Case BriefsSupreme Court

Supreme Court: The Division Bench of Justice M.R. Shah and B.V. Nagarathna, JJ., affirmed the decision of Delhi High Court wherein the High Court had rejected an hawker’s claim to be permitted to leave his goods and wares at hawking place overnight.

The petitioner was a hawker in the Sarojini Nagar Market, who had approached the Delhi High Court seeking permission to leave his goods and wares at the place of hawking overnight.

Affirming the view expressed by the High Court, the Bench stated that any hawker can be permitted to hawk in the market only as per the hawking policy and not de hors the same. The Bench held that the petitioner, being a hawker, has no right to insist that he may be permitted to keep his goods and wares at the place where he is hawking overnight.

Directing the authority concerned to act as per the hawking policy, the Bench dismissed the instant Special Leave Petition.

[Madan Lal v. New Delhi Municipal Council, SLA (C) No(s). 5684 of 2022, decided on 11-04-2022]


Appearance by:

For the Petitioner: N.K. Sahoo, Advocate and Ranvir Singh, AOR


Kamini Sharma, Editorial Assistant has put this report together

Experts CornerTarun Jain (Tax Practitioner)

  1. Introduction: Setting the context

 

The doctrine of “clean hands”[1] has been influencing exercise of judicial discretion in India for long, the common law tradition being the inspiration. So much so that it is arguably an axiomatic proposition in Indian jurisprudence. Originally an equitable principle, though not without exceptions[2], the doctrine has found its feet in India and has been successfully transposed in various as judicial dimensions. For instance, it has been deployed as a filter to screen public interest litigations,[3] besides being a paramount disqualifying criteria for exercise of extraordinary writ jurisdiction[4]. The doctrine has, since, metamorphosed into various other dimensions which are deployed as a ground to refuse judicial redress.

 

In this context, this article reviews five decisions of the Supreme Court released in this first quarter of the calendar year 2022, to reflect upon the judicial attitude which has unrestrainedly applied the expanded version of this doctrine to deny relief to the claimants. The foremost criteria for choice of these decisions is pedestaled on the fact that in all these cases the State instrumentalities were the defendants. The intent of the analysis is to test the hypothesis that there is a change in the judicial stance insofar balancing of equities versus the constitutional and legal obligations of the State instrumentalities is concerned.

 

Unarguably, some of the propositions emerging from the decisions examined in this article are not novel. However, the premise of this article is to highlight how the expanded version of the clean hands doctrine is being allowed to give leeway to the State through complete judicial abstinence to scrutinising the propriety of State instrumentalities. Through these case studies, the article argues that the application of the expanded contours of the doctrine implies that the resultant propositions may soon claim a near axiomatic status.

 

  1. Venus Stampings – Overriding legal stipulations to arrest hoodwinking tactics

The facts and outcome in Venus Stampings (P) Ltd. v. CCE[5] make an interesting case study, even though the decision of the Supreme Court and the impugned order of the Appellate Tribunal were rather brief. In order to appreciate the issue, a brief background on the “valuation” related provisions under the central excise law is relevant. Central excise is a tax on “manufacture” of goods. The tax collection, however, is deferred till the clearance of the goods from the factory. The statute provides for two different valuation methodologies. Originally the levy of Central Excise duty was computed on the basis of actual selling price of such manufactured goods. In the 1980s, an additional valuation methodology was introduced whereby the central excise duty began to be computed on the basis of the maximum retail price (MRP) of certain notified goods. The validity of this new methodology was upheld by the Supreme Court[6] and since then the two valuation methodologies i.e. one on actual selling price (referred as “Section 4 valuation”) and other on MRP basis (referred as “Section 4-A valuation”) have been in parallelly in vogue. The critical aspect is that these methodologies are mutually exclusive and once a particular commodity has been notified for MRP based valuation, the actual selling price as a basis for valuation becomes irrelevant.

In Venus Stamping[7], the issue related to sale of a commodity which was notified for MRP based valuation. However, in reality the commodity was being sold at a price more than MRP; the actual sale price being 830 whereas the declared MRP was only 675. Venus took a view that owing to the Section 4-A notification the Tax Department was obliged to compute the central excise duty only on the MRP without recourse to the actual sale price. This view was contested by the tax authorities who insisted upon ignoring the MRP because the actual sale price was much higher than the MRP. In a short order[8] the Appellate Tribunal concluded that the actual sale price being much higher implied that MRP “has no relevance”. Thus, the Appellate Tribunal ignored the legal stipulations of Section 4-A valuation in the wake of unacceptable factual position adopted by Venus.

 

The decision of the Supreme Court was shorter than that of the Appellate Tribunal and confirmed the latter’s views with an additional reason. The Supreme Court opined that Section 4-A valuation preceded on the premise of “retail price” and thus where the actual sale price was more than the stipulated MPR, the MRP lost its relevance as the “retail price”. Thus the Supreme Court rejected the taxpayer’s argument “that the mandate of Section 4-A(2) obligates the taxing authority to assess the excise duty only in reference to the market selling price printed on the packing of the product”.

 

Even though the decisions of both the Appellate Tribunal and the Supreme Court are silent on the aspect of the conduct of the taxpayer, both clearly evidence the displeasure at the hoodwinking tactics employed by the taxpayer to reduce the tax incidence. This is because under law the taxpayer is obliged to predetermine and notify the MRP while also ensuring that the sale price does not exceed MRP. Thus, by selling the goods above the MRP the taxpayer was already committing a legal violation and it was in the teeth of such unacceptable (in fact illegal) conduct that the taxpayer argued that the tax authorities must nonetheless accept the MRP. The judicial approach in this case in declining to adopt a purely technical interpretation of the tax law confirms that it would not shy away from overriding legal stipulations to address untenable conduct, notwithstanding the general non-application of equity or morality in the canons of tax law[9].

