate framework for competition assessment of the Combination.

In response to Item 8.8, Amazon had furnished a presentation titled ‘Taj Coupons – Business Plan for 5 years’. The eight- page presentation provides only a brief idea of the gift voucher business of FCPL, its business operating model, estimated five-year business size, organisation design, sales team and financial summary, without any reference to FRL.

Commission in view of the above stated that Amazon knowingly suppressed relevant and material documents to be furnished under Item 8.8. of Form I.

Hence, Commission held that the conduct of Amazon amounted to suppression and misrepresentation of the purpose of the Combination and the said was in contravention of the provisions contained n clauses (a) and (b) of Section 44 and clause (a) and sub-section (1) of Section 45 of the Act.

The conduct of Amazon in supressing relevant and material documents against the disclosure requirement under Item 8.8 of Form I is a contravention of clause (c) of sub-section (1) of Section 45 of the Act. Similarly, the rights over FRL that were considered as strategic in the Internal Correspondence of Amazon, were represented as mere investor protection rights. Such repeated assertions, contrary to their actual purport, amount to statements that are false in material particular, in contravention of the provisions contained in clauses (a) and (b) of Section 44 and clause (a) of sub-section (1) of Section 45 of the Act.

Whether FRL SHA was identified and notified as an inter-connected part of the Combination?

In the present matter, Combination was a composite of acquisition of shares, rights and commercial contracts. These together were for the purpose of strategic alignment amongst the business of the parties, in particular to expand the ultra-fast delivery service of Amazon.

The fact that FRL SHA was part of the Combination and was executed at the behest of Amazon, was overwhelmingly evident from the email dated 4-1-2019 of Amazon to Future Group. Commission observes that mere consideration of the values of the asset and turnover of FRL cannot be considered as notification of FRL SHA and BCAs, as parts of the Combination.

Coram stated that details of FRL SHA were not mentioned in Item 5.2. As has emerged now, FRL SHA and the commercial agreements were inter-connected parts of the Combination and accordingly, their details ought to have been disclosed against Item 5.1.2.

The Notice, nowhere disclosed the fact that FRL SHA was negotiated as part of the Combination and was executed for the purpose of Amazon acquiring rights over FRL, through FCPL SHA, and that Amazon had insisted for FRL SHA to be entered into as a prerequisite to Transaction III. In the absence this material fact being disclosed, footnote 3, read with the disclosures and statements in the Notice and subsequent submissions of Amazon, including those against Items 5.1.2 and 5.2 of Form I, statements made in paragraphs 34 of the Notice and paragraph 44 of the submission dated 15th November, 2019 (in response to the letter dated 9th October, 2019 of the Commission), the impugned statement was self-evidently misleading to the effect that FRL SHA was not a part of the Combination and is only pursuant to the Warrants Transaction.

CCI held that, the categorical statements that FRL SHA and BCAs were independent of the Combination sufficiently establish that the same were not notified to the Commission as a part of the Combination, which is a contravention of the obligation contained in Section 6(2) of the Act, which attracts penalty under Section 43A of the Act.

Coram noted that Section 6(2) of the Act requires any person proposing Combination ‘to give notice to the Commission in the form as may be specified…disclosing the details of the proposed combination’.

If a party conceals/suppresses and/or misrepresents to the Commission the scope and purpose of the Combination and obtains approval, the same would effectively amount to approval/consent having been obtained by way of fraud.

Therefore,

Amazon ought to have notified the combination, inter alia, consisting of the following inter-connected steps: (a) Transaction I; (b) Transaction II; (c) Transaction III; (d) FRL SHA for the purpose of acquisition of strategic rights over FRL through FCPL SHA; and (e) commercial agreements between Amazon and Future groups, for the purpose of establishing strategic alignment and partnership between Amazon Group and FRL as well as have a ‘foot-in-the-door’ in the India retail sector.

The Commission directed Amazon to give notice in Form II within a period of 60 days from the receipt of this order and till disposal of such notice, the approval granted vide Order dated 28-11-2019, in Combination, shall remain in abeyance.

Penalty

The Commission considers it appropriate to levy the maximum penalty of INR One Crore each under the provisions of Section 44 and Section 45 of Act. Accordingly, Amazon is directed to pay a penalty of INR Two Crore.

Due to failure to notify combination in terms of the obligation cast under Section 6(2) of the Act, Section 43A of the Act enables the Commission to impose a penalty, which may extend to one percent of the total turnover or the assets, whichever is higher, of such a combination. Accordingly, for the above-mentioned reasons, the Commission hereby imposes a penalty of INR Two Hundred Crore upon Amazon.[ Proceedings against Amazon.com NV Investment Holdings LLC under Sections 43A, 44 and 45 of the Competition Act, 2002, In Re., 2021 SCC OnLine CCI 71, decided on 17-12-2021]


Advocates before the Commission:

For Amazon: Mr. Gopal Subramanium and Mr. Amit Sibal, Senior Advocates with Mr. Anand S. Pathak, Ms. Sreemoyee Deb, Ms. Anubhuti Mishra and Mr. Rajat Moudgil, Advocates alongwith Mr. Rakesh Bakshi, Mr. Ankur Sharma, Ms. Ujwala Uppaluri and Ms. Hina Doon, representatives of Amazon

For FCPL: Mr. Harish Salve and Mr. Ramji Srinivasan, Senior Advocates with Mr. Raghav Shankar and Mr. Pranjit Bhattacharya, Advocates alongwith Mr. Sanjay Rathi, representative of FCPL

For CAIT: Mr. Krishnan Venugopal and Mr. Saurabh Kirpal, Senior Advocates with Mr. Rajat Sehgal and Mr. Debayan Gangopadhyay, Advocates

Case BriefsTribunals/Commissions/Regulatory Bodies

Customs, Excise and Services Tax Appellate Tribunal (CESTAT): The Coram of Dilip Gupta (President) and P.V. Subba Rao (Technical Member) partly allowed an appeal which was filed assailing order-in-original passed by the Commissioner of Central Excise, Customs & Service Tax, Cochin.

The appellant manufactured electric cables/ACSR conductors and supplies to M/s Kerala State Electricity Board (KSEB) as per the contract which included a price variation clause. They paid duties at the time of the removal of goods subsequently prices were enhanced retrospectively in view of the increased in the cost of raw material. The differential duty in respect of such goods which were already cleared was paid by issuing supplementary invoices using Cenvat credit.

A show cause notice was issued to the appellant alleging that the supplementary invoices were raised and, therefore, they are relatable to the clearances already made during the previous months.

As per the proviso to Rule 3 (4) of Cenvat Credit Rules, 2004 and proviso to Rule 3 (3) of Cenvat Credit Rules, 2002, the appellant could not have used Cenvat credit, which was taken after the last day of month for payment of duty relating to that month. Therefore, the assessee/ appellant was called upon to pay the differential central excise duty on the supplementary invoices in cash and not using Cenvat credit. The Commission had confirmed the demand of Rs. 89,95,674/- plus interest along with penalty.

The appellant had contended that the supplementary invoices were relatable to the month in which the supplementary invoices were raised and not relatable to the month in which the goods were originally cleared because the duty became payable only when the price was enhanced and not before and that they had correctly availed and utilized Cenvat credit available at the time of raising supplementary invoices in its account and since the duty is relatable to the date of supplementary invoices, no interest was payable. Lastly, he concluded that no penalty was imposable under Rule 25 of Central Excise Rules, 2002 and Rule 15 of Cenvat Credit Rules, 2004 as there was no violation of any Act or Rules and they had paid the duty on such supplementary invoices when they raised.

The Tribunal opined that on the first question as to whether the supplementary invoices relate to the date of original clearance or the date on which the supplementary invoice was raised had been decided in Steel Authority of India Ltd. v. CCE, 2019 (366) E.L.T. 769 (S.C.) and thus interest under Section 11AB needs to be paid by the appellant on the differential amount of duty.

