Madras High Court
Case BriefsHigh Courts

   

Madras High Court: In a case where show cause notices were sent by Assistant Commissioner of Customs (Respondent 4) for short collection of duty due to non-levy of anti-dumping duty in terms of Section 28(1) of Customs Act, 1962, a Division Bench of R. Mahadevan and J. Sathya Narayana Prasad, JJ. placed reliance on the doctrine of ‘substantial compliance’ to hold that the notices are not barred by limitation.

The petitioner firm imported three consignments of Ascorbic Acid for manufacture of medicines and paid the customs duty, following which the goods were released. But subsequently, Respondent 4 issued notices under section 28(1) of Customs Act, 1962 (‘the Act’). While the CESTAT dismissed the two appeals out of three filed by the petitioner. Aggrieved by the final order of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) dated 11-10-2004, the petitioner has appealed for quashing the same.

Counsel for appellant submitted that as per the provisions of Section 28 of the Act, a show cause notice has to be served within the statutory time limit of six months, from the date of payment of the customs duty. Whereas, in the present matter, the fourth respondent did not comply with these provisions. Hence, the notices served after the expiry of the limitation period were barred as such. He also contended that the 2nd and 3rd Bills of Entry were not duly served according to the said procedure in the Act. Further referring to Sections 28(1) and (3) of the Act, the terms ‘relevant date’ and ‘serve’ were interpreted to show that there was no actual delivery of the impugned documents to the recipient.

Counsel for respondents submitted that with regards to the provisions of Section 28 and Section 153 of the Act, Respondent 4 delivered the notices within the limitation period, according to the statutory procedure.

The Court identified that the primary issue at hand was whether the show cause notices in the respect of the two bills of entry, issued by the Respondent 4 were barred by limitation as per Section 28(1) of the Act. And thus, the Court noted that the notices were duly served with adherence to the impugned statute and that the CESTAT had issued correct orders. Reliance was placed on the case of Commissioner of Central Excise, New Delhi v. Hari Chand Shri Gopal, (2011) 1 SCC 236, to elucidate the doctrine of ‘substantial compliance’ that formed an integral part of the decision of this Court.

It was held as follows:

Doctrine of Substantial Compliance

The doctrine of substantial compliance is a judicial invention, equitable in nature, designed to avoid hardship in cases where a party does all that can reasonably be expected of it, but failed or faulted on some minor or in consequent aspects which cannot be described as the “essence” or the “substance” of the requirements.

Substantial compliance means “actual compliance in respect to the substance essential to every reasonable object of the statute” and the court should determine whether the statute has been followed sufficiently so as to carry out the intent of the statute and accomplish the reasonable objectives for which it was passed.

The doctrine of substantial compliance seeks to preserve the need to comply strictly with the conditions or requirements that are important to invoke a tax or duty exemption and forgive non-compliance for either unimportant and tangential requirements or requirements that are so confusingly or incorrectly written that an earnest effort at compliance should be accepted.

34. The test for determining the applicability of the substantial compliance doctrine has been the subject of a myriad of cases and quite often, the critical question to be examined is whether the requirements relate to the “substance” or “essence” of the thing to be done but are given with a view to the orderly conduct of business, they may be fulfilled by substantial, if not strict compliance. In other words, a mere attempt at compliance may not be sufficient, but actual compliance with those factors which are considered as essential.”

The Court thus held that the demand notices issued by the fourth respondent were not barred by limitation and thus, the order of the CESTAT was upheld. Finally, it dismissed the appeal for writ petitions and closed the related miscellaneous petitions as well.

[Lalchand Bhimraj v. CESTAT, WP Nos. 34308 & 34309 of 2004, decided on 30-06-2022]


Advocates who appeared in this case :

J. Sivanandaraaj, Advocate, for the Appellant;

T. Pramod Kumar Chopda, Senior Standing Counsel, Advocate, for the Respondent.


*Arunima Bose, Editorial Assistant has reported this brief.

Allahabad High Court
Case BriefsHigh Courts

   

Allahabad High Court: Saumitra Dayal Singh, J. dismissed a revision which was filed for revenue against the order passed by the Trade Tax Tribunal, Noida by which the Tribunal had allowed assessee’s appeal holding insulated glass as taxable unclassified commodity @ 10%.

The question of law raised in the instant revision was, “Whether on the facts and in the circumstances of the case the Trade Tax Tribunal was legally justified in holding that on the manufacture and sale of laminated, insulated and toughened glass the dealer was liable to tax @ 10% as glass and not @ 16% as all the goods made of glasses ?”

The Court after perusing the records clarified that the dispute has to remain confined to insulated/ toughened glass. The Court stated that considering the case of Hindustan Safety Glass Works v. Commissioner of Sales Tax, 1998 SCC OnLine All 1345 and relying on the decision of the Supreme Court in Atul Glass Industries (P) Ltd. v. CCE, (1986) 3 SCC 480, the single bench of this Court had made the following observations:

” 9. Now coming down to the present case, description as per entry 39 of the notification dated 20.5.1976 is of all goods and wares made of glass, not including plain glass-panes”. This means that all items of glass have not been included as part of “glass and glassware”. Plain glass-panes have been excluded from the scope of Entry 39 aforesaid. Glass screen manufactured by the assessee is more akin to glass-panes rather than glassware. The said item has been excluded from the scope of Item 39. Glass screen is manufactured out of glass sheets and it is a new item. As such, the same is excluded from the said Entry 39. Following the Supreme Court decision, I have no hesitation in holding that the aforesaid goods fall under unclassified item rather than in Item No. 39 of the notification. In any case, if it falls under Item 39, the same is by way of exclusion.”

Thus, glass screens were held to be covered under the term ‘plain glass-panes’ appearing in the exclusionary clause of the taxing entries.

The Court applied the case of Hindustan Safety Glass Works v. Commissioner of Sales Tax, 1998 SCC OnLine All 1345 and believed that the Tribunal had made enough discussion of manufacturing process of the insulated glass manufactured and sold by the assessee and on its use. Insulated glass is nothing but double-glazed dual sheet (DGDS). The revision was thus dismissed reiterating that 10% Value Added Tax (VAT) is payable on insulated glass.

[Commr. Commercial Tax v. S/S G.S.C. Toughened Glass, Sales/TradeTax Revision No. – 1281 of 2012, decided on 14-07-2022]


Advocates who appeared in this case :

A.C. Tripathi, Advocate, Counsel for the Revisionist;

Nishant Mishra ,Yashonidhi Shukla, Advocates, Counsel for the Opposite Party.


*Suchita Shukla, Editorial Assistant has reported this brief.

Legislation UpdatesNotifications

On 02-08-2022, the Goods and Service Tax Network has introduced a Single click Nil filing of GSTR-1 on the GSTN portal in order to improve the user experience and performance of GSTR-1/IFF filing. Taxpayers can now file NIL GSTR-1 return by simply ticking the checkbox File NIL GSTR-1 available on the GSTR-1 dashboard.

Eligibility to file NIL GSTR-1: Taxpayers may file NIL GSTR-1 if they have:

  • No Outward Supplies (including supplies on which tax is to be charged on reverse charge basis, zero rated supplies and deemed exports) during the month or quarter for which the form is being filed for, or
  • No Amendments to be made to any of the supplies declared in an earlier form,
  • No Credit or Debit Notes to be declared/amended,
  • No details of advances received for services is to be declared or adjusted.

Steps to file NIL GSTR-1:
Taxpayers shall login to GST portal and navigate to online form GSTR-1 by selecting relevant GSTR-1 period in Returns dashboard (Services > Returns > Returns Dashboard > Form GSTR-1 > Prepare Online).

  1. Select File NIL GSTR-1 checkbox: In the GSTR-1 dashboard, a File NIL GSTR-1 checkbox shall be available at the top. If the taxpayer is eligible to file NIL GSTR-1, they can select the File NIL GSTR-1 checkbox. On click of the checkbox, system will show a note related to NIL filing and all the tiles/tables shall be hidden.
  2. File Statement: To file Nil GSTR-1, taxpayer need to click File Statement button, which shall be available at the bottom of the GSTR-1 dashboard page. On clicking of ‘File Statement’ button, taxpayers will be navigated to the filing page to file GSTR-1/IFF using DSC/EVC.
Madras High Court
Case BriefsHigh Courts

   

Madras High Court: Anita Sumanth, J. set aside the impugned order which rejected a registration application filed under Section 22 read with Section 25 of Central Goods and Service Tax (‘CGST Act') and Rule 8 of CGST Rules, without assigning proper reasons and adhering to proper procedure.

The petitioner filed an application seeking registration in accordance with Section 22 read with Section 25 of the CGST Act, 2017 and Rule 8 of the CGST Rules, 2017 in respect of a rice mandi which was duly acknowledged, and physical verification was also duly undertaken. A notice was issued by the respondent officer seeking clarification as the application did not enclose the details of the principal place of business of the petitioner. Pursuant to which, a copy of the rental / lease deed was uploaded however, registration was refused by way of a monosyllabic order simply mentioning ‘rejected’ without assigning any reasons or explanation for rejection. Aggrieved by this, the present petition was filed.

Rule 9(4) of the Central Goods and Services Tax Rules, 2017 states:

‘9. Verification of the application and approval

………….(4) Where no reply is furnished by the applicant in response to the notice issued under sub-rule (2) or where the proper officer is not satisfied with the clarification, information or documents furnished, he [may], for reasons to be recorded in writing, reject such application and inform the applicant electronically in FORM GST REG-05.’

The Court noted that the word ‘may’ only refers to the discretion to reject and not to blatantly violate the principles of natural justice. If the assessing authority is inclined to reject the application, which he is entitled to, he must assign reasons for such objection and adhere to proper procedure, including due process.

Thus, the Court allowed the petition and set aside the impugned order.