 

  1. Devas – Fraud as a vitiating variable to override to all claims against the State

With the decision in Devas Multimedia (P) Ltd. v. Antrix Corpn. Ltd.[10] there is no better contemporary precedent to support the proposition that fraud vitiates everything because this decision dissects the legal theory and reflects the pragmatic variables which influence judicial choices and determine the real treatment to be meted to legal claims. Even though this case arose in the context of company law, the decision is essentially in the public law realm as it was a challenge to correctness of approach and motive underlying the government’s decision on corporate winding up. If one were to exclude a rather large part of the decision which interprets company law provisions relating to winding up, the factual part of the decision reveals that it was the overwhelming presence of factual elements which really swayed the Supreme Court in deciding what it decided.

 

In this case the Supreme Court was examining allegations of fraud by the management of Devas, which as a legal entity executed a contract for provision of certain service to a government company. Citing various unacceptable acts of the entity (inter alia being “(i) the offer of a non-existent technology; (ii) misrepresentation about the possession of intellectual property rights over a device; (iii) violation of SATCOM policy; (iv) securing of an experimental licence fraudulently; (v) manipulation of the minutes; and (vi) the trail of money brought in through Foreign Investment Promotion Board (FIPB) approvals”, etc.), the Supreme Court approved the allegations of undue favour being extended to the entity and fraud being perpetrated by it.

 

The Supreme Court engaged in a rather expanded scope of evaluation by refusing to be cowed down by statutory provisions to hold that the review (to determine whether fraud was committed) could not be confined only to that government entity which transacted with the defrauder. Opining that the “principle that fraud vitiates all solemn acts, will itself be rendered nugatory, if the understanding of fraud is confined only to the realm of contract”, the Supreme Court highlighted that there “are cases where a party may perpetrate a fraud either upon non-contracting parties or upon the Government or even upon the courts”. Thus, the entirety of circumstances (and all stakeholders) were held to be relevant in order to assess the allegations of fraudulent conduct.

 

The Supreme Court also did not allow the corporate management to hide under the auditor’s confirmation. It inter alia observed that (a) “auditors are not experts either in criminal law or in the technology that formed the subject-matter of the agreement”; (b) “the auditor’s report can neither be taken as gospel truth nor act as estoppel against the company”; and (c) “statement in the auditor’s report, is as per the information given to them or as per the information culled out to the best of their ability”, and therefore, a clean chit by the auditors does not absolve the corporate management. Discussing event after event and action after action of the entity, which established contumacious conduct, the Supreme Court took head-on the contention of the entity that the impugned order of the Company Tribunal permitting winding up was “completely perverse and erroneous”,[11] only to reject it.

 

Notwithstanding the aforesaid, the real takeaway for our analysis from this decision is the contention of the entity that the winding up initiated by the Government was with an ulterior motive. It was argued before the Supreme Court “that the actual motive behind Antrix seeking the winding up of Devas, is to deprive Devas, of the benefits of an unanimous award passed by the ICC Arbitral Tribunal presided over by a former Chief Justice of India and the two BIT awards and that such attempts on the part of a corporate entity wholly owned by the Government of India would send a wrong message to international investors”. An unimpressed Supreme Court[12] refused to indulge, tersely rejecting this contention with the following observations:

  1. 167. We do not find any merit in the above submission. If as a matter of fact, fraud as projected by Antrix, stands established, the motive behind the victim of fraud, coming up with a petition for winding up, is of no relevance. If the seeds of the commercial relationship between Antrix and Devas were a product of fraud perpetrated by Devas, every part of the plant that grew out of those seeds, such as the agreement, the disputes, arbitral awards, etc., are all infected with the poison of fraud. A product of fraud is in conflict with the public policy of any country including India. The basic notions of morality and justice are always in conflict with fraud and hence the motive behind the action brought by the victim of fraud can never stand as an impediment.
  2. 168. We do not know if the action of Antrix in seeking the winding up of Devas may send a wrong message, to the community of investors. But allowing Devas and its shareholders to reap the benefits of their fraudulent action, may nevertheless send another wrong message, namely, that by adopting fraudulent means and by bringing into India an investment in a sum of INR 579 crores, the investors can hope to get tens of thousands of crores of rupees, even after siphoning off INR 488 crores.

 

Undoubtedly the most critical part of the Supreme Court’s observations is that “every part of the plant that grew out of those seeds … are all infected with the poison of fraud”, which shall render all rights unenforceable because of “a product of fraud [being] in conflict with the public policy of any country including India”. Also evident from the aforesaid is the Supreme Court’s affirmation that “the motive behind the action brought by the victim of fraud can never stand as an impediment”. This unqualified conclusion of the Supreme Court does not make exception or factor that it was the Government’s “motive” which was under challenge. In other words, the presence of fraud is concerned as a sufficient ground to reject an examination of even the actions of the State instrumentality and its propriety on the touchstone of constitutional and other obligations under the law of the realm.