On the second question of whether Cenvat credit can be utilized for payment of duty in view of the proviso to Rule 3 (4) of the Cenvat Credit Rules, 2004, the tribunal found that High Court of Gujarat in Advance Surfactants India Ltd. v. Union of India, 2017 (358) E.L.T. 53 (Guj.) had held that this proviso is ultravires therefore the appellant was correct in utilizing the Cenvat credit for payment of the excise duty.

On the third question of imposition of penalty the Tribunal found that from the facts of the case its clear that assessee has not violated any provision of the Act or the Rules to attract penalty under Rule 25 of the Central Excise Rules, 2002.

The Tribunal partly allowed the appeal and modified the order accordingly.[Traco Cable Co. Ltd. v. Commr. Of CE & Customs, 2021 SCC OnLine CESTAT 2595, decided on 01-11-2021]


Suchita Shukla, Editorial Assistant has reported this brief.

Hot Off The PressNews

Competition Commission of India (CCI): In its recent press release, Competition Commission of India, while giving benefit of reduction in penalty under the provisions of Section 46 of the Competition Act, 2002  of 100%, 40% and 20%   to AB InBev, United Breweries Ltd. (UBL) and  Carlsberg India Private Limited (CIPL), and all their individuals respectively besides passing a cease-and-desist order. a final order against three beer companies namely United Breweries Limited (‘UBL’), SABMiller India Limited (now renamed as Anheuser Busch InBev India Ltd. after being acquired by Anheuser Busch InBev SA/NV) (‘AB InBev’) and (‘CIPL’) for indulging in cartelisation in the sale and supply of beer in various States and Union Territories in India, including through the platform of All India Brewers’ Association (‘AIBA’). The period of cartel was held to be from 2009 to at least 10.10.2018 (the date on which the Director General (‘DG’) conducted search and seizure operations at the premises of the beer companies), with CIPL joining in from 2012 and AIBA serving as a platform for facilitating such cartelisation since 2013. All three beer companies were lesser penalty applicants before CCI.

Engaged in price co-ordination in contravention of the provisions of Section 3(3)(a) of the Competition Act, 2002 (the ‘Act’) in the States of Andhra Pradesh, Karnataka, Maharashtra, Odisha, Rajasthan, West Bengal, National Capital Territory of Delhi and the Union Territory of Puducherry, in collectively restricting supply of beer in the States of Maharashtra, Odisha and West Bengal in contravention of the provisions of Section 3(3)(b) of the Act, and in sharing of market in the State of Maharashtra as well as co-ordination with respect to supply of beer to premium institutions in the city of Bengaluru in contravention of the provisions of Section 3(3)(c) of the Act. CCI also found co-ordination amongst UBL and AB InBev with respect to purchase of second-hand bottles.


PR40-2021-22


Agatha Shukla, Editorial Assistant has reported this news.

Case BriefsTribunals/Commissions/Regulatory Bodies

Competition Commission of India (CCI): Noting that Maruti Suzuki India Limited used to impose penalties on its dealers for the reason of the violation of its ‘Discount Control Policy’, Coram of Ashok Kumar Gupta (Chairperson) and Sangeeta Verma and Bhagwant Singh Bishnoi (Members) held that,

Maruti Suzuki India Limited was not a third-party in the enforcement of the Discount Control Mechanism.

When a significant player such as MSIL imposes minimum selling price restrictions in the form of maximum discount that can be offered by the dealers, RPM can decrease the pricing pressure on competing manufacturers.

Factual Matrix

Instant matter was taken up suo motu by the Commission based on an anonymous e-mail received from a purported Maruti Suzuki India Limited (MSIL) dealer, wherein it was alleged that MSIL’s sales policy was against the interest of customers as well as the provisions of the Competition Act, 2002.

Discount Control Policy

Further, it was alleged that, in the West-2 Region, (Maharashtra State other than Mumbai & Goa) the dealers of MSIL were not permitted to give discounts to their customers beyond that prescribed by MSIL is the announced ‘consumer offer’. In case, a dealer was found giving extra discounts, a penalty was levied upon the dealer by the MSIL.

Penalty amount imposed was required to be paid via cheque in the name of Swati Kale, wife of Vinod Kale who was the Vice-President of Wonder Cars Pvt. Ltd., an MSIL dealership in Pune, Maharashtra. Prior to charging the penalty, MSIL management would send an email with a ‘Mystery Shopping Audit Report’ to the errant dealership asking for clarification.

The above-said similar Discount Control Policy was implemented by MSIL all across India – specifically in cities where more than 4 to 5 dealerships operated.

Commission vide an order dated 4-7-2019 passed under Section 26(1) of the Act, formed an opinion that there exists a prima facie case of contravention of the provisions of Section 3(4)(e) of the Act, i.e. Resale Price Maintenance, by MSIL.

In view of the above background, Commission had directed the Director General to cause an investigation into the matter and submit a report.

The Commission directed MSIL to furnish its audited balance sheets and profit and loss accounts/turnover details for FYs 2017–18, 2018–19 and 2019–20 along with details of the revenue and profits generated by it from the sale of ‘passenger vehicles in India’ during these FYs by way of Affidavits supported by certificates from Chartered Accountants.

Analysis Law and Decision

Commission noted that MSIL was the manufacturer dealing in the upstream market while its dealers were distributors dealing in the downstream market.

Manufacturer and dealers entered into an agreement which could be examined within the scope of Section 3(4) of the Act, being an agreement amongst enterprises engaged at different stages or levels of the production chain in different markets.

Whether there was an agreement between MSIL and its dealers in terms of Section 3(4) on restricting discounts that may be offered by dealers?

‘Agreement’ for the purposes of Competition Law, is not the same as ‘agreement’ for the purposes of Contract Law.

The definition of ‘agreement’ under Section 2(b) of the Act is very wide and covers all possible agreements/ arrangements/understanding, not only in written form but also in tacit and informal form.

Since MSIL argued that only agreement between them with the dealers was the Dealership Agreement and the same contained no clause restricting discounts but rather allowed dealers to offer any discounts as they deem fit.

Coram opined that such agreement/arrangement/understanding with regard to discount control policy between MSIL and its dealers may exist dehors the Dealership Agreement entered into on writing between them.

Did MSIL have a Discount Control Policy? DG’s investigation

DG in its investigation while looking through the email dump found multiple email exchanged between MSIL and its dealers which showed that MSIL did, in fact, have an agreement with its dealers to not let them offer discounts to customers beyond those permitted from time to time by MSIL without MSIL’s prior approval.

“…dealers were discouraged from giving extra discounts, freebies, etc. to consumers beyond what was permitted by MSIL.” 

“If found to be violating the Discount Control Policy, the dealers were threatened with imposition of penalty, not only upon the dealership, but also upon its individual persons, including Direct Sales Executive, Regional Manager, Showroom Manager, Team Leader, etc., and stopping of supplies.”

MSIL’s contention:

Discount Control Policy, even if found to be existing in certain region, was only a form of policing amongst the dealers themselves inter se, and MSIL had no role in formulating such a policy, except to enforce the same on behalf of the dealers as an independent third-party.

Commission’s Opinion:

Commission noted that, meetings on Discount Control Policy were conducted by MSIL and it formulated policies wherein discounts were defined by way of limiting maximum discount allowed in cash or in terms of accessories, etc.

Adding to the above, it was noted that, MSIL dictated that any dealership, after price rise, if found selling/billing on old price, will be considered violating selling norms and it will be treated as a discount offered to customers

MSIL circulated communications of warning and threats of imposing high penalties in case dealers offered extra discounts without prior approval

Hence, Coram opined that MSIL did not seem to be merely a third-party in the Discount Control mechanism as contended.

MSIL nowhere could establish that the discounts were given by the dealers without seeking any prior approval from MSIL.

Significantly, the Commission observed that MSIL was the approving authority of the maximum discounts that may be offered by its dealers to customers, despite its claim that it had a principal-to-principal relationship with the dealers.