[B C Mohankumar v. Superintendant of Central Goods and Service Tax, WP No. 13272 of 2022, decided on 16-06-2022]


Advocates who appeared in this case :

Adithya Reddy, Advocate, for the Petitioner;

Prakash for Mr. Rajendran Raghavan Senior Standing Counsel, Advocates, for the Respondent.


*Arunima Bose, Editorial Assistant has reported this brief.

Legislation UpdatesRules & Regulations

The Central Board of Direct Taxes notifies Income-tax (Twenty Second Amendment) Rules, 2022 to amend the Income-tax Rules, 1962. The amendment introduces a provision dealing with Application u/s 158AB to defer filing of appeal before Tribunal or jurisdictional High Court.

Key points:

  • Rule 16 which specifies “Declaration under Section 158A” has been renumbered to Rule 15A.
  • New Rule 16 which specifies “Application under section 158AB to defer filing of appeal before the Appellate Tribunal or the jurisdictional High Court” has been inserted:

“The application referred to in sub-section (2) of section 158AB, required to be made before the Appellate Tribunal or the jurisdictional High Court, as the case may be, shall be made in Form No. 8A by the Assessing Officer”

  • In Appendix II a new Form 8A has been inserted.
Customs, Excise and Services Tax Appellate Tribunal
Case BriefsTribunals/Commissions/Regulatory Bodies

Customs, Excise and Services Tax Appellate Tribunal (CESTAT): While dealing with an issue relating to payment of 6% on empty packaging drums of cenvatable input considering the same as non-excisable goods, Ramesh Nair (Judicial Member) held that the empty packaging material of cenvatable input is not liable for payment.CA appearing on behalf of the appellant submitted that the adjudicating authority and Commissioner (Appeals) confirmed the demand considering the drum as non excisable goods. He further submitted that the empty drums are not generated during the process of manufacture it is cleared after emptying the inputs therefore, the drums are cleared as such and the same is not liable for payment under Rule 6(3).

The Tribunal considered the submission made by both sides, perused the records and found that the lower authorities have confirmed the demand only on the ground that empty drums of cenvatable input is a non excisable goods and therefore, the clearance there of will attract 6% reversal in terms of rule 6(3) of Cenvat Credit Rules, 2004. The Tribunal further considered and reiterated the judgment of the Tribunal in Banco Gasket (INDIA) Ltd. v. CCE & ST, (2021) 8 TMI 77 which was also dealing with an identical issue. The Tribunal relied on the above judgment stating that the very identical issue has been considered and categorically held that empty packaging material of cenvatable input is not liable for payment either as excise duty or as Cenvat credit under Rule 6(3) of Cenvat Credit Rules, 2004.

The Tribunal allowed the appeal, setting aside the impugned order holding that the appellant is not liable to make any payment on clearance on empty drums.

[Cadila Healthcare Ltd. v. C.C.E & ST, Excise Appeal No. 10100 of 2020, decided on 24-06-2022]


Advocates who appeared in this case :

Shri Mitesh Jain, Advocate, for the Appellant;

Shri Vinod Lukose, Superintendent (AR), for the Respondent.


*Suchita Shukla, Editorial Assistant has reported this brief.

Orissa High Court
Case BriefsHigh Courts

Orissa High Court: A Division Bench of Krushna Ram Mohapatra and Murahari Sri Raman, JJ. in a case where due to pandemic certified copy was not available on time while filing appeal , enclosure of impugned order copy available on GST portal as opposed to procedural requirement of certified copy must not result in compromising the matter to be decided on merits.

The present appeal arises from the rejection of the petitioner’s prior appeal against the order of the Joint Commissioner of CT & GST, dated 23-05-2022. The petitioner, Atlas PVC Pipes Ltd., claims to have filed an appeal against an order of the CT & GST Officer for a rise in demand, and it is further asserted that apart from adhering to the procedure for filing of the appeal, the petitioner could not submit the certified copy of the impugned order along with the appeal memo in time.

The petitioners contended the hyper-technical approach of the Appellate Authority left it remediless and that the Authority should have been more practical in its approach, by taking into consideration the pandemic situation.

While the defendants claimed that the Authority had sufficiently followed the principles of natural justice as it gave the petitioners the opportunity to adhere to the impugned procedure by specifying dates for compliance.

Reliance was placed on the judgment, In Re: Cognizance for Extension of Limitation, 2022 SCC OnLine SC 27, the Court held that the petitioner was entitled to the benefit of the exclusion of 7-day limitation as per Rule 108(3) of the OGST Rules, 2017. The Bench further made the observation that a mere delay in attaching a certified copy of the impugned order appealed against, should be treated a mere technical defect and the merit of the matter must not be disregarded in this respect.

The Court allowed the appeal accordingly and directed the petitioner to appear before the Joint Commissioner of State Tax (Appeal),so that the Appellate Authority may proceed to decide the present appeal on the basis of its merits.

[Atlas PVC Pipes Limited v. the State of Odisha, 2022 SCC OnLine Ori 2182, decided on 29-06-2022]


Advocates who appeared in this case :

Sudeepta Kumar Singh, Advocate, for the Appellant;

Sunil Mishra, Advocate, for the Respondents.


Customs, Excise and Services Tax Appellate Tribunal
Case BriefsTribunals/Commissions/Regulatory Bodies

Customs, Excise and Services Tax Appellate Tribunal (CESTAT): The coram of Ramesh Nair (Judicial Member) and Raju (Technical Member) allowed an appeal holding that TCS collected from sale of scrap cannot be included in the assessable value for charging excise duty which was filed by the aggrieved on the dismissal of the previous appeal by the Commissioner (Appeals).

The appellant are engaged in the manufacture of M.S Drums falling under Chapter Heading 73 of the Central Excise Tariff Act, 1985 and in the manufacturing process some scrap is generated which is sold in connection with sale of scrap. The appellant collected TCS (Tax collected at source).

The case of the department was that the TCS collected from the buyer over and above the price of the goods should be included in the transaction value as the same shall be treated as amount of money value of additional consideration and Central Excise duty was required to be paid. A show cause notice was issued which was adjudicated by the adjudicating authority by confirming the demand of duty on the said TCS amount. Commissioner (Appeals) upheld the demand, thus the instant appeal.

Counsel appearing on behalf of the appellant submitted that the TCS was not a part and parcel of sale price of the goods which was collected from the buyer of scrap. As per Section 206-C of the Income Tax Act, 1961 said amount was deposited to the income tax department, therefore the said amount was neither returned by the appellant nor earned by them. The appellant was only complying the provision of the income tax without any gain out of the TCS collected and paid to the department, therefore, the same cannot be considered as a part and parcel of the assessable value. Adjudicating authority had invoked Rule 6 of the Central Excise Valuation Rules, for demand of duty to which he submitted that in the present case the amount of TCS was not flowing to the appellant whereas, the said amount was as it is deposited to the income tax department therefore, Rules 6 was also not applicable.

The Tribunal opined that the amount collected as TCS had nothing to do with the price of the goods but it was a tax collected from the buyer of the scrap and the same was deposited in the income tax department, therefore, the amount collected as TCS was a tax and in terms of Section 4, the tax was not includable in the assessable value. While perusing Rule 6 of the Central Excise Valuation Rules the Tribunal clarified that additional amount if it is flowing from the buyer to the assesse directly or indirectly the same is includable in the assessable value meaning thereby any amount which is coming from the buyer and retained by the appellant alone will be includable in the assessable value. In the present case the TCS was collected not as a additional consideration but explicitly as tax and same was deposited to the income tax department, therefore, it cannot be said that the amount of TCS belonged to the appellant.

The appeal was allowed holding that the amount of TCS cannot be considered as additional consideration flowing from the buyer to the appellant accordingly, the same was not includable in the assessable value for charging Excise Duty.

[Yashraj Containeurs Ltd. v. C.C.E & S.T., Excise Appeal No. 800 of 2012, decided on 07-06-2022]


Advocates who appeared in this case :

Shri Prakash Shah, Advocate, for the Appellant;

Shri G. Kirupanandan, Authorised Representative, for the Respondent.


*Suchita Shukla, Editorial Assistant has reported this brief.

Legal RoundUpWeekly Rewind

 


TOP STORY OF THE WEEK


Right to Abortion no longer a Constitutional right in the USA

In a far-reaching decision concerning American women’s right to abortion, the Supreme Court of the United States, has held that the Constitution of the United States does not confer any right to obtain abortions. The judgment decisively overrules the landmark SCOTUS ruling of Roe v. Wade, 1973 SCC OnLine US SC 20, which granted this constitutional right in the first place and also Planned Parenthood of Southeastern Pennsylvania v. Casey, 1994 SCC OnLine US SC 11 which upheld Roe. Furthermore, by this mandate the authority to regulate abortion is returned to the people and their elected representatives.

While Chief Justice Roberts agreed with the majority opinion that the viability line established by Roe and Casey should be discarded, he however took a “measured course” and said that the right should extend far enough to ensure a reasonable opportunity to choose but need not extend any further certainly not all the way to viability.

However, the dissenting opinion termed the decision to be catastrophic and stated that the majority has given the ruling out of despise and has substituted a rule by judges for the rule of law. Either the mass of the majority’s opinion is hypocrisy, or additional constitutional rights are under threat. It is one or the other,

The dissent concluded with the following words,

“With sorrow—for this Court, but more, for the many millions of American women who have today lost a fundamental constitutional protection—we dissent.”

Detailed Analysis: SCOTUS| United States’ Constitution does not confer any right to abortion; Roe v. Wade overruled after 49 years

Also read: “With sorrow—for this Court, but more, for the many mil­lions of American women…we dissent.” Read SCOTUS dissent on Right to Abortion case 


APPOINTMENTS AND TRANSFERS


6 High Courts get new Chiefs

6 High Courts have got new Chief Justices. While Telangana High Court’s current Chief, Justice Satish Chandra Sharma will now be assuming the charge of the Chief Justice of the Delhi High Court, 5 judges have been promoted to be the Chief Justices of Gauhati, Rajasthan, Uttaranchal, Himachal Pradesh and Telangana High Courts.