 

  1. Adiraj Manpower – Disdain for camouflage

In Adiraj Manpower Services (P) Ltd. v. CCE[13] the Supreme Court was appraising the correctness of the determination made by the Service Tax Appellate Tribunal (CESTAT) which had declined to extend exemption to Adiraj. The claim for exemption arose in the context of a change in regime in the service tax law. Prior to the change Adiraj was discharging service tax liability, considering itself to be a manpower supplier. After the change in law, a new agreement was executed by Adiraj with the existing customer purportedly claiming a revisit to the terms of engagement and transformation of the service provider relationship as one of manufacturing. By doing so, Adiraj claimed, it became entitled to claim exemption under the changed service tax law which exempted manufacturing activities. This claim, however, was not acceded to by the CESTAT.[14]

 

Dismissing the appeal, the Supreme Court did not just approve of the conclusion of the CESTAT, but it went beyond to record its own factual findings to justify the denial of exemption to Adiraj. Reviewing the contractual stipulations threadbare, the Supreme Court noted with disdain the “fact that the appellant is not a job worker [which] is evident from a conspicuous absence in the agreement of crucial contractual terms which would have been found had it been a true contract for” carrying out manufacturing activity. On its own accord the Supreme Court listed the following five ingredients which were missing in the new agreement i.e. “(i) the nature of the process of work which has to be carried out by the appellant; (ii) provisions for maintaining (a) the quality of work; (b) the nature of the facilities utilised; or (c) the infrastructure deployed to generate the work; (iii) the delivery schedule; (iv) specifications in regard to the work to be performed; and (v) consequences which ensue in the event of a breach of the contractual obligation”. According to the Supreme Court in the absence of these stipulations “it is apparent that the contract is pure and simple a contract for the provision of contract labour”. Not stopping at a mere rejection of the claim, the Supreme Court in Adiraj Manpower[15] proceeded to criticise the actions of Adiraj because it opined that an “attempt has been made [by it] to camouflage the contract as a contract for job work to avail of the exemption from the payment of service tax”.

 

The stance of the Supreme Court, in not merely refusing the claim for exemption but going ahead to characterise the claim as an outcome of abuse, is a rare occurrence in the sphere of fiscal laws, though not unheard of in the jurisprudential sphere. For illustration, the Supreme Court earlier in McDowell & Co. v. CTO [16] gave a sermon on the moral responsibility of the taxpayers to the effect that “[i]t is the obligation of every citizen to pay the taxes honestly without resorting to subterfuges”and in Commr. of Customs v. Phoenix International Ltd.[17] declared that “intention plays an important role in matters in which there is an allegation of duty evasion”. Even though the Supreme Court itself, time and again, has advised against introduction of such moralistic canons in the sphere of tax laws[18] and, more recently, declared that the Tax Department “has no business to second guess commercial or business expediency of what parties at arms length decide for each other”,[19] still decisions like Adiraj Manpower[20] find a way to disturb the precarious tranquillity where the parties’ conduct becomes a relevant parameter for statutory interpretation in the fiscal realm. This is a strong message flowing from this decision which reveals that judiciary continues to detest colourable devices, whose very presence implies that the judicial ruling would favour the State.

 

  1. Apex Labs – Consequence-driven interpretation trumps settled principles of statutory interpretation

In Apex Laboratories (P) Ltd. v. CIT[21] the Supreme Court was concerned with the interpretation of Section 37 of the Income Tax Act, 1961. This provision allows deduction of certain expenses incurred by a business entity for the purpose of computing the income tax liability of such entity. The condition for this provision to apply is that the expenditure must be “laid out wholly and exclusively for the purposes of the business” of the entity. The provision, however, debars expenditure incurred “for any purpose which is an offence or which is prohibited by law”. The issue before the Supreme Court was whether expenses incurred by pharmaceutical and allied healthcare industries for distribution of incentives to medical practitioners could be allowed as deduction. Apex argued before the Supreme Court that though there was a prohibition issued by the Medical Council to the medical professionals from accepting such incentives, there was no corresponding prohibition attached to the pharmaceutical companies from giving such incentive and thus the exception to Section 37 was not attracted. The Supreme Court, however, did not approve the contention and rejected the claim for deduction.

 

What makes the decision in Apex Laboratories[22] relevant in our quest is its emphasis upon a purposive interpretation of the provision to give meaning to the purported legislative intent. The Supreme Court rejected the claim being of the view that the literal reading of the statutory provision, which otherwise is the settled norm in interpretation of fiscal statutes, would result into a “narrow interpretation” of the provision which logically cannot be apprehended as intended by the legislature.[23] The Supreme Court, thereby, refused to “lend its aid to a party that roots its cause of action in an immoral or illegal act”, which in this case was undue influence by the pharmaceutical companies through the incentives to the fiduciary relationship between doctors and their patients. The Supreme Court also observed that “one arm of the law cannot be utilised to defeat the other arm of law – doing so would be opposed to public policy and bring the law into ridicule” besides declaring that it would not sustain the claim for deduction as the “pharmaceutical companies have misused a legislative gap to actively perpetuate the commission of an offence”.

 

The decision in Apex Laboratories[24] is a quintessential illustration to the effect that the ordinary principles of statutory interpretation can be a give a go by in light of blemished conduct of the party contesting against the State. To exemplify this proposition, one must recall the often-quoted restatement of law by Rowlett, J., which has been consistently followed by Indian courts, that “[i]n a taxing Act one has to look merely at what is already said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used”.[25] Thus, applying this strict interpretation standard,[26] the claim of the pharmaceutical companies was well founded. The Supreme Court, however, in Apex Laboratories[27], got over this principle by observing that the “well-settled principle of interpretation of taxing statutes – that they need to be interpreted strictly – cannot sustain when it results into an absurdity contrary to the intentions of the Parliament” and preferred to adopt that meaning which “gave shape to the intent of the lawmakers” after “discerning the social purpose which the specific provision subserves”.

 

The penultimate paragraph of the decision in Apex Laboratories[28] clearly contextualises unworthy conduct as the overwhelming disentitling variable when it inter alia observes, “[i]n the present case too, the incentives (or ‘freebies’) given by Apex, to the doctors, had a direct result of exposing the recipients to the odium of sanctions, leading to a ban on their medical practice” and therefore, the fact that “medical practitioners were forbidden from accepting such gifts, or “freebies” was no less a prohibition on the part of the given, or donor i.e. Apex”.