MSAs Role with respect to Discounting Policy

To enforce its Discount Control Policy, MSIL used to appoint MSAs who used to pose as customers to MSIL dealerships to find out if any additional discounts were being offered by such dealerships to customers or not. If found offered, the MSA would report to MSIL management with proof (audio/video recording) who, in turn, would send an e-mail to the errant dealership with a ‘Mystery Shopping Audit Report’, confronting them with the additional discount offered and asking for clarification.

If clarification was not to the satisfaction of MSIL, penalty would be imposed on the dealership and its employees, accompanied in some cases, by the threat of stopping supplies. MSIL would even dictate to the dealership where the penalty had to be deposited.

MSIL contended:

Appointment of MSAs was done by the dealers only and MSIL had no role to play in this regard.

Commission’s view:

Commission opined that MSIL had tried to pick-up isolated statements from its emails, which appeared to be self-serving statements, to allege that it was the dealers who has appointed the MSAs.

Adding to its opinion, Coram stated that there was absolutely no indication in the e-mails that the appointment of MSAs was done by the dealers themselves.

DG when questioned Swati Kale, she submitted that her role was to receive cheques as per the instructions of Regional Manager of MSIL and deposit the same in her account and issue cheques as per his instructions when required.

It was further noted that the amount collected in the account of Ms Swati Kale was used by MSIL to pay the bills of advertisements.

Whether any AAEC in the market had been caused or was likely to be caused as aresult of such an agreement between MSIL and its dealers?

In Commission’s opinion, the imposition of maximum discount limits by MSIL upon its dealers amounted to Resale Price Management (RPM) as defined under Explanation (e) to Section 3(4) of the Competition Act.

RPM can prevent effective competition both at the intra- brand level as well as at the inter-brand level.

 Present Scenario

In the present matter, RPM imposed upon the dealers led to the denial of benefits to the consumers in terms of competitive prices being offered by MSIL dealers.

Restriction on intra-band competition

Coram stated that, when all the dealers are controlled by a Discount Control Policy, they are forced to sell the same product at the same price which, to a large extent, eliminates price competition amongst them.

Due to almost nil intra-brand competition amongst MSIL dealers, the consumers would have had to purchase MSIL vehicles at fixed prices without flexible discounts being offered to them by MSIL dealers, thereby leading to charging of higher prices/ denial of discounts in kind, to them.

Hence, had there been no discount control policy enforced by MSIL, customers of MSIL would have been able to buy MSIL vehicles at lower prices.

Anti-competitive impact of the above practice of MSIL was reinforced by the fact that MSIL had more than 50% market share in the passenger vehicles segment, as observed by the DG.

Commission, however, opined that, imposition and enforcement of RPM by a player like MSIL, having a significant market share, not only thwarts intra-brand competition but also leads to the lowering of inter-brand competition in the passenger vehicles market.

Noting the above discussion, Coram expressed that RPM as a practice by multiple manufacturers is conducive for monitoring of tacit collusion among such manufacturers.

Arrangement/ Agreement perpetuated by MSIL hindered in the distribution of goods and the provision of services in relation to new cars, further it resulted in creating barriers to new entrants/dealers in the market as the new dealers would take into consideration restrictions on their ability to compete with respect to prices in the intra-brand competition of MSIL brand of cars.

Another significant observation made by the Commission was that by controlling the dealers’ margin, inter brand competition softens due to ease of monitoring of retail prices by the competitors, providing the manufacturer more liberty to regulate its own margin freely.

All dealers of MSIL are subjected to the SOP/SPG and non-compliance with the same also results in the imposition of penalties. As such, the justification put forth by MSIL, that RPM is required to eliminate the problem of free-riding, is not tenable.

Conclusion

Commission concluded that Maruti Suzuki India Limited not only entered into an agreement with its dealers across India for the imposition of ‘Discount Control Policy’ amounting to RPM, but also monitored the same by appointing MSAs and enforced the same through the imposition of penalties, which resulted in Appreciable Adverse Effect on Competition (AAEC) within India, thereby committing contravention of the provisions of Section 3(4)(e) read with Section 3(1) of the Act.

Competition Commission of India having considered the nature of infringing conduct and the post-pandemic phase of recovery of automobile section, deemed it fit to appropriate to impose a penalty of Rs 200 Crores upon MSIL as against a maximum penalty permissible under the provisions of the Act which may extend upto ten percent of the average of the turnover of the entity for the last three preceding financial years.

Order

Commission directed MSIL in terms of Section 27(a) to cease and desist from indulging in RPM directly and or indirectly.  [Alleged anti-competitive conduct by Maruti Suzuki India Ltd. in implementing discount control policy vis-a vis dealers, In re.;    2021 SCC OnLine CCI 45, decided on 23-08-2021]


Advocates before the Commission:

For Maruti Suzuki India Limited (MSIL): Dr. Abhishek Manu Singhvi and Mr. Rajshekhar Rao, Senior Advocates, with Ms. Shweta Shroff Chopra, Mr. Rohan Arora and Ms. Supritha Prodaturi, Authorized Representatives of MSIL and Ms. Manjaree Chowdhary, Executive Director and General Counsel of MSIL

Case BriefsTribunals/Commissions/Regulatory Bodies

Customs, Excise and Services Tax Appellate Tribunal (CESTAT): Rachna Gupta (Judicial Member) allowed an appeal in relation to evasion of payment of duty.

Appellants were registered under the category of legal consultancy service, work contract service, manpower recruitment/ supply agency service, maintenance or repair service and security/ detective agency service. During the scrutiny of ST-3 Returns of the appellant by AG (Audit), the Department noticed that the appellant had received services of manpower recruitment or supply agency during the period of April, 2015 to March, 2016 and had paid Service Tax under manpower recruitment or supply agency service on 75% of gross service value under reverse charge mechanism as per the provisions of Notification No.30/2012-ST dated 20-06-2012. It was observed that the appellant was otherwise liable to pay Service Tax on 100% of gross service value in terms of the aforesaid Notification being amended vide Notification No. 07/2015-ST dated 01-03-2015 with effect from 01-04-2015.

Short payment of Service Tax of Rs 71,440/- was proposed by the department alongwith the interest and the penalty.

It was submitted on the behalf of the appellant that he was liable to pay Service tax on 75% of gross service value of the services received under reverse charge mechanism. It was submitted that the period in dispute was immediately after the said amended Notification i.e. w.e.f. April 2015 to March, 2016 and the amendment had also to take effect from 01-04-2015. In the given circumstances, intentional evasion may not be alleged against the appellant. The authorities below were alleged to have wrongly held suppression of facts on part of the appellant.

The Tribunal observed that appellant admitted his liability of paying Service Tax for receiving manpower recruitment and supply agency service to the extent of 75% on the gross value of service received under reverse charge mechanism and further opined that non-payment by the appellant for the said period is merely due to his bonafide belief of his liability to the extent of paying the service tax at 75% of the service value. Once there is no apparent malafide on part of the appellant and in view of the aforesaid bonafide belief of the appellant, fastening the allegations as that of concealment fraud and suppression are held to be highly unjustified.

The Tribunal relied on the judgments of the Supreme court in Pushpam Pharmaceuticals Co. v. Collector of Central Excise, 1995 (78) ELT 401 (S.C.) and Continental Foundation Jt. Venture v. CCE, 2007 (216) ELT 177 (SC) explaining the term “suppression of facts”.

When the Revenue invokes the extended period of limitation under Section 11A, the burden is cast upon it to prove the suppression of fact as far as fraud and collusion are concerned, it is evident that intent to evade duty is built into these very words so far as misstatement or suppression or facts are concerned, they are clearly qualified by the word “willful” preceding the words “mis-statement or suppression of facts” which means with intent to evade duty. The next set of words “contravention of any of the provisions of this Act or Rules” are again qualified by the immediately following words” with intent to evade payment of duty”. Therefore, there cannot be suppression or misstatement of fact which is not willful.