Full Story: 5 Appointments and one Transfer lead to 6 High Courts getting new Chiefs


SUPREME COURT


Clean Chit to PM Modi in 2002 Gujarat Riots

Supreme Court has dismissed Zakia Jafri’ss plea challenging the clean chit given to Prime Minister Narendra Modi by the Special Investigation Team in 2002 Gujarat riots case. The Court observed that no fault can be found with the approach of the SIT in submitting final report back in 2012, which is backed by firm logic, expositing analytical mind and dealing with all aspects objectively for discarding the allegations regarding larger criminal conspiracy (at the highest level) for causing and precipitating mass violence across the State against the minority community.

Detailed Analysis: “SIT Officials have come out with flying colours unscathed despite all odds”; Read SC’s key observations while upholding SIT’s clean chit to PM Modi in 2002 Gujarat riots

Man set free in a 28-year-old honour killing case

In 1994, a young couple belonging to different castes was found hanging from a tree after having gone missing for days. The love affair did not sit well with the girl’s father and uncle. It was alleged her uncle had killed both of them and had kept the bodies in the house for 3 days, after which he had taken the bodies to the cashew nursery and had hung them on a cashew tree to give it the shape of them having committed suicide.

Noting that the prosecution had miserably failed to bring home the charges levelled against the accused beyond reasonable doubt, the Court observed that conviction could not be based on a very weak kind of evidence of extra judicial confession by the co-accused and the theory of “Last seen together” propounded by the prime witness.

Detailed Analysis: No conviction based on ‘last seen together’ theory when possibility of suicidal death not ruled out; SC sets man free in a 28-year-old honour killing case


HIGH COURTS


Bombay High Court| Unmarried major Daughter’s right to maintenance

In a case where a father had refused to maintain his unmarried major daughter on the ground that the daughter was earning Rs.72 lakhs to Rs.80 lakhs by merely posting photographs on Instagram, the Bombay High Court has held that the father had the responsibility to maintain his daughter and her Instagram biography is not enough to prove that she has independent and sufficient income.

The Court remarked,

it is a well-known fact that it is the habit of the youth of today to project a glossy picture and post the same in the social media though its contents may not always be true.”

Detailed Analysis: Bombay High Court| Unmarried major Daughter entitled for maintenance from her father; Glossy life on Instagram does not prove independent and sufficient income

Orissa High Court | Vigilance Department vis-à-vis Right to Information

The Orissa High Court has held that the Government of Odisha cannot deny information pertaining to the Vigilance Department involving allegations of corruption and human rights violations, and other information that does not touch upon any of the sensitive and confidential activities undertaken by the Vigilance Department. The Court held that if under the RTI Act disclosure is the norm, and non-disclosure is the exception, then the notification by the Odisha Government’s Information and Public Relations Department seeks to take away what is provided by the RTI Act and is therefore ultra vires the RTI Act.

Detailed Analysis: Orissa High Court | Notification exempting Orissa Vigilance Department from the purview of RTI is ultra vires of RTI Act, 2005

Patna High Court| Right to Sanitation a fundamental right

Sanitation is personal and private, inextricably linked to human dignity. At the same time, sanitation has an essential public health dimension. The Patna High Court observed that the right to sanitation comes within the scope of Article 21 and therefore, directed the State, National Highway Authority of India (NHAI), and Oil Marketing Companies (OMC) to construct public toilets and public conveniences on highways across the state of Bihar.

Detailed Analysis: Right to Sanitation a fundamental right: Patna HC issues directions to Bihar Govt and NHAI to construct “Public toilets” on highways


NATIONAL COMMISSIONS


NCDRC| Women with sponge left in abdomen after Caesarean Surgery gets Rs. 5 Lakhs Compensation

In a consumer dispute where a woman had alleged medical negligence on part of the doctors who had left a sponge in her abdomen after performing a Caesarean surgery; NCDRC has held that, since a foreign body was left in the system of the complainant during the surgery, it clearly indicated a failure of reasonable degree of care and thus it constitutes medical negligence. As a result, the woman will now get the compensation of Rs. 5 lakhs.

Detailed Analysis: Infected sponge left in the abdomen of a woman post Caesarean surgery, constitutes medical negligence; NCDRC directs compensation of Rs. 5 lakhs to the aggrieved party


LEGISLATIONS


TDS exemption on rent of ‘aircraft’ leased out by IFSC units on certain conditions

The Central Board of Direct Taxes (CBDT) has exempted TDS on lease rentals under Section 194-I of Income Tax Act, 1961 paid to Aircraft Leasing Units. The Notification will come into force on July 1, 2022. The Exemption is applicable on certain conditions. You can read the same on the SCC Online Blog.

Full Report: CBDT notifies exemption of TDS on rent of ‘aircraft’ leased out by IFSC units on certain conditions

Registration of Electors (Amendment) Rules, 2022

Central Government, after consulting the Election Commission of India has notified Registration of Electors (Amendment) Rules, 2022 A new Rule has been inserted which provides Merger and integration of list of amendments. The rule provides that the list of amendments prepared with reference to the qualifying dates shall be merged and integrated with the last finally published roll and published as draft roll, before every election and bye-election and shall be put in public domain with reference to the qualifying date, proximate to the said election, as the Election Commission may direct.

Full Report: Centre notifies linking of Aadhaar with electoral roll vide Registration of Electors (Amendment) Rules, 2022

NFRA Amendment Rules, 2022

The National Financial Reporting Authority Amendment Rules, 2022 introduces the penalty in case of non-compliance of the provisions of the Rules. Whoever contravenes any of the provisions of these rules, shall be punishable with fine not exceeding five thousand rupees, and where the contravention is a continuing one, with a further fine not exceeding five hundred rupees for every day after the first during which the contravention continues.”.

Full Report: MCA introduces maximum penalty upto Rs. 5000 in case non-compliance of NFRA Rules, 2018 vide NFRA Amendment Rules, 2022


Curated and presented by Prachi Bhardwaj, Associate Editor, EBC Publishing Pvt. Ltd. 

AAR GST
Case BriefsTribunals/Commissions/Regulatory Bodies

Maharashtra Authority for Advance Ruling: Rajiv Mangoo, Additional Commissioner of Central Tax & T.R. Ramani, Joint Commissioner of State Tax held that the stipend amount is given to the trainees by the training institutes for the duration of their training is not a part of taxable value.

Factual Background of the case

The applicant is indulged in the business of human resource and skill development and had enrolled as a facilitator under the National Employability Enhancement Mission (NEEM) scheme and provides trainees to various institutes for which service charges were collected in addition to the reimbursement of the stipend payable to trainees.

An application was filed by the applicant, under Section 97 of the Central Goods and Services Tax Act, 2017 (CGST Act) before the Maharashtra Authority for Advance Ruling to seek an Advance Ruling on the following:

  • Whether the applicant, in the capacity of being a NEEM facilitator, acts as a ‘Pure Agent’ while receiving reimbursement of stipend amounts from the various trainer institutes and remitting the same to the trainees?

  • If not, whether such a stipend amount forms a part of the taxable value?

Analysis and Decisions

The bench defined ‘advance ruling’ as a decision given by the authority to an applicant on matters or issues specified in sub-section (2) of Section 97, concerning the supply of goods and services. Therefore, the bench refrained from answering the first issue of the case as the matters specified in clauses (a) to (g) of Section 97 sub-clause (2) of the CGST Act as it was not applicable to the facts of the case.

Further, the bench observed that in regard to payment of stipend to the trainees, the actual service was provided by the trainees for which stipend was payable, the applicant was only acting as an intermediary in collecting the stipend from the training institutes and disbursing the same to the trainees in full without making any deductions.

At this juncture, the bench referred to the case of Yashaswi Academy for Skills 2019 SCC OnLine Mah AAR-GST 78 wherein the bench held that “the reimbursement by industry partner to the applicant, of the stipend paid to the trainees, does not attract tax under the GST Act.”

Hence, the bench applied the same principle as laid down in the aforementioned case and held that the stipend paid by entities/ training institutes to the trainees through the applicant does not attract GST and need not be added to the taxable value.

[Patle Eduskills Foundation, In Re. 2022 SCC OnLine Mah AAR-GST 13, decided on 08-06-2022]

Legislation UpdatesNotifications

On 16th June, 2022, the Central Board of Direct Taxes (CBDT) has exempted TDS on lease rentals under Section 194-I of Income Tax Act, 1961 paid to Aircraft Leasing Units vide notification no. 65/2022/F. No. 275/30/2019-IT(B). This will come into force on July 1, 2022.Exemption is applicable on following conditions:

The Lessor must

  • furnish a statement-cum-declaration in Form No. 1 to the lessee giving details of previous years relevant to the ten consecutive assessment years for which the lessor opts for claiming deduction under sub-section (IA) read with section (2) of the section 80LA of the Income-tax Act; and
  • such statement-cum-declaration shall be furnished and verified in the manner specified in Form No.1, for each previous year relevant to the ten consecutive assessment years for which the lessor opts for claiming deduction under sub-section (IA) read with section (2) of the section 80LA of the Income-tax Act.

The Lessee must

  • not deduct tax on payment made or credited to lessor after the date of receipt of copy of statement-cum-declaration in Form No. 1 from the lessor; and
  • furnish the particulars of all the payments made to lessor on which tax has not been deducted in view of this notification in the statement of deduction of tax referred to in sub-section (3) of section 200 of the Income-tax Act read with rule 31A of the Income-tax Rules, 1962.

The above relaxation shall be available to the lessor during the said previous years relevant to the ten consecutive assessment years as declared by the lessor in form 1 which specifies “To be furnished by a unit engaged in the business of leasing of aircraft located in International Financial Services Centre to the Lessee”


*Shubhi Srivastava, Editorial Assistant has reported this brief.