 

  1. Loop Telecom–Impropriety strips legitimacy of claims for legal entitlements

The decision in Loop Telecom and Trading Ltd. v. Union of India[29] was in a sense another round in a decade old dispute relating to the 2G scam. The genesis of this lis was engrafted by the earlier decision of the Supreme Court in Centre for Public Interest Litigation v. Union of India (CPIL)[30] wherein the government policy on grant of 2G telecom licences and all licences granted in pursuance of the policy were quashed. Pursuant thereto, Loop applied for refund of entry fee paid as a condition for grant of telecom licence to it which since thereafter stood quashed. The propriety of refund claim was the subject-matter of consideration of the Supreme Court in this Loop Telecom[31] decision.

 

Recalling the observations made in the CPIL case[32], the Supreme Court in Loop Telecom[33] refused to hold the Government alone as accountable and absolve Loop “from taint or wrong doing” as the earlier decision “did not exculpate the private business entities who obtained [the licences] and became the beneficiaries” of the government’s actions. Thus being found “in pari delicto[34] with the Union Government”, the Supreme Court denied any relief to Loop. The Court further categorised this this overriding blot on claim of Loop as an attempt “to take another bite at the cherry by initiating proceedings over various forums, particularly to circumvent the jurisdiction of this Court which is in seisin of the matter”, which was “a dilatory tactic” and even “an attempt at forum shopping”.

 

In view of the foregoing characterisation of its conduct, the Supreme Court in Loop Telecom[35] refused to extend relief which was other available under the contract law.[36] To this end it was declared by it that the contract law provisions do not operate in derogation of equitable standards and “restitution” as a relief will not be allowed to “those who aim to perpetuate illegality”. In fact the Supreme Court described Loop as a “beneficiary of a manifest arbitrary policy which was adopted by the Union Government” and thus even the legal principle of restitution could not come to its aid.

 

In parting, the Supreme Court categorically declared that “as a beneficiary and confederate of fraud, the appellant cannot be lent the assistance of this Court for obtaining the refund of the entry fee”. Clearly therefore, the conduct of Loop was considered as disqualifying criteria which stripped it of any entitlement to claim any reliefs, including those founded in statutory provisions.

 

  1. Conclusion

In a contest between private parties, unworthy conduct has always been a ground for refusal to judicial relief. These case studies illustrate that courts have now steadily started applying this principle even in lis against the State and its instrumentalities. This aspect has serious consequences because, unlike private parties who can define their own rules of conduct, the State and its instrumentalities can never be absolved of their obligations under law irrespective of the conduct of the citizens. Much less, the State can never be heard to argue that it would derive advantage from lack of diligent conduct of the citizens.[37] Nonetheless, if these case studies are considered as crystallisation of the legal proposition, through this clear and unequivocal transposition of equitable principles and judicial exposition in the context of private disputes, the Supreme Court appears to have permitted the State to deny legal entitlements to citizens citing their dubious conduct. One would hope that this shift in trend is an exception reserved for those cases alone which fall within the adage; hard cases make bad law.


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

[1] “Clean hands: A phrase from a maxim of equity — he who comes to equity must come with clean hands i.e. a person who makes a claim in equity must be free from any taint of fraud with respect to that claim.” P. Ramanatha Aiyar’s The Major Law Lexicon, p. 1194, 4th edn., 2010.

[2] For illustration, see Siraj Ahmad Siddiqui v. Prem Nath Kapoor, (1993) 4 SCC 406; MCD v. Nirmal Sachdeva, (2001) 10 SCC 364.

[3] For illustration, see Kalyaneshwari v. Union of India, (2011) 3 SCC 287.

[4] For illustration, see Raj Kumar Soni v. State of U.P., (2007) 10 SCC 635.

[5] Civil Appeal No. 63 of 2022, decided on  4-1-2022. (SC)

[6] Union of India v. Bombay Tyre International Ltd., (1984) 1 SCC 467 : (1983) 14 ELT 1896.

[7] Civil Appeal No. 63 of 2022, decided on  4-1-2022. (SC)

[8] 2017 SCC OnLine CESTAT 2738.

[9] For illustration, see CTT v. National Industrial Corpn. Ltd., (2008) 15 SCC 259 : (2009) 233 ELT 146.

[10] Devas Multimedia (P) Ltd. v. Antrix Corpn. Ltd., 2022 SCC OnLine SC 46.

[11] Devas Multimedia case, 2022 SCC OnLine SC 46, para 167, 168

[12] Devas Multimedia case, 2022 SCC OnLine SC 46.

[13] 2022 SCC OnLine SC 203.

[14] Vide Final Order No. A/86237/2019(Mumbai) dated 15-7-2019 in Service Tax Appeal No. 86153/2015 (CESTAT, Mumbai).

[15] 2022 SCC OnLine SC 203.

[16] (1985) 3 SCC 230.

[17] (2007) 10 SCC 114 : (2007) 216 ELT 503.

[18] For illustration, see CWT v. Arvind Narottam, (1988) 4 SCC 113 : (1988) 173 ITR 479; Union of India v. Azadi Bachao Andolan, (2004) 10 SCC 1 : (2003) 263 ITR 1; Vodafone International Holdings BV v. Union of India, (2012) 6 SCC 613 : (2012) 341 ITR 1; etc.

[19] Shiv Raj Gupta v. CIT, 2020 SCC OnLine SC 589.

[20] 2022 SCC OnLine SC 203.

[21] 2022 SCC OnLine SC 221.

[22] 2022 SCC OnLine SC 221.