The Tribunal allowing the appeal held that alleged non-payment cannot be called as willful or intentional act of the appellant to evade the payment of duty. The findings of Commissioner (Appeals) that there was no documentary evidence to prove the payment of service tax twice in support of appellants contention was therefore held, not at all sustainable.[Mahatma Gandhi University of Medical Sciences and Technology v. CCE & CGST, Service Tax Appeal No. 50962 of 2020 [SM], decided on 08-09-2021]


Suchita Shukla, Editorial Assistant has reported this brief.

Case BriefsSupreme Court

“The nation continues to wait, and is losing patience. Cleansing the polluted stream of politics is obviously not one of the immediate pressing concerns of the legislative branch of government.”

Supreme Court: A Division Bench comprising of R.F. Nariman and B.R. Gavai, JJ. found several political parties guilty of contempt of court for non-compliance of directions given by the Supreme Court in Rambabu Singh Thakur v. Sunil Arora, (2020) 3 SCC 733 in connection with disclosure of information of candidates with criminal antecedents. Penalties have been imposed on the political parties found guilty. The Court also issued further directions in order to make the right of information of a voter more effective and meaningful.

The instant contempt petition arose out of elections held to the Bihar Legislative Assembly in October/November 2020. Brajesh Singh, Advocate registered with the Bar Council of Delhi, filed the contempt petition bringing to the Court’s notice that its directions given vide Rambabu Singh Thakur, (2020) 3 SCC 733 were being flouted.

Earlier Directions

It is seemly to note that the Constitution Bench in Public Interest Foundation v. Union of India, (2019) 3 SCC 224 had issued several directions to the effect that the candidates and political parties were obligated to disclose information pertaining to criminal antecedents of candidates. As a sequel, following directions were issued in Rambabu Singh Thakur, (2020) 3 SCC 733:

(i) It shall be mandatory for political parties (at the Central and State election level) to upload on their website detailed information regarding individuals with pending criminal cases (including the nature of the offences, and relevant particulars such as whether charges have been framed, the Court concerned, the case number, etc.) who have been selected as candidates, along with the reasons for such selection, as also as to why other individuals without criminal antecedents could not be selected as candidates.

(ii) The reasons as to selection shall be with reference to the qualifications, achievements and merit of the candidate concerned, and not mere “winnability” at the polls.

(iii) This information shall also be published in: (a) one local vernacular newspaper and one national newspaper; (b) on the official social media platforms of the political party, including Facebook and Twitter.

(iv) These details shall be published within 48 hours of the selection of the candidate or not less than two weeks before the first date for filing of nominations, whichever is earlier.

(v) The political party concerned shall then submit a report of compliance with these directions with the Election Commission within 72 hours of the selection of the said candidate.

(vi) If a political party fails to submit such compliance report with the Election Commission, the Election Commission shall bring such non-compliance by the political party concerned to the notice of the Supreme Court as being in contempt of the Court’s orders/directions.

Pursuant to the order in Rambabu Singh Thakur, (2020) 3 SCC 733, the Election Commission of India (“ECI”) issued a letter to all National and State level recognised political parties asking them to comply with the directions of the Supreme Court, and also issued a new Form C-7 in which the political parties have to publish the reason for selection of candidates with criminal antecedents in addition to all other relevant information. Also, in Form C-8, the political parties were then to report compliance of the Supreme Court’s order and the directions contained therein within 72 hours of selection of the candidate.

Bihar Legislative Assembly Elections, 2020

Assembly Elections in Bihar were held in October/November 2020. As per the report issued by Association for Democratic Reforms, it was found that 32% contesting candidates had criminal antecedents. Further, 68% of winning candidates had criminal antecedents. Out of these winning candidates who had criminal antecedents, 51% had serious criminal cases against them including cases related to murder, kidnapping, attempt to murder, crime against women including rape, etc.

ECI filed a report in the Supreme Court informing that out of 10 recognised political parties which contested general elections to the Bihar Legislative Assembly in 2020, 8 political parties submitted information about criminal antecedents of the contesting candidates and only 2 political parties, namely Communist Party of India (Marxist ) and Nationalist Congress Party that fielded 4 and 26 candidates respectively with criminal antecedents, did not furnish the requisite information.

Political parties found in contempt of Supreme Court directions

Senior Advocate K.V. Viswanathan, acting as Amicus Curiae, prepared a chart (appended as Annexure I to the judgment) to show how all the political parties have been flouting the Court’s directions, and fielding persons whose criminal antecedents show that they have been charge-sheeted or charged with serious offences, with no real reason as to why such person has been preferred over other more deserving candidates. In addition, he also brought to Court’s notice that in the concluded Bihar Assembly Elections, 2020, the required forms were either not filled by the political parties or were filled without disclosing particulars.

Foremost, the Supreme Court referred to provisions of the Representation of the People Act, 1951 including Section 33-A (Right to information). Then, after recording the evolution of law on the subject through several judicial pronouncements, the Court stated:

“The nation continues to wait, and is losing patience. Cleansing the polluted stream of politics is obviously not one of the immediate pressing concerns of the legislative branch of government.”

The Court considered the facts pointed out by the petitioner in the instant contempt petition and found several political parties to be in contempt of the order in Rambabu Singh Thakur, (2020) 3 SCC 733. The reasons for such finding is indicated below:

Janta Dal (United): Reasons given by the party for the nomination of a candidate from the Belaganj Assembly were inadequate and not in consonance with the Supreme Court directions. Further, the party filled Form C-1 and C-2, which specifies the format for publication of criminal antecedents of candidates in newspapers, in a vague and mechanical manner.

Rashtriya Janta Dal: The party cited ‘winnability’ as the only reason for selection of candidates, which is in the teeth of the Supreme Court directions.

Lok Janshakti Party: The party gave identical reasons for selection of 5 of its candidates and had also filled Form C-2 in a mechanical manner.

Indian National Congress: Criminal antecedents were published in newspapers of low circulation and the forms in which details of criminal antecedents have to be published were filled in a mechanical manner. The party gave reasons along the lines of ‘winnability’ for selection of candidates accused of serious offences. Supreme Court’s were directions not followed in letter and spirit.

Bharatiya Janata Party: The party failed to submit Form C-7 in respect of one of its candidates without acceptable reason and the party did not provide reasons for selection of its candidates which were in line with Supreme Court directions.

Communist Party of India (Marxist): The party was one of the two parties that did not submit Form C-7 or C-8 for any of its candidates and, therefore, was fully non-compliant with Supreme Court directions. An oversight on part of the State Committee of the party cannot be a ground for non-compliance of the directions.

Nationalist Congress Party: The party was one of the two parties that did not submit Form C-7 or C-8 for any of its candidates and, therefore, was fully non-compliant with Supreme Court directions. The dissolution of the State Committee of the party a few months prior to the election in the State of Bihar cannot be a ground for non-compliance of the directions.

Communist Party of India: Criminal antecedents were published in newspapers of low circulation and the forms in which details of criminal antecedents have to be published were filled in a mechanical manner. The party justified selection of some candidates accused of serious offences by stating that the cases “do not have any substance”. The party did not follow Supreme Court directions in letter and spirit.

Rashtriya Lok Samta Party: The party gave same reason for selection of 5 of its candidates in a stereotyped manner.

Penalty

Taking into consideration that these were the first elections which were conducted after issuance of the  directions in Rambabu Singh Thakur, (2020) 3 SCC 733, the Supreme Court was inclined to take a lenient view in the matter. It, however, warned the political parties that they should be cautious in future and ensure that the directions issued by the Supreme Court as well as ECI are followed in letter and spirit.

Since Communist Party of India (Marxist) and Nationalist Congress Party did not at all comply with the directions, the Court ordered them to deposit an amount of Rs 5 lakh each in a specified account. All other parties found in contempt were ordered to deposit an amount of Rs 1 lakh each.