Madras High Court
Case BriefsHigh Courts

Madras High Court: A Division Bench of R Mahadevan and Sathya Narayan Prasad, JJ. dismissed the tax appeal holding that guarantee commission as well as royalty must be excluded from the business profit for the purpose of calculation of deduction under Section 80 HHC of the Income Tax Act, 1961. 

 

The facts of the case are such that the appellant was engaged in the business of manufacture and sale of V & Fan Belts, Oil Seals etc. For the assessment year 2004-2005, they filed its return admitting a total income of Rs.14, 02, 65,870/-, which was subsequently, revised by them. Upon scrutiny of the same, the respondent issued notice under section 143(2) of the Income Tax Act, 1961 (hereinafter, “the Act”) and thereafter, completed the assessment under section 143(3) determining the total income which excludes long term capital gains. While doing so, the assessing officer, among others, restricted the claim of deduction under Section 80HHC by excluding 90% of the royalty receipts from the profits of the business under clause (baa) to explanation to section 80HHC (4). The order of AO was challenged before the Commissioner of Income Tax Madurai, who partly allowed the appeal. Aggrieved by this, the Revenue filed an appeal before the Income Tax Appellate Tribunal (‘ITAT’) which thereby set aside the impugned order. Assailing this, the present tax appeal was filed under Section 260 A of the Income Tax Act, 1961. 

 

Counsel for appellants submitted that the appellant entered into a MOU with its 100% subsidiary company; the subsidiary company manufactures the goods as per the specifications given by the appellant and the appellant has also provided know-how, secret formula manufacturing process and methods to ensure the same quality of manufactured goods; for providing these services, the subsidiary company paid royalty and hence, the royalty receipts are directly related to the goods exported by the appellant and the same cannot be excluded from the profits of the business. 

  

The Court relied on CIT v. Bangalore Clothing Co., 2003 SCC OnLine Bom 40 , wherein it was categorically held that “guarantee commission as well as royalty viz., a payment for using a right, must be excluded from the business profit for the purpose of calculation of deduction under section 80HHC of the Act. 

  

The Court noted that there is no concrete material produced by the appellant / assessee to prove that the royalty income received from the subsidiary company is related to export business,  

  

Thus, the court held the “Tribunal has rightly directed the assessing officer to exclude the royalty income from the business profits for the purpose of calculation of deduction under section 80HHC of the Act, which warrants no interference.” 

[Fenner India Ltd. v. Assistant Commissioner of Income Tax, 2022 SCC OnLine Mad 2923 , decided on 08-06-2022] 

 

Appearances 

For Appellant: Mr. Subbaraya Aiyar 

For Respondent: Mr.M. Swaminathan, and Mrs. V. Pushpa 

 


*Arunima Bose, Editorial Assistant has reported this brief.

Calcutta High Court
Case BriefsHigh Courts

Calcutta High Court: The Division Bench of Debangsu Basak and Bibhas Ranjan De, JJ. disposed of a appeal which was directed against the order dated 09-02-2022 by which Judge was pleased to hold that, despite the assessee receiving further evidences with regard to the quantum of tax liability subsequent to the conclusion of the order of refund, there was no material irregularity in the order of refund warranting interference under Article 226 of the Constitution of India. 

 

Advocate appearing for the appellant/writ petitioner submitted that order of refund was passed on 03-05-2021 after which the assessee received Certificate of Export on 25-08-2021 and if such Certificate is placed before the revisional authority, the petitioner will be entitled to refund of the tax liability of the petitioner. The Certificate is a material evidence which the revisional authority needs to consider in order to assess the tax liability of the petitioner. It was further submitted that the tax authorities cannot derive undue benefit of circumstances which are beyond the control of the appellant/writ petitioner.  

 

Advocate appearing for the State submits that the adjudication of tax liability stood completed on the passing of the order of the revisional authority.  

 

The Court was of the opinion that the appellant/writ petitioner was not at all fault in not receiving the document dated 25-08-2021 that the appellant/writ petitioner seeks to place before the revisional authority. It is not a case that the appellant/writ petitioner was in possession of certain documents which the appellant/writ petitioner did not place before the revisional authority. Rather, it is a case where the appellant/writ petitioner received a document subsequent to the order of the revisional authority. Reasonable opportunity should be afforded to such assessee to bring such evidences to the notice of the tax authorities.

 

The Court thus held that another opportunity should be granted to the appellant/writ petitioner to place the document before the revisional authority. Revisional authority was requested to reconsider its order passed on refund taking into account the document dated 25-08- 2021 in accordance with law. 

 

[Nipika Agarwal v. Asst. Commr. of State Tax,  2022 SCC OnLine Cal 1490, decided on 09-06-2022] 


Mr  Sandip Choradia, Ms Esha Acharya : for the Appellant 

Mr Hirak Barman, Mr Bikramaditya Ghosh : for the State 


*Suchita Shukla, Editorial Assistant has reported this brief.

Delhi High Court
Case BriefsHigh Courts

Delhi High Court: A Division  Bench of Manmohan and Manmeet Pritam Singh Arora JJ. disposed the petition and directed the respondents to refund to the petitioner the amount adjusted in excess of 10% of the disputed tax demands for the Assessment Year 2017-18. 

 

FACTUAL BACKGROUND 

The petitioners herein were seeking refund of Rs. 1,52,240/- which was recovered in excess of 10% of the total disputed tax demand for the Assessment Year 2017-18 against the refunds due for the Assessment Year 2020-21. 

An appeal was pending against the first case and a stay order was granted in favor of the petitioner and. It was alleged that the amount was recovered despite the stay order. However, the stay order had expired and the application for renewal was pending.  

Arguments were also made on the notice under Section 245 of the Income Tax Act, 1961 being issued to the petitioner, which is a mandatory requirement before adjusting any refund due.  

 

DECISION AND OBSERVATION 

The Bench of Manmohan Singh, J. and Manmeet Pritam Singh Arora, J.  took the view that the restrictive stay order issued by the Respondents granting stay to the petitioner only till a specific date was in violation of the directions of the Central Board of Direct Taxes as well as previous orders of this Court, categorically holding that the Assessing Officer must grant stay till the disposal of the first appeal.[Kshiprajatana v. Asst. Commissioner of Income Tax Circle 61(3),  2022 SCC OnLine Del 1528, decided on 20-5-2022] 


Appearances: 

For petitioners: Mr Vikram Kakkar 

For respondent: Mr Kunal Sharma with Ms Zehra Khan and Mr Shray Nargotra 

 

 

Karnataka High Court
Case BriefsHigh Courts

Karnataka High Court: Suraj Govindaraj, J. dismissed the petition as being devoid of merits.

The facts of the case are such that petitioner 1 is a registered association of the advertising agencies, in the business of advertisement on the advertisement hoardings licensed by respondent 2 Hubballi Dharwad Mahanagara Palike and are also registered as dealers under S. 22 of the Karnataka Value Added Taxes Act. The petitioners 2 to 6 are the members of the petitioner 1. A demand notice was issued upon the petitioners to make payment of advertisement tax as regards advertisement hoardings used by them. The instant petition was filed under A 226 and 227 of the Constitution of India seeking issuance of writ to set aside the demand notice and writ of prohibition to the respondents not to meddle with the advertisement displays and hoardings of the petitioners.

Counsel for petitioners submitted that on the enactment of Goods and Services Tax Act the authority of the respondents to either levy or collect advertisement tax is ousted. The respondents have collected the advertisement tax in terms of Section 134 of the Karnataka Municipal Corporations Act, 1976. The power under Section 134 of the KMC Act flows from Entry 54, List II of Schedule VII of the Constitution of India. The entry 54 having been deleted the said power is divested. Thus, there could be no demand for advertisement tax post the enactment of GST Act and deletion of Entry 54.

Counsel for respondents Mr GI Gachchinmath submitted that the power of respondent 2 to collect the advertisement tax continues under Section 134 of KMC Act. In the decision relied upon by the counsel for the petitioner, said power had been deleted, whereas no such deletion has occurred in the KMC Act.

The Court observed that in the entire transaction of GST, the petitioners are only a collecting agency who collects the GST payable on the service rendered and deposits the same with the authorities, the incidence of tax, i.e., GST being on the services rendered or goods supplied, the obligation of payment being on the person availing the service and or receiving the goods. The incidence of GST is on the service rendered by the petitioner to its clients and has nothing to do with respondent 2-HDMC. The transaction with HDMC is the permission and or license granted by the HDMC to put up hoarding and or use a hoarding either on the land belonging to the HDMC and or on land belonging to a private party.

The Court further observed that there are two distinct transactions. The incidence of tax on both transactions are different. The first transaction is the permission by respondent No.2-HDMC to put up a hoarding or advertisement to use their hoarding for the purpose of advertisement, as regards which respondent No.1-HDMC charges the fee or advertisement tax. The second transaction is on the petitioners making use of the hoarding to display advertisements of its clients towards which the petitioners charge their client which is a supply of services or goods as regards which the GST is liable to be paid. Both the transactions being independent and distinct the incidence of both the GST and advertisement fee being on two distinct transactions inasmuch as the GST not being charged by the respondent 1- HDMC and advertisement free not being charged by the GST authorities.

The Court thus held “there is no conflict between the power to levy GST under GST Act and power of Municipal Corporation to levy advertisement fee or advertisement tax under Section 134 of the Karnataka Municipal Corporations Act.” [Hubballi Dharwad Advertisers Association v. State of Karnataka, Writ Petition No. 104172 of 2021, decided on 21-04-2022]


Arunima Bose, Editorial Assistant has reported this brief.

Advance RulingsCase Briefs

Appellate Authority for Advance Rulings, State of Uttarakhand GST: The Coram of P.K. Goel (CGST Member) and Dr Ahmed Iqbal (SGST Member) stated that a resort running the service of Naturopathy as an additional service would not be exempted from GST.

An appeal was filed under Section 100 of the Central Goods & Service Tax Act, 2017 and Uttarakhand Goods & Service Tax Act, 2017 by M/s Corbett Nature Reserves (Applicant) against the Advance Ruling Order passed by AAR of Uttarakhand.