[23] The Supreme Court inter alia observed, “[i]t is but logical that when acceptance of freebies is punishable by the Medical Council of India (MCI) (the range of penalties and sanction extending to ban imposed on the medical practitioner), pharmaceutical companies cannot be granted the tax benefit for providing such freebies, and thereby (actively and with full knowledge) enabling the commission of the act which attracts such opprobrium”.

[24] 2022 SCC OnLine SC 221.

[25] Mangin v. Inland Revenue Commr., 1971 AC 739 : (1971) 2 WLR 39. See also, Bansal Wire Industries Ltd. v. State of U.P., (2011) 6 SCC 545 : (2011) 269 ELT 145 to similar effect.

[26] See generally, Commr. of Customs v. Dilip Kumar & Co., (2018) 9 SCC 1 : (2018) 361 ELT 577(5 Judges) for an exposition of the strict interpretation principle in the context of fiscal laws. See also, Krishi Upaj Mandi Samiti v. CCE, 2022 SCC OnLine SC 224 for the most recent elucidation of the legal position on the subject.

[27] 2022 SCC OnLine SC 221.

[28] 2022 SCC OnLine SC 221.

[29] 2022 SCC OnLine SC 260.

[30] (2012) 3 SCC 1.

[31] 2022 SCC OnLine SC 260.

[32] (2012) 3 SCC 1.

[33] 2022 SCC OnLine SC 260.

[34] The Supreme Court explained this expression in this case to state that “when the party claiming restitution is equally or more responsible for the illegality of a contract, they are considered in pari delicto”.

[35] 2022 SCC OnLine SC 260.

[36] To this end the Supreme Court discussed S. 56 (“agreement to do impossible act”) and S. 65 (“obligation of a person who has received advantage under void agreement or contract that becomes void”) of the Contract Act, 1872.

[37] For illustration, see State of Haryana v. Mukesh Kumar, (2011) 10 SCC 404.

Case Briefs

Customs, Excise & Service Tax Appellate Tribunal (CESTAT): Anil Choudhary (Judicial Member) allowed an appeal which was filed on the ground that in the facts and circumstances and the documents produced, there could not be any doubt about export of finished goods which were lying in stock on the date of debonding.

The counsel submitted that appellant had submitted complete documents for verification namely – copy of ER-I, copy of shipping bill, copy of export promotion invoice, copy of bill of lading. Further, the goods were exported soon after debonding and admittedly duty have been paid on such goods at the time of debonding.

The Tribunal found that the appellant had exported 448 units of handicraft on 30-07-2015, within a week after the date of debonding being 27-07-2015 when only 153 units were lying in stock. Thus, the refund claim have been rejected on presumptions and assumptions that such 153 units may not have been included in the exported units as there has been further production of 448 units on 28 and 29-07-2015. Such presumption was drawn without any adverse finding or any adverse material on record. It was held that the appellant had exported 153 units lying in stock on the date of debonding. Accordingly, the impugned order was set aside. It was further held that appellant was entitled to refund of the duty of Rs.7,22,290/- relying on the Division Bench of this Tribunal in Parle Agro (P) Ltd. v. Commissioner –CGST-2021-TIOL-306-CESTAT-All. It cannot be conclusively proved that they have exported the goods which were lying in stock, at the time of debonding.[Sun Art Exporter v. Commr. Of CGST, 2021 SCC OnLine CESTAT 347, decided on 01-07-2021]


Suchita Shukla, Editorial Assistant has reported this brief.

Case BriefsTribunals/Commissions/Regulatory Bodies

Customs, Excise and Services Tax Appellate Tribunal (CESTAT): P.K. Choudhary (Judicial Member) partly allowed an appeal which was filed against the Order-in-Appeal whereby two separate appeals of the appellant against two Orders-in-Original had been dismissed. The basic issue recorded by the Commissioner (Appeals) was whether confiscation of goods and imposition of fine and penalty by the Lower Authority in absence of valid PSI certificate was maintainable.

It was contended on behalf of the appellant that the imported goods were declared as Tin Waste and Scrap (Light Melting Scrap) in accordance with the import documents provided by the foreign supplier. Only during 100% examination after import, a Chartered Engineer was appointed who opined on visual examination that the goods are Tin Plated Steel Scrap as steel predominates by weight. It was contended that prior to such inspection, it was not possible for the appellant to verify the actual nature of goods being supplied by the foreign supplier. The counsel for the appellant further submitted that there was neither any knowledge nor reason to believe on the part of the appellant herein w.r.t. the alleged mis-declaration of the goods so imported. He further submitted that the goods imported during January, 2013 were of no material value as on date and as such, the appellant was no more interested in getting release of the goods against the redemption fine as imposed by the Adjudicating Authority.

The Tribunal after perusing the records found that the goods declared as Tin Waste and Scrap (Light Melting Scrap) were on verification by the qualified Chartered Engineer certified as Tin Plated Steel Scrap since steel predominates by weight. The appellant had not asked for any re-test or alike at the relevant point of time. On the contrary the appellant/ importer had waived his right of show cause notice and/or hearing at the stage of adjudication and hence, the contention on behalf of the appellant before me that the certificate was issued by the Chartered Engineer on visual examination, cannot come to rescue of the appellant with regard to the proper description of the goods. The Tribunal reminded that importation was permitted only against Pre Shipment Inspection

Certificates and it was settled position of law that conditions for import, if not fulfilled, the importation was not permitted. The Tribunal further explained that when goods imported or exported without complying with the conditions subject to which such goods are permitted for export and import, the goods shall be rendered as ‘Prohibited Goods’.