It may be noted that the Court found in all 9 parties to be guilty of contempt; but as per the direction, penalty was levied only on 8 parties. No penalty was specified for Rashtriya Lok Samta Party (Respondent 12).

Caution to the Election Commission of India

The Court accepted ECI’s argument that it cannot be said to have committed any contempt of the directions in Rambabu Singh Thakur, (2020) 3 SCC 733 as ECI did bring flouting of directions to Court’s notice. The Court, however, cautioned ECI to do so as promptly as possible in future so that prompt action may be taken by the Court.

Incidental Discussion

Political party’s freedom to select candidate of choice

Recapitulating the directions given in Rambabu Singh Thakur, (2020) 3 SCC 733, the Court said that the directions were given so as to enable the voter to have an informed choice while exercising his right to vote. What had been directed, was only to provide information to the voter so that his right to have information as to why a particular political party has chosen a candidate having criminal antecedents and as to why a political party has not chosen a candidate without criminal antecedents, is effectively guaranteed. The Court was of the view that such a requirement would only enable the voter to have complete information and exercise his right to vote effectively.

It was clarified that a political party can always give a reason that a candidate with criminal antecedents is found to be more suitable than a person who does not have criminal antecedents. What was directed is that the reasons should not be with regard to “mere winnability at the polls”. The Court observed:

“The directions in no way impinge upon the right of a political party to choose a candidate of its own choice.”

Court cannot direct ECI to invoke powers under Clause 16-A of Symbols Order

The Amicus Curiae strenuously submitted that Supreme Court should issue a direction to ECI to invoke powers under Clause 16-A of the Election Symbols (Reservation and Allotment) Order, 1968 and take requisite action under the said clause to suspend, subject to terms and conditions, or withdraw recognition of political party that flouts the directions given by the Court in Rambabu Singh Thakur, (2020) 3 SCC 733.

The Court followed the law laid down in Public Interest Foundation, (2019) 3 SCC 224 wherein it was held that the prescription as regards disqualification is complete in view of provisions of the Representation of the People Act, 1951. The Constitution Bench had said that it is clear as noon day and that there is no ambiguity. It had further held that the legislature has very clearly enumerated the grounds for disqualification and the language of the said provision leaves no room for any new ground to be added or introduced.

Opining that the Court could not accede to the submission of the Amicus Curiae, it was reiterated that:

“The court cannot legislate”

Further Directions

Before concluding, the Court said that no one can deny that the menace of criminalisation in the Indian political system is growing day by day. Also, no one can deny that for maintaining purity of political system, persons with criminal antecedents and who are involved in criminalisation of political system should not be permitted to be the law-makers. It was observed:

“This Court, time and again, has appealed to the law-makers of the Country to rise to the occasion and take steps for bringing out necessary amendments so that the involvement of persons with criminal antecedents in polity is prohibited. All these appeals have fallen on the deaf ears. The political parties refuse to wake up from deep slumber.”

It was added that though the Court desired that something urgently requires to be done in the matter, its hands are tied and it cannot transgress into the area reserved for the legislative arm of the State. The Court commented:

“We can only appeal to the conscience of the law-makers and hope that they will wake up soon and carry out a major surgery for weeding out the malignancy of criminalisation in politics.”

In furtherance of the directions issued in Public Interest Foundation, (2019) 3 SCC 224 and Rambabu Singh Thakur, (2020) 3 SCC 733, in order to make the right of information of a voter more effective and meaningful, the Court found it necessary to issue following further directions:

(i) Political parties are to publish information regarding criminal antecedents of candidates on the homepage of their websites, thus making it easier for the voter to get to the information that has to be supplied. It will also become necessary now to have on the homepage a caption which states “candidates with criminal antecedents”;

(ii) The ECI is directed to create a dedicated mobile application containing information published by candidates regarding their criminal antecedents, so that at one stroke, each voter gets such information on his/her mobile phone;

(iii) The ECI is directed to carry out an extensive awareness campaign to make every voter aware about his right to know and the availability of information regarding criminal antecedents of all contesting candidates. This shall be done across various platforms, including social media, websites, TV ads, prime time debates, pamphlets, etc. A fund must be created for this purpose within a period of 4 weeks into which fines for contempt of Court may be directed to be paid;

(iv) For the aforesaid purposes, ECI is also directed to create a separate cell which will also monitor the required compliances so that the Supreme Court can be apprised promptly of non-compliance by any political party of the directions contained in the Court’s orders, as fleshed out by ECI, in instructions, letters and circulars issued in this behalf;

(v) The direction in paragraph 4.4 of the order in Rambabu Singh Thakur, (2020) 3 SCC 733 be modified and it is clarified that the details which are required to be published, shall be published within 48 hours of the selection of the candidate and not prior to two weeks before the first date of filing of nominations; and

(vi) If such a political party fails to submit such compliance report with ECI, ECI shall bring such non-compliance by the political party to the notice of the Supreme Court as being in contempt of the Court’s orders/directions, which shall in future be viewed very seriously.

The contempt petition was disposed of in above terms. [Brajesh Singh v. Sunil Arora, 2021 SCC OnLine SC 571, decided on 10-8-2020]


Tejaswi Pandit, Senior Editorial Assistant has reported this brief.

Case BriefsTribunals/Commissions/Regulatory Bodies

Customs, Excise and Services Tax Appellate Tribunal (CESTAT): Rachna Gupta (Judicial Member) allowed an appeal which was filed aggrieved by the order-in-original asking the appellants for recovery of Central Excise Duty amounting to Rs 16,22,501 along with the appropriate interest and proportionate penalty.

The appellant was engaged in the manufacture of organic compound and enzymes. During the course of audit, the Department observed that the appellant had sent 1,41,396.180 litres of chemical for job work under job work Challan for processing. They had received only 90620.290 litres of chemicals. The chemical not received by the appellant i.e. 50775.890 litres was alleged to have the value of Rs. 1,01,15,903/- involving Central Excise duty of Rs.16,22,501/- from their job worker. The said amount of excise duty during the period from 1-3-2003 to 31-3-2005 has accordingly been alleged to have not been paid in contravention to the provisions of Rule 4(5) of CENVAT Credit Rules, 2002.

The appellant submitted that in the manufacture of organic compound into antibiotics and enzymes, the appellant has used Hexa methyl Di-Silioxane (HMDS). After the manufacture of said antibiotic, there remain a by-product namely, (Hexa-Methyl Di-Silixane) HMDSO which contains 75% of HMDS, the raw material for the appellant’s final product and about 25% Toluene. They did not have recovery plant in their factory premises to recover said 75% of HMDS from the said by-product HMDSO. Accordingly, the said product was given to the job worker with an agreement that the yield returnable product would be 90% calculated on 100% basis of HMDS in case the purity is more than 80%. However, if the purity was less than 80%, the yield returnable would be 85%. It was submitted that it is because of that difference in yield returnable that quantity of HMDS received back by the appellant from the job worker was less by about 32-36% of total quantity of HMDSO.

The main issue deduced by the tribunal was that whether Rule 4(5) of CCR was applicable to the given facts and circumstances. The Tribunal perused Rule 4 (5) and explained that:

  • where the manufacturer need to sent those inputs for any kind of processing either inputs as such or after partially processing those inputs, then also those inputs shall be eligible for Cenvat Credit to the extent of duty paid on those inputs provided job workers returned the reprocessed inputs within one hundred eighty days, else the manufacturer shall be liable to pay the amount equivalent to the Cenvat Credit attributable to such inputs by debiting the Cenvat Credit or otherwise.
  • It also stand, abundantly clear from this provisions that this Rule applies to such inputs which have been sent to the job worker before the manufacturer is able to manufacture its final product.
  • This provision applies Thus to a situation where final product cannot be manufactured unless and until the inputs has to undergo such further processing, testing, repairing, reconditioning or any other such treatment which is not available with the manufacturer himself and it has to be got down from the job worker that Rule 4(5) of CCR is invokable. That too in case when Job worker fails to return the processed input within 180 days of receipt thereof.