Factual Background

Advance Ruling on the following Question was sought:

Whether “The Centre” of the applicant was eligible to get the benefit of entry 74 of exemption Notification No. 12/2017-Central Tax (Rate) classified under SAC Heading 9993?

The applicant was running a resort namely “Aahana – The Corbett Wilderness” and it was stated that the same runs an independent unit namely “Aahana Naturopathy Centre” wherein services in the form of Nature cure and Yoga therapies were provided, which were not restricted to the in-house customers, but open to all.

The Authority for Advance Ruling, Uttarakhand observed that the supply of services provided by the applicant, was a composite supply, rightly classifiable under sub-heading No. 996311 as ‘Room or unit accommodation services provided by Hotels, Inn, Guest House, Club and the like’, whereas the exemption at Entry 74 was applicable to services falling under SAC 9993. Therefore, the AAR held that the applicant was not eligible to get the benefit of Entry 74 of Exemption Notification No. 12/2017-Central Tax (Rate) dated 28-6-2017.

On being aggrieved with the above, the present appeal was filed.

Analysis and Decision

In the instant matter, the applicant had advertised and marketed their accommodation service as their main service and Naturopathy as an additional service.

Hence, the accommodation service and other services including Naturopathy rendered during the course of said service would be covered under the composite service and the accommodation service constituted the predominant element and therefore, the principal supply and other services including Naturopathy shall form the part of that composite supply.

Therefore, all the services provided in relation to or in addition to accommodation service were liable to GST applicable to ‘Accommodation Service’.[Corbett Nature Reserve, In Re., 2022 SCC OnLine Utt AAAR-GST 1, decided on 10-3-2022]

Experts CornerTarun Jain (Tax Practitioner)

  1. Introduction

It is a well-known fact that there is an innate complexity in fiscal law and policy. It has been commented upon by many Judges, much less the experience of ordinary citizens, that it is not easy to decipher the fine text of the tax law. Such policy choices in fiscal laws, however, are there for specific reasons. Larger underlying objectives and competing priorities are often the reason for the crisscross in tax law and policy. A fairly recent debate upon the scope of appellate remedies under the anti-dumping duty (ADD) law is one such illustration which explains the reasons for controversies in the fiscal space. The issue at hand is an innocuous question regarding the jurisdiction of the Customs Excise and Service Tax Appellate Tribunal (CESTAT) and whether there is a provision to file an appeal in ADD dispute in a particular situation. In order to appreciate the controversy some background is necessary. It relates to the peculiar scheme of how the circumstances warranting the levy (or non-levy) of ADD are appreciated under the administrative and legal framework in India which will also explain the reason for the controversy.

  1. Legal framework for levy of anti-dumping duty in India

ADD is administered under the overall customs law framework in India. The Customs Act, 1962 (1962 Act) provides for the legal framework governing import and export of goods in India. However, the 1962 Act does not carry the rate of tax leviable as customs duty. The classification and rate of tax is provided for under the Customs Tariff Act, 1975 (1975 Act). The 1975 Act is also a repository of a host of other taxes which are imposed at the time of import or export of goods. For illustration, safeguard duty, countervailing duty, etc. are certain other illustrations of taxes imposed under the overall customs law framework. However, conceptually ADD is not a customs duty, the latter being levied upon the act of importation of goods in a particular country. Instead ADD is understood as a trade protection measure which is deployed by the importing country in order to deal with the pernicious activity of dumping of goods by another country in the importing country.

The levy of ADD is now internationally aligned in terms of the legal framework mooted by the World Trade Organisation (WTO), as codified in terms of the “Agreement on Implementation of Article 6 of the General Agreement on Tariffs and Trade 1994[1].” This agreement sets out the international consensus and standards on the ingredients to be satisfied for levy of ADD besides the procedural steps and safeguards which are to be observed by the importing country for the levy of ADD. India as a member of the WTO has adopted this framework on ADD both in letter and spirit. In fact the Supreme Court of India has categorically declared that the levy of ADD under the Indian law must be in due compliance of India’s commitment to agree and abide by the WTO Agreement on ADD.[2]

The legal framework in India relating to ADD is set out in Section 9-A of the 1975 Act. This provision is a standalone code governing the levy of ADD and is supplemented by three other provisions in the 1975 Act; (a) Section 9-AA, which provides for refund of ADD in certain cases; (b) Section 9-B, which specifies certain situations in which ADD is not to be levied; and (c) Section 9-C, which provides for appeal to CESTAT in ADD cases. The present controversy relates to the interpretation of this Section 9-C. However, we shall come back to it after a brief appreciation of the administrative position in which ADD is levied in India.

  1. Administrative scheme for levy of anti-dumping duty in India

The Government of India had adopted a peculiar scheme for levy of ADD. Ordinarily the Ministry of Finance (MoF) is the sole repository for the levy of taxes enacted by the Union Parliament. For illustration, income tax, wealth tax, service tax, central excise duty, customs duty, etc. are the various union taxes which have been implemented and enforced by the MoF. The levy of ADD is also the responsibility of the MoF. However, unlike other taxes where the MoF is this sole Judge and authority on the executive and administrative framework of all union taxes, such is not the case in ADD. Instead, an inquiry as to whether ADD should be levied or not is undertaken by the Ministry of Commerce and Industry (MoC) of the Government of India.

The Directorate General of Trade Remedies (DGTR), as a department of the MoC, undertakes the investigation if there is dumping and whether ADD is required to be levied in a given situation. This investigation is undertaken in terms of the Customs Tariff (Identification, Assessment and Collection of Anti-Dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995 (1995 Rules). These 1995 Rules supplement the legal framework for levy of ADD by laying out the detailed procedural framework to be followed by the DGTR during the investigation, including rights and obligations of the affected parties.

What is notable in the aforesaid scheme is that the principal agency empowered to carry out the investigation (i.e. MoC), however, does not have the authority to implement the levy of ADD. The MoC, in a situation in which it considers that levy of ADD is warranted after a technical evaluation of the prescribed variable, can only make a recommendation to the MoF to such effect. It is thereafter the MoF which is the final arbiter as regards the decision whether or not to levy ADD. This is not a mere procedural mechanism whereby the MoC would recommend and the MoF would routinely impose ADD. Instead, it is the MoF which independently evaluates, having regard to other factors which it finds relevant to adjudge the recommendations of the MoC and thereafter arrives at a conclusion whether or not the levy of ADD is warranted. In other words, the MoF can approve or reject the recommendations of MoC. There are multiple illustrations with many such frequent instances, where the MoF disagrees with the MoC and refuses to levy ADD despite a positive recommendation of the MOC to such effect.

  1. Contextualising the issue

It is in the aforesaid legal and administrative framework that the issue arises. Under law as also under the administrative framework, neither any parameter is set out as regards the obligation of MoF while considering the recommendations of MoC nor any enumeration of factors has been made which must be considered by the MoF in order to decide whether or not levy of ADD is warranted in a given fact pattern. Resultantly, the MoF only publishes its conclusion upon review of the recommendations of the MoC. In the event the MoF agrees with the recommendations of the MoC, it will issue a notification under the relevant legal provisions providing for levy of ADD. In such circumstances, the recommendations and the detailed findings of the MoC reflect the rational for the levy of ADD. The affected parties can rely upon such recommendations and findings in order to canvas appropriate legal action in case of prejudice being caused through such levy. In a reverse situation i.e. where the MoF disagrees with the recommendation of the MoC and chooses not to levy any ADD, in such a case the MoF publishes its conclusions regarding the disagreement. However, as a matter of convention, the MoF does not set out the reasons as to why it disagrees with the recommendations and findings of the MoC. It is at this stage that the issue arises because a decision not to levy ADD can also cause prejudice to certain persons.

The precise issue to be answered is whether there is a right of appeal in the event MoF rejects the recommendations of the MoC and decides not to levy ADD.

  1. Appreciating the appellate mechanism for anti-dumping duty

This takes us to legal framework relating to CESTAT as the Appellate Tribunal. Though CESTAT is constituted under the 1962 Act, it is also the Appellate Tribunal for the purposes of ADD. Section 129-B of the 1962 Act provides for the remedy of appeal before the CESTAT in respect of a matters arising in relation to customs law. There is, however, a distinct provision for appeal in relation to ADD. The difference between the scope of two provisions is stark and accordingly warrants a closer review.

Section 129-B of the 1962 Act provides for the appellate remedy against “any order” passed by the specified officer of customs.[3] This is, however, not the case with Section 9-C of the 1975 Act which provides for an appeal remedy before CESTAT in relation to the ADD. In this situation, the appeal provision permits an appeal only “against an order of determination or review” in relation to ADD.[4]

In the aforesaid background, a question has arisen as to whether an appeal can be filed before the CESTAT in a situation where the MoC recommends for levy of ADD but the MoF decides to the contrary and does not levy ADD. Before that, one may ask, why does the issue of filing of appeal even arises when no ADD is levied. This is an interesting question, the response to which lies in appreciating the scheme of ADD. There are multiple interested parties in an ADD contest. As noted above, ADD is a trade protection measure invoked by an importing country the situation of dumping is not conducive to its interests. This is because dumping hurts the domestic industry of the importing country engaged in the manufacture or trade of such goods which have been dumped from abroad. Thus, in a situation where the MoC has concluded and recommended upon the levy of ADD, it implies that there is indeed dumping of goods being carried out in India by the exporters of another country which is creating injury to the domestic industry of India. Thus, in a situation where the MoF disagrees with the recommendation made by the MoC to levy ADD, the view of MoF prejudices the interests of the domestic industry of India insofar as no ADD would be imposed despite the conclusion by the MoC that such ADD is warranted in order to protect the interests of the domestic industry. In such a circumstance, therefore, it is obvious to expect that the domestic industry would be aggrieved by the decision of MoF not to impose ADD and may like to claim legal remedies against the refusal of the MoF to impose ADD. This takes us to the conjoint questions, whether CESTAT has jurisdiction in such a situation and whether the domestic industry (being an aggrieved party) can successfully prosecute an appeal against the MoF’s refusal to levy ADD.