The Tribunal while partly allowing the appeal explained that at the time of importation of the goods, admittedly, Pre Shipment Inspection Certificates were not available and the goods were wrongly described as scrap of tin instead of scrap of steel. The appellant could not even produce such certificates prior to adjudication and thus the order of confiscation of the imported goods was proper and correct under Section 111(d) of the Customs Act, 1962 and thus upheld on the other hand the law requires existence of mens rea and maintenance of balance of convenience prior to imposition of penalty upon any person and in the present case there was no existence of ingredient of section 112 of the Customs Act, 1962 nor any mens rea and hence, the imposition of penalty upon the appellant was bad in law and liable to be quashed.[Sanjay Kumar Agarwal v. Commr. Of Customs, 2020 SCC OnLine CESTAT 397 ; decided on 23-12-2020]


Suchita Shukla, Editorial Assistant has put this story together

National Consumer Disputes Redressal Commission
Case BriefsTribunals/Commissions/Regulatory Bodies

National Consumer Disputes Redressal Commission (NCDRC): The Bench of Dinesh Singh (Presiding Member) observed that:

“Consumer has the right to know, before he exercises his choice to patronize a particular retail outlet, and before he makes his selection of goods for purchase, that additional cost will be charged for carry bags, and also the right to know the salient specifications and price of the carry bags.”

In the present matter, petitioner, Big Bazaar (Future Retail Ltd.) was the Opposite Party before the District Forum.

Condonation of Delay

The petition was filed with self-admitted delay of 60 days and the reasons laid down for condonation of delay were with regard to the managerial inefficiency and perfunctory and casual attitude to the law of limitation.

Though the above-stated reasons were illogical and unpersuasive, yet in the interest of justice, delay was condoned in light of providing fair opportunity.

Issue

Charging additional cost (Rs 18 in this case) for ‘carry bags’ to carry the goods purchased by the complainant was concluded as an unfair trade practice on the part of OP by the two Fora below.

hence, OP Co. was directed to refund the cost of ‘carry bags’ and pay compensation of Rs 100 along with the cost of litigation which was Rs 1100 and Rs 5000 to be deposited in the Consumer Legal Aid Account.

Revision Petition

The instant revision petition was filed by the OP Co. under Section 58(1)(b) of the Consumer Protection Act, 2019 before this Commission.

[The jurisdiction of this Commission under both sections i.e. Section 21(b) of the Act 1986 and Section 58(1)(b) of the Act 2019 is the same (the articulation in both is identical)]

Bench noted the fact that earlier OP was providing ‘carry bags’ made of polythene without charging additional costs and later when it started providing cloth carry bags it started charging additional cost.

In light of the above, the Commission expressed that:

Prominent prior notice / signs / announcement / advertisement / warning to the consumers, before the consumers exercised their choice to make their purchases from the outlets of the Opposite Party Co., that additional cost will be charged for carry bags, was not there.

In the present case, the consumers were not allowed/were not in a position to/did not have prior notice or information to take their own ‘carry bags’. In fact, after the purchase was completed and at the time of making the payment, they were being charged additionally for the cost of ‘carry bags’.

Fora Below

The Forums below appraised the case and returned with concurrent findings of deficiency and unfair trade practice.

Notice issued by Co-Ordinate Benches

The argument made by Senior Counsel, in the hearing on admission on 01-12-2020, that in “similar” cases of other traders notice has been issued by co-ordinate benches of this Commission, is not tenable.

Mere issuance of notice by a co-ordinate bench in “similar” cases of other traders is not a binding precedent.

Cloth Carry Bags

Carry bags of undisclosed specifications were forced on the consumers at the price as fixed by the Opposite Party Co., the consumers were forced to accept the carry bags, of undisclosed specifications, at the price fixed.

Adding to the above, Bench stated that a mere notice at the payment counter or consumer being informed at the payment counter that additional cost will be charged for ‘carry bags’ after the purchase from the store concerned has been made, should not be the case.

“It also cannot be that carry bags of (undisclosed) specifications and of price as fixed by the Opposite Party Co. are so forced on the consumer.

Such notice or information at the time of making payment not only causes embarrassment and harassment to the consumer and burdens him with additional cost but also affects his unfettered right to make an informed choice of patronizing or not patronizing a particular outlet at the initial stage itself and before making his selection of goods for purchase.”

Therefore, the Commission found such practice of disclosing the price of carry bags at the payment counter to be unquestionably ‘unfair trade practice’ under Section 2(1)(r) of the Act 1986 [corresponding Section 2(47) of the Act 2019].

Right to Know

As a matter of Consumer rights, the consumer has the right to know that there will be an additional cost for ‘carry bags’ and also to know the salient specifications and price of the carry bags, before he exercises his choice of patronizing a particular retail outlet and before he makes his selection of goods for purchase from the said retail outlet.

Commission in very clear words expressed that:

“…arbitrarily and highhandedly deviating from its past practice, deviating from the normal, not giving adequate prominent prior notice or information to the consumer before he makes his choice of patronizing the retail outlet, and before he makes his selection for purchase, imposing the additional cost of ‘carry bags’ at the time of making payment, after the selection has been made, forcing carry bags without disclosing their salient specifications at price as fixed by the Opposite Party Co., putting the consumer to embarrassment and harassment, burdening the consumer with additional cost, in such way and manner, is decidedly unfair and deceptive.”

Hence, the Commission directed OP to discontinue its unfair trade practice of arbitrarily and highhandedly imposing an additional cost of carry bags on the consumer at the time of making payment, without prominent prior notice and information before the consumer makes his choice of patronizing its retail outlets and before the consumer makes his selection of goods for purchase, as also without disclosing the salient specifications and price of ‘carry bags’.