The Tribunal was of the opinion that there was no denial of the fact that the by-product / waste (HMDSO) which has emerged with the final product (anti-biotic/ organic compound ) of the appellant from the inputs HMDS is sent to the job worker for the reason that this by-product has a potential of releasing the inputs i.e. HMDS by further recovery process as 75% of such HMDS is still contained in the said by-product i.e. HMDSO and this was sufficient to hold that Rule 4(5) of Cenvat Credit Rules is not applicable to the given facts and circumstances. The Tribunal held that what was given to the job worker was the waste which emerged along with final product and not the inputs as such, used by the appellant for manufacturing anti-biotic as a final product. The Tribunal relied on the rulings of Rocket Engineering Corporation Pvt. Ltd. v. CC Pune, 2005 (191) ELT 483 which has been based upon the earlier decision of this Tribunal in the case of Preetam Enterprises v. CCE, 2004 (173) ELT 26. It was held in these decisions that Rule 4(5)(a) of the Cenvat Credit Rules, 2002 does not cover the return of waste and scraps.

The Tribunal further stated that the Commissioner (Appeals) had rejected the appeal solely on the ground that Rule 4(5) does not differentiate between product and by-product however findings are apparently wrong on the face of it.

The Tribunal allowed the appeal and set aside the order-in-original canceling the recovery of Central Excise duty along with interest and penalty.[Dalas Biotech Ltd. v. Commr. Of CE & CGST,  2021 SCC OnLine CESTAT 2523, decided on 03-08-2021]


Suchita Shukla, Editorial Assistant has reported this brief.


Counsel appearing for the Appellant: Ms Jwaria Kainath

Authorised Representative appearing for the Department: Shri Yashbir Singh

Case BriefsTribunals/Commissions/Regulatory Bodies

Securities and Exchange Board of India (SEBI): Soma Majumder, Adjudicating Officer, imposed a 25 crore penalty on Yes Bank Ltd. (YBL), and separate penalties on the three senior executives of its private wealth management team for perpetrating fraud on its customers by influencing them to alter their investment positions from fixed deposits (FD) to risky AT-1 bonds.

In the pertinent matter, the Bank was allegedly involved in the sale of AT1 bond fraudulently, which started in 2016 and continued till 2019. It appeared that YBL wanted to free up ‘shelf space’ for institutional investors to subscribe to further capital of YBL. Therefore, the Noticees devised a devious scheme to dump the AT1 bonds on their hapless customers acted through its employees including the three senior executives to perpetrate such fraudulent acts on its hapless and unsuspecting customers, some of whom were influenced to even alter their investment positions from FDs to these risky AT1 bonds. In order to do that, the Noticees highlighted the AT1 bonds as earning high interest vis-à-vis the FDs. The omission on the part of the Noticees to forward the relevant documentation to the investors customers indicated suppression of material facts and thus misrepresentation Some of the customers also closed the FDs and used the money to buy the AT1 bonds.

Noticee 1 had put forth 52 submissions and Noticee 2 had put 15 additional submissions.

While addressing the demand of the Noticees to cross-examine the complainants, it was held that, “…I note that while the impugned complaints have been the basis of initiation of investigation by SEBI, the charges in the SCN have been alleged on the basis of the detailed fact-finding which investigation conducted. Cross-examination is meant for assisting the Noticees to rebut the evidence against them while contesting the matter. However, since the complaints of the investors are not primarily relied upon in this proceedings, the question of cross-examination does not arise and hence no prejudice is caused to the Noticees by not acceding to their request for cross-examination…”.

The tribunal after looking into all the submissions so made, took note of all the evidences, documents and the proximate facts and circumstances, and was thus of the opinion that “It is clear that to further their own cause, the Noticees devised a scheme to purposely suppress the risk factors of the AT-1 bonds and to highlight the attractive features and also distorted and misrepresented the material facts, so that their customers could be influenced to invest in these risky bonds, some of who also shifted their investments from FDs to these bonds. It is clear that the Noticees had an intention to defraud the customers while making the sales pitch to their customers which is why they did not institute any of the aforesaid safeguards. It cannot be a matter of coincidence that such a large number of customers, i.e. 1311, were influenced and induced to invest in these risky bonds…”.

It further observed that, “It is seen from the facts of the instant case that these AT-1 bonds were ‘down sold’ in order to make ‘shelf space’ for the Institutional Investors to subscribe to further capital which may be issued by the YBL. So it was in the interest of Noticee1 to make shelf space and make the Institutional investors to subscribe to further capital and therefore Noticee 1 decided to facilitate the down selling of these AT-1 bonds…”.

It also took note of the fact that I note that initially, AT1 bonds were allowed to be issued only to institutional investors. Thereafter, vide its circular dated September 01, 2014, RBI allowed Banks to issue AT1 Bonds to individual investors but also mandated issuers to appropriately disclose to the investors, the unique features along with the risks associated with the bonds. And therefore, the issuer had the fiduciary duty to make sure that the features and risks of the instrument were known to the investors. And the difference between a subordinated bond and a fixed deposit should have been made clear while highlighting that it is not covered by deposit insurance.

Therefore the Tribunal exclaimed that,“ I conclude that the AT-1 bonds were sold to the customers of YBL by the Noticees without adopting adequate safeguards to protect their interests and without sufficient due diligence”. “…I conclude that the allegation that Noticees 1 to 4 violated Regulations 3(a), 3(c), 3(d) and 4(1) of PFUTP Regulations and Sections 12A(b) & 12A(c) of the SEBI Act and Noticees 1 and 2 also violated Regulation 4(2)(s) of PFUTP Regulations, read with Explanation (1) to Regulation 4(2) of PFUTP Regulations stands established. Further, Noticees 3 and 4 have submitted that the amendment to Section 4(2)(s) of PFUTP Regulations came into effect only in February 2019 after they had left the employment of YBL…”.

Resultantly a penalty of 25 crores was imposed on Yes Bank Ltd. a penalty of Rs 1 crore on Vivek Kanwar, head of private wealth management, and Rs 50 lakh each on Ashish Nasa and Jasjit Singh Banga.[Yes Bank Limited, In re, Order/SM/MG/2021-22/11306-11309, decided on 12-04-2021]

Case BriefsTribunals/Commissions/Regulatory Bodies

Customs, Excise and Services Tax Appellate Tribunal (CESTAT): Ramesh Nair (Judicial Member) partly allowed an appeal where the issue was whether the appellant was entitled to Cenvat credit of Service Tax paid on Outward Transportation Service for clearance of Excisable Goods by the appellant.

The appellant raised the sale invoice in respect of sale of goods wherein after calculating the excise duty on the assessable value an amount of Rs 45000/- was added and recovered from the buyer of the goods. On this freight, the service tax was paid and the same was claimed as Cenvat Credit which was not in dispute in the present case.

Counsel for the appellant, Mr Dhaval K. Shah submitted that freight was included in the invoice value of the goods and the sale was on FOR basis therefore, the service tax paid on such transportation charges was admissible for Cenvat Credit, he further submitted that the issue involved was of interpretation of Cenvat Credit Rules and there was a bunch of litigation on the same issue of admissibility of Cenvat Credit on outward transportation, therefore being the pure question of law involved there was no intention to evade excise duty.

The Tribunal after perusing all the records found that issue of Cenvat Credit on outward transportation has been considered by this tribunal in detail in the case of Ultratech Cement Ltd. v. C.C.E Kutch, 2019 (2) TMI 1487- CESTAT Ahmedabad and in the case of Sanghi Industries Ltd. v. C.C.E Kutch, 2019 (2) TMI 1488 – CESTAT Ahmedabad. The Tribunal observed that in the above cases Cenvat credit was allowed on one of the important facts that the freight element was included in the assessable value and excise duty was paid there upon. It was also a fact in those cases that the assessee had not charged the freight separately to the customers, however in the present case it was seen that freight amount of Rs 45,000 was charged by the appellant to their customers separately, the said amount of the freight was also not included in the assessable value.