  1. Stock-taking the rival contentions and the current position

There are certain well-settled legal aspects regarding right to appeal; (a) an appeal is a creature of statute; (b) there is no inherent right to file an appeal; (c) a remedy by way of appeal must be specifically provided by law; and (d) no appeal is maintainable in the absence of a specific law providing for an appeal remedy.[5]

Applying this standard, a view has arisen that there is no right of appeal in a situation where the MoF refuses to levy ADD. The proponents of this view indicate two broad reasons to substantiate their position; (a) Section 9-C of the 1975 Act which provides the appellate remedy is limited to a situation where there is an “order of determination or review” in relation to ADD whereas no such order exists in wake of MoF’s refusal to accede to the views of the MoC; and (b) Section 9-C of the 1975 Act, which is specific to ADD, is at contrast with the appeal provision relating to customs duty under the 1962 Act. Under the latter, any person aggrieved has the right to file an appeal against any order passed by the specified customs officer. The contrast between the two provisions is crucial and determinative because this implies that a person being aggrieved is irrelevant under the 1975 Act, and also there is no right of appeal against every order of MoF. Accordingly it is argued that there is no legislative intent to provide for an appeal against MoF’s refusal to impose ADD.

Conversely, those carrying the opposite view contend that the refusal of the MoF to impose ADD despite a positive recommendation of the MoC warrants a judicial review and the appeal mechanism cannot be made defunct by the MoF’s refusal to provide reasons for its disagreement with the detailed findings of the MoC. The proponents of this view highlight that the constitutional scheme neither permits any wing of the Government to act unilaterally or arbitrarily so as to trample upon the legal rights of the citizens nor can the government’s decisions affect the citizens without being substantiated with valid rationale and adequate reasons to support its decision. On this account it is argued that irrespective of the correctness of the view of the MoF that ADD should not be imposed, the MoF does not have an unbridled discretion and it is obliged to give reasons for its decision not to impose ADD. Such reasons it is further contended, must be also subjected to judicial review as non-levy of ADD (particularly when one wing of the Government has concluded and recommended levy of ADD) has serious consequences and severely prejudices the affected domestic industry.

It is crucial to note that the aforesaid discussion and the rival positions are not a hypothetical or mere academic inquiry and in fact have received judicial advertence. In Jindal Poly Film Ltd. v. Designated Authority[6] the Delhi High Court by way of a detailed order rejected a writ petition (as non-maintainable) against refusal of the MoF to levy ADD being of the view that even in such a situation an appeal was maintainable before the CESTAT.[7] This order of the High Court was premised principally upon the conclusion that the refusal of the MoF to levy ADD also constitutes an “order of determination” and thus appeal is indeed maintainable. This order actually reversed the tide as prior to this delineation by the Delhi High Court, the CESTAT was taking a consistent view that no appeal is maintainable when no ADD is levied by the MoF.[8]

The High Court’s exposition of the statutory provisions, however, appears not to have extinguished the debate. For illustration, the Government continues to hold the view that an order of the MoF refusing to levy ADD cannot be subjected to appeal before the Appellate Tribunal. This view of the Government has been noted by the Appellate Tribunal but only to be rejected.[9] However, at this stage, it is not clear if the Government has accepted the position emanating from the legal exposition of the Delhi High Court or would seek the final view by way of appeal to Supreme Court. Thus, as of date, precarious tranquillity prevails on the lis and the aggrieved domestic industry.

  1. Factoring the policy considerations

It is critical to note that the determination whether or not an appeal lies against the MoF’s decision not to levy ADD does not depend only on the interpretation of Section 9-C of the 1975 Act. Instead, there are multiple policy considerations which are relevant in order to arrive at a balanced position. Some of these are enlisted below:

  • The 1995 Rules provide the statutory framework for the levy of ADD. Of these, Rule 18 is relevant for the purpose of our inquiry. It states that “[t]he Central Government may, within three months of the date of publication of final findings by the designated authority under Rule 17, impose by notification in the Official Gazette, … anti-dumping duty ….” Two aspects of this provision are relevant. First, there is no obligation upon the Central Government to impose ADD as Rule 18 states “may”. The contours of this expression are well settled, especially when contrasted from the expression “shall”, which is also frequently employed[10] in the 1995 Rules. Put differently, there is no obligation upon the Government to impose ADD and instead it is the discretion of the Government to impose a tax. Thus, the necessity for judicial review is doubtful. Second, Rule 18 clearly delineates the position of MoC vis-à-vis MoF. The MoC, acting through the DGTR is referred only as the “designated authority” in the 1995 Rules whereas it is the MoF which acts as the “Central Government” in the setting of Rule 18. Thus, the decision to levy or not to levy the ADD is of the MoF and no legal consequences should arise from the determination and recommendations of the MoC alone.
  • In addition to the aforesaid aspect a critical and noteworthy aspect is that ADD is a tax. Under the constitutional scheme, the judiciary is certainly competent to annul a tax liability or even quash the statutory provision levying a tax. However, it is doubtful if the judiciary can direct the Government to issue a particular notification[11] or levy the tax itself. Equally, levy of tax is policy matter where is generally beyond the judicial prowess, especially in the fiscal realm.[12] In fact, in the very context of ADD, there are decisions to support that levy of ADD is a legislative function.[13]
  • The decision of the Gujarat High Court in Alembic[14] provides an added perspective insofar as it highlights the limited role of MoC and the larger balancing rule of MoF in the context of ADD so as to approve the MoF’s exclusive role by enumerating a host of factors which require appreciation. One of these overwhelming reasons assigned by the High Court to approve independent role and overriding authority of the MoF relates to the finer distinction between the role of MoF and the MoC. According to the High Court, the role of MoC is limited and “specific, to ascertain existence, degree and effect of any alleged dumping and various factors connected therewith”. In comparison, the role of MoF is much wider as it needs to appreciate a “[n]umber of other questions of larger public interest such as possible impact of ADD on other industries, on consumption, on supply, etc. of such articles may not possibly be within the purview of designated authority while carrying out investigation envisaged under the rules”. Hence, the statutory provisions should not be interpreted in a manner which renders MoF to “be oblivious of all such factors and once through mathematical exercise, task of ascertaining extent of dumping and causal injury to the domestic industry is completed, necessarily to such extent, ADD must follow. Any such proposition would be putting the Central Government into too straitjacket a situation wherein on a mere ascertainment of dumping and its impact on domestic industry, the Government in all cases invariably be bound to impose duty irrespective of fact that such imposition may for valid reasons found to be not in public interest”.
  • The decision in Alembic[15] is also relevant from the perspective of the wide-ranging non-legal variables which form the MoF’s zone of consideration while evaluating MoC’s recommendations. In this case the MoF defended non-levy of ADD inter alia citing lack of domestic industry’s capacity to address the local demand, which defence was accepted by the High Court. Courts are clearly not the best forums for adjudication of such economic and financial variables.[16]
  • Also relevant is the perspective that there are inherent differences in scope and approach of judicial review between an appeal remedy before the CESTAT versus a writ petition before the High Court. This is because it is well settled that the appellate forum is obliged to examine validity of appeal and all antecedents to it, including review of all aspects relating to the order challenged before it.[17] This scope of appeal is at contrast with the scope of inquiry in a writ petition wherein the High Court generally has a limited scope to address violation of constitutional rights or legal errors without adverting to disputed questions of facts. Thus, pragmatically there is a significant distinction in the standard of judicial review by CESTAT in appeal vis-à-vis High Court in writ petition. Thus, there is added reason to determine the correct forum to address propriety of MoF’s refusal to levy ADD.
  • In any case, the scheme of appeal before the CESTAT in an ADD dispute is also peculiar. Unlike the provision under the 1962 Act which confers wide powers upon the CESTAT, limited powers are vested in the CESTAT under the 1975 Act in respect of ADD disputes. To elaborate, Section 9-C(4) of the 1975 Act states that “the provisions of sub-sections (1), (2), (5) and (6) of Section 129-C of the Customs Act, 1962 shall apply to the Appellate Tribunal in the discharge of its functions under this Act as they apply to it in the discharge of its functions under the Customs Act, 1962”. Section 129-C of the 1962 Act, however, has clauses (1) to (8). Thus, clauses (7) and (8) of Section 129-C of the 1962 Act do not apply to CESTAT while considering ADD appeals under Section 9-C of the 1975 Act. This has a crucial relevance because clause (7) vests the powers of a civil court in the CESTAT thereby authorising it to pass orders for “(a) discovery and inspection; (b) enforcing the attendance of any person and examining him on oath; (c) compelling the production of books of account and other documents; and (d) issuing commissions”. Clause (8) deems “any proceeding before the Appellate Tribunal … to be a judicial proceeding within the meaning of Sections 193 and 228 and for the purpose of Section 196 of the Penal Code”. By exclusion of these clauses (7) and (8), therefore, the 1975 Act has severely restricted the powers and scope of inquiry by the CESTAT. Does this aspect manifest the legislative intent of a limited scope of review by the CESTAT in ADD matters generally?

8. Conclusion

The aforesaid discussion, even though hinged upon the interpretation of statutory provisions governing appeal in ADD matters, reveals the complexities which are inherent in tax policy. Viewed from the judicial perspective, the observations of the Delhi High Court and the CESTAT’s current outlook appear to be a reasonable interpretation to subject MoF’s refusal to levy ADD within the appellate framework. However, examined from the larger policy perspective, many other variables require appreciation in order to arrive at a balanced conclusion which takes into consideration the innate limitations of a judicial review whether to impose a tax, such as the ADD. One would hope that the debate attains a quietude sooner than later, given the larger implications the conclusion has on the role of judiciary in rejudging the government’s decision not to levy a tax.