The above order is made under Section 39(1)(g) of the 2019 Act.  However, the Commission made it explicitly clear that:
“It is made explicit that the critique apropos the Opposite Party Co. and the order under Section 39(1)(g) of the Act 2019 to the Opposite Party Co. have been made inter alia considering that it is a company with the wherewithal and inter alia considering the way and manner in which it conducts its business of retail. As such, nothing in the critique and in the order made under Section 39(1)(g) of the Act 2019 can be (mis) construed to be made applicable to differently / lesser placed traders, the applicability can only be made on similarly / better-placed traders, similarly / better situate, having similar way and manner of conducting their business.” [Big Bazaar (Future Retail Ltd.) v. Ashok Kumar, 2020 SCC OnLine NCDRC 495, decided on 22-12-2020]


Advocates who appeared before the Commission:

For the Petitioner: Sudhir K. Makkar, Senior Advocate along with Saumya Gupta, Advocate and Yogita Rathore, Advocate.

Case BriefsSupreme Court

Supreme Court: The 3-judge bench of Ashok Bhushan*, R. Subhash Reddy and MR Shah, JJ has held that while determining the taxable value of lottery the prize money is not to be excluded for the purpose of levy of GST.

The Court explained that for determining the value of the lottery, there is statutory provision contained in Section 15 read with Rule 31A. Section 15 of the Central Goods and Services Tax Act, 2017 by sub-section (2) provides what shall be included in the value of supply. What can be included in the value is enumerated in sub-clause (a) to (e) of sub-section (2) of Section 15. Further, subsection (3) of Section 15 provides that what shall not be included in the value of the supply.

“What is the value of taxable supply is subject to the statutory provision which clearly regulates, which provision has to be given its full effect and something which is not required to be excluded in the value of taxable supply cannot be added by judicial interpretation.”

Further, Rule 31A as noted above, sub-rule (2) as amended clearly provides that value of supply shall be deemed to be 100/128 of the face value of ticket or of the prize as notified in the Official Gazette by the Organising State, whichever is higher.

The Court said that the value of taxable supply is a matter of statutory regulation and when the value is to be transaction value which is to be determined as per Section 15 it is not permissible to compute the value of taxable supply by excluding prize which has been contemplated in the statutory scheme. It was hence, held that

“When prize paid by the distributor/agent is not contemplated to be excluded from the value of taxable supply, we are not persuaded to accept the submission of the petitioner that prize money should be excluded for computing the taxable value of supply.”

[Skill Lotto Solutions v. Union of India, 2020 SCC OnLine SC 990, decided on 03.12.2020]


*Justice Ashok Bhushan has penned this judgment

For petitioner: Senior Advocate Ravindra Shrivastava,

For Union of India: Additional Solicitor General Vikramjit Banerjee

For Intervenor: Senior Advocate C.A. Sundaram

Also read: Supreme Court upholds constitutionality of imposition of GST on lotteries, betting and gambling 

Case BriefsSupreme Court

Supreme Court: The 3-judge bench of Ashok Bhushan, R. Subhash Reddy and MR Shah, JJ has upheld the constitutionality of imposition of GST on lotteries, betting and gambling.

Here are the key takeaways from the judgment: 

Whether the inclusion of actionable claim in the definition of goods as given in Section 2(52) of Central Goods and Services Tax Act, 2017 is contrary to the legal meaning of goods and unconstitutional?

The inclusion of actionable claim in definition “goods” as given in Section 2(52) of Central Goods and Services Tax Act, 2017 is not contrary to the legal meaning of goods nor it is in conflict with the definition of goods given under Article 366(12).

“The Constitution framers were well aware of the definition of goods as occurring in the Sale of Goods Act, 1930 when the Constitution was enforced. By providing an inclusive definition of goods in Article 366(12), the Constitution framers never intended to give any restrictive meaning of goods.”

Parliament by the  Constitution (One Hundred and First Amendment) Act, 2016 inserted Article 246A, a special provision with respect to goods and services tax in which special power has to be liberally construed empowering the Parliament to make laws with respect to goods and services tax. Article 246A begins with non obstante clause that is “Notwithstanding anything contained in Articles 246 and 254”, which confers very wide power to make laws. When the Parliament has been conferred power to make law with respect to goods and services, the legislative power of the Parliament is plenary.

“The power to make laws as conferred by Article 246A fully empowers the Parliament to make laws with respect to goods and services tax and expansive definition of goods given in Section 2(52) cannot be said to be not in accord with the constitutional provisions.”

Whether the Constitution Bench’s observation ‘lottery is an actionable claim’ in Sunrise Associates v. Govt. of NCT of Delhi, (2006) 5 SCC 603 a law or obiter dicta?

The definition of goods in Section 2(j) as noticed by the Constitution Bench states that ‘goods’ means all kinds of movable property (other than newspaper, actionable claims, stocks, shares and securities). The exclusion of the actionable claims from the goods as enumerated in the definition is also a part of the definition.

“If a particular item is covered by exclusion it is obvious that it does not fall in the definition of the goods. When the Constitution Bench came to the conclusion that the lottery is an actionable claim it was considering the definition of 2(j) itself and what has been held by the Constitution Bench cannot be held to be obiter dicta.”

The Constitution Bench in Sunrise Associates has categorically held that lottery is actionable claim after due consideration which is ratio of the judgment. The expansion of definition of goods under Section 2(52) of Act, 2017 by including actionable claim is in the line with the Constitution Bench pronouncement in Sunrise Associates and no exception can be taken to the definition of the goods as occurring in Section 2(52).

Whether exclusion of lottery, betting and gambling from Item No.6 Schedule III of Central Goods and Services Tax Act, 2017 is hostile discrimination and violative of Article 14 of the Constitution of India?

The Constitution Bench in State of Bombay Vs. R.M.D. Chamarbaugwala, AIR 1957 SC 699 has clearly stated that Constitution makers who set up an ideal welfare State have never intended to elevate betting and gambling on the level of country’s trade or business or commerce.