The Tribunal found that the appellant on merit was not entitled to the Cenvat Credit however the Tribunal emphasized that the issue involved was of interpretation of Cenvat Credit Rules and on this issue, there were a number of cases made out by the department. In these circumstances, it could not be said that the appellant had a mala fide intention to evade the excise duty by taking the wrong credit.

The Tribunal while partly allowing the appeal set aside the demand for the extended period stating that the remaining demand may be re-quantified by the adjudicating authority and recovered the same from the appellant in accordance with law, the Tribunal further held that appellant was not liable for penalty under Rule 15(2) of Cenvat Credit Rule 2004 read with section 11 AC of the Central Excise Act 1944 as there was no intention to evade duty.[Inox (INDIA) (P) Ltd. v. C.C.E. & S.T., 2021 SCC OnLine CESTAT 157, decided on 25-03-2021]


Suchita Shukla, Editorial Assistant has reported this brief.

Case BriefsHigh Courts

Patna High Court: Birendra Kumar, J., heard the instant revision application challenging the validity of ex-post facto approval of search and seizure operations effected by the police.

“…entire exercise of action of seizure from the house of accused Kundan Mandal and its confirmation by the Designated Authority suffers from arbitrariness and illegality.”

On 26-07-2012, the SHO of Naya Ram Nagar Police Station registered a case for offences under Section 414 of the Indian Penal Code, Sections 10/13 of the Unlawful Activities (Prevention) Act, 1967 and Sections 25(1-AA)/(1-AAA), 26(2) and 35 of the Arms Act, 1959 on the basis of self-statement.

The accused were reported to be moving to supply arms and explosives to the Nuxals. The police arrested the accused, though nothing was recovered from the physical possession of the accused. However, from the vehicle, a pistol along with other accessories was recovered for which the arrested accused could not show any paper. Besides that some Nuxal literature were also seized from the vehicle and the arrested persons disclosed that they used to supply arms to the Nuxals. Pursuant to the arrest of the house of Kundan Mundal, one of the accused was searched from where laptop, cash, ATM cards, Pan Cards and 34 deposit bonds were recovered. Additionally, a tractor was also seized without the approval of the Designated Authority which was a prerequisite under Section 25 of UAP Act, 1967. Interestingly, the Designated Authority granted ex post facto approval for the seizure made above and confirmed the same.

Noticing that the Investigating Officer could exercise power of seizure only if the offence had been committed under Chapter IV or Chapter VI of the UAP Act and no such offence was alleged to had been committed in the instant case In this case, the Bench remarked,

“…the exercise entered into by the Investigating Officer in making seizure of property from the house of accused Kundan Mandal is wholly illegal and without jurisdiction. Section 25 of the UAP Act requires that the Investigating Officer must have “reason to believe”

Section 25 of the UAP Act requires that the Investigating Officer must have “reason to believe” that any property in relation to which an investigation is being conducted represents “proceeds of terrorism”. “The reason to believe” must be on the basis of specific, reliable and relevant information. The police report did not show, specially, the evidence collected till the date of making of the prayer for confirmation of seizure that any specific reliable or relevant information was there to form a belief that the property seized from the house of the accused were proceeds of terrorism. Thus,

In absence of any connection between the act alleged and the property recovered, it cannot be assumed that those properties were acquired by the terrorist act.”

The Bench opined that to attract the mischief of penalty for being member of an unlawful association under Section 10 of the UAP Act, it must be established that the association was declared unlawful by a notification issued under Section 3 of the Act. In the case on hand, there was no evidence that to which of the unlawful association the accused were supplying the arms. Hence, it could not be ascertained whether that association was declared unlawful association or not.

Hence, the entire seizure exercise and its confirmation, as well as the order of the Lower Appellate Court, was set aside and the police officials were directed to release the property in favour of the petitioners at the earliest preferably within ten days. In case of default compensation of rupees ten thousand to the petitioners for each day delay was also granted.  [Ramchandra Mandal v. State of Bihar,  2021 SCC OnLine Pat 670, decided on 22-03-2021]


Kamini Sharma, Editorial Assistant has reported this brief.


Appearance before the Court:

 For the Petitioner/s: Adv. Sandeep Kumar, Adv. Arvind Kumar and Adv. Anil Kumar Roy,

For the Respondent/s: A.P.P. Umanath Mishra

Case BriefsTribunals/Commissions/Regulatory Bodies

Securities Appellate Tribunal (SAT): A Coram of Tarun Agarwala, J., (Presiding Officer) and M.T. Joshi, J., (Judicial Member) while dismissing an appeal held that separate penalties by the stock exchanges could be imposed.

In the present matter, BSE and NSE separately imposed a penalty of Rs 12 lakh for violation of Regulation 17 and 19 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR Regulations), in two consecutive quarters. The stock exchanges suspended the trading activities of the appellant considering the non-payment of penalty amount.  The appellant contended that the default was made only in the first quarter. Further, contended that, separate penalties for the same offence cannot be imposed by the two stock exchanges separately.

The Coram resultantly found defaults in both consecutive quarters. While relying on the SEBI’s conscious decision in W.S. Industries (India) Limited v. BSE Ltd. (Appeal No. 8 of 2019 decided on 19.09.2019) held that, separate penalties by the stock exchanges could be imposed.[PVP Ventures Ltd. v. Bombay Stock Exchange Ltd., 2021 SCC OnLine SAT 90, decided on 17-03-2021]

Case BriefsTribunals/Commissions/Regulatory Bodies

Customs, Excise and Services Tax Appellate Tribunal (CESTAT): Ashok Jindal (Judicial Member) allowed an appeal which was filed against the impugned order wherein the penalty of Rs 50,000 had been imposed under Section 112 read with Section 114AA of the Customs Act, 1962.

The appellant was a customs broker and handled import consignment of the importer, namely, Inder International. The appellant had filed 4 Bills of entry declaring the goods as cold-rolled coil (non-alloy) alongwith invoices, test certificate and other relevant documents for clearance of the same. After filing bills of entry, the importer filed a declaration that the exporter had intimated to the appellant that the goods is of prime in nature. Thereafter, the goods were examined and found to be prime in nature, therefore, a case had been booked against the importer for mis-declaration of the goods to evade payment of duty on the said goods. It was alleged that the appellant has made a false declaration in respect of the said consignments.

The Counsel for the appellant, Mr Sudhir Malhotra submitted that the appellant had filed bills of entry as per the directions of the importer who had imported the said goods on high-seas sale basis the relevant documents, namely, invoices, high-seas agreement, test certificate were also filed by the appellant alongwith the bills of entry and the appellant had never examined the goods before filing the bills of entry, in that circumstances, it cannot be alleged that the appellant had knowingly mis-declared the goods on behalf of the importer. Therefore, there was no mens-rea of the appellant to have undue benefit of mis-declaration, in that circumstances, the penalty cannot be imposed on the appellant.

The Tribunal observed that no where it had been placed on record that the appellant was having prior knowledge of defective/secondary material. In fact, in the invoices, high-seas agreements, test certificates, it was mentioned that the material was of prime nature. It further held that the Revenue had further failed to establish the fact that the appellant about the doing omission of the act which would render the goods liable for confiscation.

The Tribunal while allowing the appeal held that act of filing the test certificate showed that the appellant had no mens rea and filed the documents being a bonafide facilitator and in view of the same no penalty was imposable upon the appellant, therefore, the penalty imposed on the appellant under Section 112 along with 114AA of the Customs Act, 1962 was set-aside.[MS Exim Services v. C.C. Ludhiana, 2021 SCC OnLine CESTAT 14, decided on 04-02-2021]


Suchita Shukla, Editorial Assistant has put this story together

Case BriefsHigh Courts

Delhi High Court: Prathiba M. Singh, J., upheld that order of the Central Information Commission whereby a penalty of Rs 10000 was imposed on the petitioners for changing stands while not providing the information as sought by the applicant under the RTI Act.