 


Tarun Jain, Advocate, Supreme Court of India; LLM (Taxation), London School of Economics

[1] Available HERE

[2] Commr. of Customs v. G.M. Exports, (2016) 1 SCC 91.

[3] S. 129-B of the Customs Act, 1962, providing for “appeals to the Appellate Tribunal” inter alia states that “any person aggrieved by any of the following orders may appeal to the Appellate Tribunal against such order ….”

[4] S. 9-C(1) of the Customs Tariff Act, 1975, providing for “appeals” states that “an appeal against the order of determination or review thereof shall lie to the Customs, Excise and Service Tax Appellate Tribunal constituted under S. 129 of the Customs Act, 1962 (hereinafter referred to as “the Appellate Tribunal”), in respect of the existence, degree and effect of – (i) any subsidy or dumping in relation to import of any article; or (ii) import of any article into India in such increased quantities and under such condition so as to cause or threatening to cause serious injury to domestic industry requiring imposition of safeguard duty in relation to import of that article”.

[5] See generally, Raj Kumar Shivhare v. Directorate of Enforcement, (2010) 4 SCC 772.

[6] 2018 SCC OnLine Del 11395 : (2018) 362 ELT 994.

[7] 2018 SCC Online Del 11395 : (2018) 362 ELT 994.

[8] For illustration, see SI Group India (P) Ltd. v. Designated Authority Anti-Dumping Appeal No. 50456 of 2017, decided by CESTAT, Delhi on 17-8-2017 vide Final Order No. 56445 of 2017, following Panasonic Energy India Co. Ltd. v. Union of India Anti-Dumping Appeal No. 50452 of 2017 decided by CESTAT, Delhi on 20-7-2017 vide Final Order No. 55305 of 2017.

[9] Jubilant Ingrevia Ltd. v. Union of India, Anti-Dumping Appeal No. 50461 of 021, decided by CESTAT, Delhi on 27-10-2021 vide Final Order No. 51988 of 2021. This final order has been followed subsequently by the CESTAT in Assn. of Chloromethanes Manufacturers REGUS v. Union of India, 2021 SCC OnLine CESTAT 2622 and SI Group India (P) Ltd. v. Union of India, 2021 SCC OnLine CESTAT 2623.

[10] For illustration, Rule 4 states that “[i]t shall be the duty of the designated authority, in accordance with these rules, ….” As another illustration, Rule 5 states, “the designated authority shall initiate an investigation to determine the existence, degree and effect of any alleged dumping only upon receipt of a written application by or on behalf of the domestic industry”.

[11] See generally Mangalam Organics Ltd. v. Union of India, (2017) 7 SCC 221.

[12] See generally, Federation of Railway Officers Assn. v. Union of India, (2003) 4 SCC 289 inter alia observing that “[i]n examining a question of this nature where a policy is evolved by the government judicial review thereof is limited. When policy according to which or the purpose for which discretion is to be exercised is clearly expressed in the statute, it cannot be said to be an unrestricted discretion. On matters affecting policy and requiring technical expertise court would leave the matter for decision of those who are qualified to address the issues. Unless the policy or action is inconsistent with the Constitution and the laws or arbitrary or irrational or abuse of the power, the court will not interfere with such matters”.

[13] This aspect, however, is a debatable proposition. For rival positions, see generally, Haridas Exports v. All India Float Glass Manufacturers’ Assn., (2002) 6 SCC 600 and Reliance Industries Ltd. v. Designated Authority, (2006) 10 SCC 368.

[14] Alembic Ltd. v. Union of India, 2011 SCC OnLine Guj 7686.

[15] 2011 SCC OnLine Guj 7686.

[16] See generally, Manohar Lal Sharma v. Narendra Damodardas Modi, (2019) 3 SCC 25.

[17] Kapurchand Shrimal v. CIT, (1981) 4 SCC 317.

Case BriefsSupreme Court

Supreme Court: The bench of UU Lalit and S. Ravindra Bhat*, JJ has held that whether corporate death of an entity upon amalgamation per se invalidates a tax assessment order ordinarily cannot be determined on a bare application of Section 481 of the Companies Act, 1956 (and its equivalent in the 2013 Act), but would depend on the terms of the amalgamation and the facts of each case.

Facts Background

The Court was deciding an appeal against the order of the Delhi High Court rejecting the appeal, by the revenue and affirming the order of the Income Tax Appellate Tribunal (ITAT) which quashed the assessment order against the assessee Mahagun Realtors Private Limited (MRPL).

MRPL, a real estate company, amalgamated with Mahagun India Private Limited (MIPL) on 01.04.2006. The Assessing Officer (AO), issued an assessment order on 11.08.2011, assessing the income of ₹ 8,62,85,332/- after making several additions of ₹ 6,47,00,972/- under various heads. The assessment order showed the assessee as “Mahagun Relators Private Ltd, represented by Mahagun India Private Ltd”.

It was argued before the Court that the assessment framed in the name of amalgamating company which was ceased to exist in law, was invalid and untenable in terms of Section 170(2) of the Income Tax Act, 1961.

Analysis

Section 170 of Income Tax Act, inter alia, provides that where a person carries on any business or profession and is succeeded (to such business) by some other person (i.e., the successor), the predecessor shall be assessed to the extent of income accruing in the previous year in which the succession took place, and the successor shall be assessed in respect of income of the previous year in respect of the income of the previous year after the date of succession.

Further, there are not less than 100 instances under the Income Tax Act, wherein the event of amalgamation, the method of treatment of a particular subject matter is expressly indicated in the provisions of the Act. In some instances, amalgamation results in withdrawal of a special benefit (such as an area exemption under Section 80IA) – because it is entity or unit specific. In the case of carry forward of losses and profits, a nuanced approach has been indicated. All these provisions support the idea that the enterprise or the undertaking, and the business of the amalgamated company continues. The beneficial treatment, in the form of set-off, deductions (in proportion to the period the transferee was in existence, vis-à-vis the transfer to the transferee company); carry forward of loss, depreciation, all bear out that under the Act, (a) the business-including the rights, assets and liabilities of the transferor company do not cease, but continue as that of the transferor company; (b) by deeming fiction through several provisions of the Act, the treatment of various issues, is such that the transferee is deemed to carry on the enterprise as that of the transferor.

The amalgamation of two or more entities with an existing company or with a company created anew was provided for, statutorily, under the old Companies Act, 1956, under Section 394 (1) (a). Section 394 empowered the court to approve schemes proposing amalgamation, and oversee the various steps and procedures that had to be undertaken for that purpose, including the apportionment of and devolution of assets and liabilities, etc.

Reading Section 394 (2) of the Companies Act, 1956, Section 2 (1A) and various other provisions of the Income Tax Act together, the Court reached to the conclusion that despite amalgamation, the business, enterprise and undertaking of the transferee or amalgamated company- which ceases to exist, after amalgamation, is treated as a continuing one, and any benefits, by way of carry forward of losses (of the transferor company), depreciation, etc., are allowed to the transferee. Therefore, unlike a winding up, there is no end to the enterprise, with the entity. The enterprise in the case of amalgamation, continues.

The Court observed,

“Amalgamation, thus, is unlike the winding up of a corporate entity. In the case of amalgamation, the outer shell of the corporate entity is undoubtedly destroyed; it ceases to exist. Yet, in every other sense of the term, the corporate venture continues – enfolded within the new or the existing transferee entity. In other words, the business and the adventure lives on but within a new corporate residence, i.e., the transferee company. It is, therefore, essential to look beyond the mere concept of destruction of corporate entity which brings to an end or terminates any assessment proceedings. There are analogies in civil law and procedure where upon amalgamation, the cause of action or the complaint does not per se cease – depending of course, upon the structure and objective of enactment. Broadly, the quest of legal systems and courts has been to locate if a successor or representative exists in relation to the particular cause or action, upon whom the assets might have devolved or upon whom the liability in the event it is adjudicated, would fall.”

Ruling on facts

The Court specifically noticed that, in the present case,

  • The amalgamation was known to the assessee, even at the stage when the search and seizure operations took place, as well as statements were recorded by the revenue of the directors and managing director of the group.
  • A return was filed, pursuant to notice, which suppressed the fact of amalgamation; on the contrary, the return was of MRPL. Though that entity ceased to be in existence, in law, yet, appeals were filed on its behalf before the CIT, and a cross appeal was filed before ITAT.
  • Even the affidavit before the Supreme Court was on behalf of the director of MRPL.
  • The assessment order painstakingly attributed specific amounts surrendered by MRPL, and after considering the special auditor’s report, brought specific amounts to tax, in the search assessment order.

The Court was, hence, of the opinion that all the aforementioned points clearly indicated that the order adopted a particular method of expressing the tax liability. The AO, on the other hand, had the option of making a common order, with MIPL as the assessee, but containing separate parts, relating to the different transferor companies (Mahagun Developers Ltd., Mahagun Realtors Pvt. Ltd., Universal Advertising Pvt. Ltd., ADR Home Décor Pvt. Ltd.).

“The mere choice of the AO in issuing a separate order in respect of MRPL, in these circumstances, cannot nullify it.”

Right from the time it was issued, and at all stages of various proceedings, the parties concerned (i.e., MIPL) treated it to be in respect of the transferee company (MIPL) by virtue of the amalgamation order – and Section 394 (2). Furthermore, it would be anybody’s guess, if any refund were due, as to whether MIPL would then say that it is not entitled to it, because the refund order would be issued in favour of a non-existing company (MRPL).

Having regard to all these reasons, the Court held that the conduct of the assessee, commencing from the date the search took place, and before all forums, reflects that it consistently held itself out as the assessee.

[Principal Commissioner of Income Tax v. Mahagun Realtors (P) Ltd, 2022 SCC OnLine SC 407, decided on 05.04.2022]


*Judgment by: Justice S. Ravindra Bhat


Counsels

For Petitioner: Advocate Raj Bahadur Yadav

For respondents: Advocate Kavita Jha

Case BriefsHigh Courts

Calcutta High Court: The Division Bench of T. S. Sivagnanam and Hiranmay Bhattacharyya, JJ., dismissed an appeal and connected application which was filed by the State against  the order of detention passed by the authority detaining two trucks containing consignment of steel and other products in WPA 17611 of 2021 dated: 07-12-2021 wherein petitioner was the wife of late Mohit Madhogoria, who was a registered dealer under the provisions of the W.B.V.A.T. Act presently under the GST Act.