The instant petition was filed by two officers working with the Union Bank of India as Central Public Information Officers (CPIO).

The above-two officers challenged the impugned Order passed by the Central Information Commission vide which penalties amounting to Rs 10,000 were imposed upon them.

Background

An RTI application was filed by the applicant who was the Chief Manager at the Union Bank of India wherein he sought the following information:

Details of the Board approval along with justification for giving exemption with regard to 3 years branch head service.

The Office of the CPIO had informed the applicant that copy of the board note, being an internal document of commercial confidence would be exempted from disclosure.

Even the appellant authority stated that the copy of the board approval was exempted from being disclosed under Section 8(1)(d) of the RTI Act.

In the second appeal with regard to the matter, CIC found that there was no reason why complete information was not provided to the applicant and held that the responses provided were rather incomplete and evasive. Therefore, a show-cause notice to the CPIOs of the bank was issued.

On receiving the above show cause notice, the CPIOs responded stating that the information which was sought could not be found on record. Due to the change in stand by the petitioners, CIC imposed a penalty of Rs 10,000 under Section 20 of the RTI Act.

Analysis and Decision

Bench referred to this Court’s decision in R.K Jain v. Union of India, 2018 SCC OnLine Del 10957  wherein it was recognized that the CPIO, being the custodian of information or documents sought for, is primarily responsible under the scheme of the RTI Act to supply the information, and in cases of default, the penal action is to be invoked against the CPIO only.

In the decision of Registrar of Companies v. Dharmendra Kumar Garg (WP(C) 11271/2009, decided on 1st June, 2012), the role of CPIOs under the RTI Act was elaborately dealt with.

Further, in the decision of J.P. Agrawal v. Union of India, (WP(C) 7232/2009, decided on 4th August, 2011) the Single Judge recognized that:

CPIOs/PIOs are not merely “post offices” and have a crucial responsibility in facilitating the purpose of the RTI Act.

 In light of the above decisions, the High Court laid down the following principles:

i)  CPIO/PIOs cannot withhold information without reasonable cause;

ii)  A PIO/CPIO cannot be held responsible if they have genuinely rejected the information sought on valid grounds permissible under the Act. A mere difference of opinion on the part of CIC cannot lead to an imposition of penalty under Section 20 of the RTI Act;

iii)  Government departments ought not to be permitted to evade disclosure of information. Diligence has to be exercised by the said departments, by conducting a thorough search and enquiry, before concluding that the information is not available or traceable;

iv) Every effort should be made to locate information, and the fear of disciplinary action would work as a deterrent against the suppression of information for vested interests;

v) PIO/CPIO cannot function merely as “post offices” but instead are responsible to ensure that the information sought under the RTI Act is provided;

vi) A PIO/CPIO has to apply their mind, analyze the material, and then direct disclosure or give reasons for non-disclosure. The PIO cannot rely upon subordinate officers;

vii) Duty of compliance lies upon the PIO/CPIO. The exercise of power by the PIO/CPIO has to be with objectivity and seriousness the PIO/CPIO cannot be casual in their approach.

viii) Information cannot be refused without reasonable cause.

Conclusion

Hence, the Court held that under the RTI Act, the CPIOs have a solemn responsibility.

Section 5(3) requires that every CPIO or SPIO shall deal with requests for information and `render reasonable assistance’ to the persons seeking information.

CPIOs or SPIOs can seek assistance from higher/other officials in the organisation in order to enable them to furnish the information sought for the `proper discharge’ of their duties, as per Section 5(4).

 In the present matter, CPIOs changed their stands which would go on to show that there was an intention to withhold certain important documents or information, leading to the finding of mala fides and unreasonable conduct.

In light of the above, Court opined that the penalty imposed could not be faulted with. However, considering the fact that both the CPIOs since retired from the service of the Bank, the penalty was reduced to Rs 5,000 each. [Rakesh Kumar Gupta (Erstwhile CPIO) Union Bank of India v. CIC, 2021 SCC OnLine Del 194, decided on 22-01-2021]


Advocates for the parties:

For the Petitioners: Mr O.P. Gaggar, Advocate.

For the Respondents: Mr Gaurang Kanth, Standing Counsel with Mr Aman Singh Bakhshi, Advocate.

Case BriefsHigh Courts

Chhattisgarh High Court: A Division Bench of P.R. Ramchandra Menon and Parth Prateem Sahu JJ., dismissed the appeal being devoid of merits.

The facts of the case are such that one Rajendra Sharma was employed as Driver in the truck owned by non-applicant 1 and insured by non-applicant 2 who while driving from Bilaspur to Raigarh carrying dolomite was attacked and assaulted by some unknown persons with the intention to cause robbery and thereby eventually succumbed to death. FIR was lodged and an application under Section 10 of the Employees Compensation Act 1923 was filed before the Commissioner seeking compensation by the wife and children of the deceased which was thereby granted on grounds that the death happened during the course of employment and fastened the liability to pay on the employer.  Assailing the said order, employer appellant filed an appeal before High Court on grounds that the penalty was imposed without issuing show-cause notice and without affording opportunity of hearing to the employer as envisaged under Section 4A (3) (b) of the Employees’ Compensation Act 1923 wherein appeal was allowed and impugned order was set aside in part relating to the amount of penalty and remitted the matter back to pass award afresh after affording reasonable opportunity of hearing to the employer. The Commissioner had fresh proceedings and issued notice to the parties and awarded 50% of the awarded amount of compensation as penalty and held the employer liable to pay amount of penalty.

Counsel for the appellants-employer submitted that there was again non-compliance of the provisions of Section 4A (3) (b) of Employees Compensation Act 1923. He contended that unless and until there is specific notice in this regard, as directed in MA No.148/2003, the impugned order awarding penalty to the extent of 50% and fastening liability upon appellant is bad in law and liable to be set aside.

Counsel for the respondents submitted that the Commissioner after receipt of the case back on remand, drawn fresh proceeding, granted opportunity of hearing and producing evidence, but appellant employer failed to produce any evidence on the issue. He submitted that the Commissioner is well within four corners of law in awarding penalty of 50% as provided under Section 4A (3) (b) of the Employees’ Compensation Act 1923.

The Court observed that the only ground relevant to the facts is that whether without issuance of notice the entire proceeding drawn by the Commissioner would be considered vitiated or not. The Court further observed that the Appellant was well aware of the fact that the case has been remanded back to the Commissioner with a specific direction for appearance of the parties before the Commissioner and to decide the issue of penalty afresh. It was further observed that the issuance of notice as provided under Section 4A (3) (b) of the Act of 1923 to be mandatory is only to bring it to the knowledge of the employer that the penalty is to be imposed, so that the employer may submit explanation and evidence for the delay occurred in depositing amount of compensation and satisfy the Commissioner on the said issue.

The Court thus held that “In the case at hand, earlier appeal was filed by appellant challenging the order of award of penalty by the Commissioner on the ground of non-issuance of show-cause notice as envisaged under Section 4A(3)(b) of the Act of 1923, which was allowed and the case was remitted back to the Commissioner. Appellant was well aware as to why the case has been remanded back to the Commissioner and also about the proceeding drawn by the Commissioner, but even then appellant has not submitted any explanation nor produced any evidence in this regard. When once the case is remitted back to the Commissioner for limited purpose of considering award of penalty; the appellant appeared before the Commissioner and participated in the proceeding but failed to submit any explanation or bring on record any evidence on issue, then he cannot be permitted to again raise the same ground that specific notice in terms of Section 4A (3) (b) of the Act of 1923 has not been issued.”

 The Court thus dismissed the appeal as the appeal did not involve any question of law which is a prerequisite for entertaining appeal under Section 30 of Employees’ Compensation Act 1923.[Ramjilal Jagannath Partnership Firm v. Kusumdevi, 2020 SCC OnLine Chh 2051, decided on 17-11-2020]


Arunima Bose, Editorial Assistant has put this story together