The Single Judge in the impugned order had directed the release of the goods along with vehicle taking note of the fact that the appellant who was the wife of the deceased dealer had paid 100% of the disputed tax and further 10% of the disputed tax. The Single Judge had concluded that the fact that as of now the GST Tribunal was not functional and had the avenue of appeal been available to the appellant, the appellant would have been required to pay 100% of the admitted tax and 10% of the disputed tax for her appeal to be entertained.

Counsel for the State strenuously contended that in terms of Section 129 of the CGST Act, 2017, the penalty would be 200% of the tax and since the appellant was not a registered dealer, the revenue could not take steps to recover the balance and, therefore, the appellant should be put on further terms by directing her to execute a bond and also other means to secure the interest of revenue.

Counsel for the respondent submitted that the respondent’s husband was a registered dealer under the GST Act and he had an untimely death and the respondent was taking steps to register herself as a dealer in the place of her husband and as on date she has stepped into the shoes of her husband drawing attention of the Court to Section 93 of the W.B.GST Act, 2017 which speaks of the liability of the legal representatives of the other persons in the case of death of a registered dealer.

Court was of the view that technical objection raised by the appellant had to be agitated before the Single Judge as the appellant has been given an opportunity to file an affidavit-in-opposition.

The Court had to decide whether the interest of revenue had been reasonably safeguarded to which the Court opined that the respondent having paid the 100% of the admitted tax and further 10% of the disputed tax, the interest of revenue has been safeguarded, for the present. The court however clarified that this order shall not be treated as laying down a legal principle or treated as a precedent as this court had not interpreted the provisions of Section 129 of the Act and rendered this decision but it was based on the fact that respondent was the wife of the deceased dealer and also that she was yet to be formally recognized as a dealer by substituting her name in the Registration Certificate for which specified procedure had to be followed.

The instant appeal and the connected application was dismissed.[Deputy Commissioner v. Nidhi Madhogaria, MAT 1332 of 2021, decided on 18-02-2022]


Mr A. Ray, G.P., Mr T. M. Siddiqui, Mr Debasish Ghosh… for the appellant State

Ms Rita Mukherjee, Mr Rowsan Kumar Jha, Mr Abhijat Das… for the respondent


Suchita Shukla, Editorial Assistant has reported this brief.

Case BriefsTribunals/Commissions/Regulatory Bodies

West Bengal Taxation Tribunal: The Coram of Justice Malay Marut Banerjee (Chairman) and Suranjan Kundu (Judicial Member) and Chanchalmal Bachhawat (Technical Member), expressed that, Article 304(a) frowns upon discrimination (of a hostile nature in the protectionist sense) and not on mere differentiation.

In order to implement a uniform tax structure effectively, both Union and States had to surrender some of their erstwhile exclusive fields of taxation and there was a realignment of the legislative power of the Union and the States.

Background

The petitioners have challenged the vires of the West Bengal Finance Act 2017 on grounds such as lack of legislative competency, discrimination, the impossibility of its successful implementation and so on.

Various petitions were filed before the Calcutta High Court seeking instructions on various situations so arose after the verdict of the Single Bench declaring the Entry Tax ultra vires was passed on 24-6-2013.

Issues:

(a) Is there any stay of the Judgment date 24-6-2013 by which the Entry Tax Act 2012 was declared void and unconstitutional? And if not, then can such Act be amended during the period when the appeal challenging the said Judgment is pending and is not yet reversed?

(b) (i) After deletion of Entry No. 52 from the State list of 7th schedule of the Constitution, has the State Legislature absolutely lost its legislative competency to amend the Entry Tax Act with a view to making it non- discriminatory with retrospective effect?

(ii) If not then whether Section 19 of the C.A. Act 2016 has conferred the said power to the State Legislature?

(c) Do Sections 5 & 6 of the Amending Act 2017 withstand the test of Article 304(a) of the Constitution?

(d) Is the retrospective imposition of Entry Tax with effect from 01-04-12 by Sections 5 & 6 of the Amending Act 2017 permissible in law?

(e) Is the Amending Act 2017 violative of Article 14 and Article 19(i)(g) of the Constitution?

Decision

Issue 14 (a)

“Once a provision has been declared ultra vires, the State cannot invoke that the said ultra vires proceedings against the citizen of the country, simply because interim order has been passed in an appeal.”

Adding to the above observation, the tribunal stated that during the period of appeal an Act already declared void can at best be considered voidable, but the said Act cannot be revived in a detour way.

Bench stated that in the present case State Legislature increased the tax liability of the existing assesses, by creating new class of assesses with the ostensible reason to make it non-discriminatory and all that happened when the verdict declared it unconstitutional and existed unreversed by the higher forum.

Tribunal opined that the State Legislature should not have amended the Entry Tax Act 2012 which was declared unconstitutional, and which is not yet reversed.

“…this amendment is premature and smacks of mis-adventure despite the fact that interim order was granted with some conditions.”

Issue 4(b)(i)

Bench stated that as to how the State Legislature obtained power to amend in the field of Entry Tax when the same was deleted, AG did not enlighten the Court any further except Section 19 of the C.A Act 2016.

In order to promote GST both the Centre and State Governments had to surrender some of their filed of taxation.

Bench noted that Entry 52 was dropped permanently so that the State Legislature cannot make any law in the field of entry of goods into local area for consumption, use and sale therein.

Further, the Tribunal remarked that,

Entry 52 having been omitted there is no vestige of power left with State Legislature to legislate or amend the law in Entry tax matter and this loss is absolute and final. 

Issue 4(b)(ii)

On bare reading of Section 19 of the C.A Act 2016 the following characteristics can be noted:

(a) it deals with those provisions which relates to tax on goods or services or both.

(b) which are in force in any State on 16.09.16,

(c) which are also inconsistent with the purpose / goal for which C.A Act 2016 was enacted.

(d) which will continue to be in force for one year up to 15.09.17

Or (e) until amended or repealed which ever is earlier.

(f) by competent Legislature or competent Authority.

Bench laid down its observation that, once a law was declared void and its appeal was pending, the State legislature, however laudable the purpose may be, without legislative competency cannot amend the same with retrospective effect.

Hence, the Tribunal found that Entry 52 of list II was a spoilsport, the presence of which would have obviously marred the successful implementation of GST.

In the present case, State Legislature had nothing left for amendment of Entry Tax Matter and it had no option.

Moving further, it was expressed that Entry 54 of the State list was not entirely deleted but was substituted and therefore, the power to frame legislation under Entry 54 was retained albeit in a truncated form.

The State Legislature lost some of their erstwhile fields of taxation for ever and retained some in changed form. Section 19 has conferred limited legislative power within a prescribed period to amend those entries of State list which were substituted / truncated / partially changed.

Sections 5 and 6 of Amending Act 2017 (West Bengal Finance Act 2017 enacted on 06.03.2017) is unconstitutional and non est in the eyes of law, having no legal effect being beyond the Legislative competence of the State of West Bengal.

Tribunal held that the State of West Bengal had no legislative competency to introduce Sections 5 and 6 of West Bengal Finance Act 2017 and the said provisions are hereby declared ultra vires and unconstitutional.

State of West Bengal had no legislative competency to introduce sec. 5 and 6 of West Bengal Finance Act, 2017 with effect from 1st July, 2017 and therefore the said provisions are ultra vires and unconstitutional,

“…advocates for the petitioners that such an attempt is a sham and futile because in view of the provision of limitation in the old Act of 2012 such new classes of assesses could never be assessed to Entry Tax.”

Lastly, the Bench held that,

Even assuming for a moment that the West Bengal Entry Tax Act was not struck down by any judgment of the High Court can it be said that the amendment introduced retrospectively and validation of the Act by way of introducing Finance Act of 2017 is within the legislative competence of the State Government?

Having regard to the deletion of Entry 52 of the State List and bearing in mind the provision contained in Article 265 of the Constitution we are impelled to hold that the State Legislature did not have the legislative competence to bring in such amendment insofar as it relates to the West Bengal Tax on Entry of Goods into Local Areas Act, 2012 

Therefore, Section 5 & Section 6 of the West Bengal Finance Act, 2017 are ultra-vires and unconstitutional. [Tata Steel Ltd. v. State of W.B., Case No. RN-08 of 2018, decided on 25-3-2022]


For Applicant(s) : Mr. Kavin Gulati, Ld. Advocate, Mr. Ajay Aggarwal, Ld. Advocate, Mr. Sumeet Gadodia, Ld. Advocate, Mr. Avra Mazumder, Ld. Advocate, Mr. Ananda Sen, Ld. Advocate,

Mr. Boudhayan Bhattacharyya, Ld. Advocate, Mr. Jaweid Ahmed Khan, Ld. Advocate,
Mr. Puneet Agarawal, Ld. Advocate,
Mr. Sandip Choraria, Ld. Advocate,

Mr. Anil Kumar Dugar, Ld. Advocate, Mr. Somak Basu, Ld. Advocate,
Dr Samir Chakraborty, Ld. Advocate, Mr. Sujit Ghosh, Ld.Advocate,

Mr. Atish Chakroborty, Ld.Advocate, Mr. Pujon Chatterjee, Ld. Advocate Mr. Piyal Gupta, Ld. Advocate.

For Respondent(s):Mr. Soumendra Nath Mookerjee, Ld. Advocate General, Government of West Bengal, with
Mr. Soumitra Mukherjee, Ld. Advocate,
Mrs. Maitree Sen,

Mrs. Pampa Sur,
Md. Zafarullah,
Mr. Debashis Ghosh, State Representative(s)