Lottery, betting and gambling are well known concepts and have been in practice in this country since before independence and were regulated and taxed by different legislations. When Act, 2017 defined the goods to include actionable claims and included only three categories of actionable claims, i.e., lottery, betting and gambling for purposes of levy of GST, it cannot be said that there was no rationale for including these three actionable claims for tax purposes.

“It is a duty of the State to strive to promote the welfare of the people by securing and protecting, as effectively as it may, a social order in which justice, social, economic and political, shall inform all the institutions of the national life.”

Hence, there is no violation of Article 14 in Item No. 6 of Schedule III of the Act, 2017.

Whether while determining the face value of the lottery tickets for levy of GST, prize money is to be excluded? 

Read here 

[Skill Lotto Solutions v. Union of India, 2020 SCC OnLine SC 990, decided on 03.12.2020]


*Justice Ashok Bhushan has penned this judgment

For petitioner: Senior Advocate Ravindra Shrivastava,

For Union of India: Additional Solicitor General Vikramjit Banerjee

For Intervenor: Senior Advocate C.A. Sundaram

 

Also read: GST on lotteries| Prize money not to be excluded for computing the taxable value of supply, holds SC

National Consumer Disputes Redressal Commission
Case BriefsTribunals/Commissions/Regulatory Bodies

National Consumer Disputes Redressal Commission (NCDRC): A Division Bench of R.K. Agrawal (President) and Dr S.M. Kantikar (Member), held that

“…for detrmining the pecuniary jurisdiction of the District Commission, State Commission or National Commission the value of goods or services paid as consideration alone has to be taken and not the value of the goods or services purchased.”

Complainant approached the Commission with regard to a complaint against National Insurance Company Limited, Kolkata.

Further, it was stated that the complainant had taken Insurance coverage from National Insurance Company Limited, Kolkata under its Standard Fire and Special Perils Policy initially for a total sum of Rupees Twenty eight crores and twenty thousand only by paying a premium of Rupees Three lac twenty thousand five hundred and twenty-five only.

An additional security coverage of Rupees Thirteen crores only on 25-08-2020 by paying a premium of Rupees One lac twenty-three thousand and thirty-seven only.

Due to heavy rainfall and flood water, factory premises of the Complainant got tilted and partial collapse of the building was caused with several other losses due to damage in the building.

Complainant informed the National Insurance Company Limited, Kolkata on 05-09-2020 about the loss sufferred and making the payment of the loss suffered by estimating it.

After exchange of correspondence and personal interaction the National Insurance Company Limited – OP-1 repudiated the claim of the Complainant.

Maintainability of the present complaint

In the present case a preliminary point arises as to how this Consumer Complaint is maintainable before the National Consumer Disputes Redressal Commission because the value of the consideration paid in the present case i.e. premium paid for taking the Insurance Policies was only Rs 3,20,525 and Rs 1,23,037 the total of which comes to Rs 4,43,562 (Rupees Four Lac forty three thousand five hundred and sixty two only), which is less than the consideration paid of more than Rs 10,00,00,000 (Rupees Ten crores) as provided under Section 58 (1) (a) (i) of the Act of 2019.

Parliament, while enacting the Act of 2019 was conscious of this fact and to ensure that Consumer should approach the appropriate Consumer Disputes Redressal Commission whether it is District, State or National only the value of the consideration paid should be taken into consideration while determining the pecuniary jurisdiction and not value of the goods or services and compensation, and that is why a specific provision has been made in Sections 34 (1), 47 (1) (a) (i) and 58 (1) (a) (i) providing for the pecuniary jurisdiction of the District Consumer Disputes Redressal Commission, State Consumer Disputes Redressal Commission and the National Commission respectively.

Hence, the bench stated that Sections 34 (1), 47 (1) (a) (i) and 58 (1) (a) (i) of the Act of 2019 make it clear that for detrmining the pecuniary jurisdiction of the District Commission, State Commission or National Commission the value of goods or services paid as consideration alone has to be taken and not the value of the goods or services purchased.

Therefore, we are of the view that the provision of Section 58 (1)(a)(i) of the Act 2019 are very clear and does not call for any two interpretations.

As the value of consideration paid by the Complainant is only Rs 4,43,562 (Rupees four lac forty three thousand five hundred and sixty two only), which is not above Rs 10,00,00,000 (Rupees Ten crore), the National Commission has no jurisdiction to entertain the present Consumer Complaint. [Pyaridevi Chabiraj Steels (P) Ltd. v. National Insurance Company Ltd., Consumer Case No. 833 of 2020, decided on 28-08-2020]

Kerala High Court
Case BriefsHigh Courts

Kerala High Court: A.K. Jayasankaran Nambiar, J. allowed the writ petition and quashed the series of detention notices issued against the petitioner.

The petitioner challenged a series of notices of detention, whereby a consignment of goods transported at the instance of the petitioner was detained by the respondent on the allegation that there was a discrepancy in the e-way bill that accompanied the transportation of the goods. The Court on reviewing the series of notices inferred that the reason for the detention was that, while the consignment was supported by an invoice which contained the details of the goods transported as also the tax paid in respect of the goods, there was no mention of the tax amounts separately in the e-way bill that accompanied the goods. The Court further inferred that the respondents, therefore, detained the goods on the ground that there was no valid e-way bill supporting the transportation in question.

Meera Menon and Harisankar Menon, counsel on behalf of the petitioner argued that the transportation was covered both by a tax invoice, as also an e-way bill in FORM GST EWB-01, and when both the documents are perused together, it was amply clear that the transportation was covered by documents that clearly indicated the fact of payment of tax on the goods that were being transported. Thus, the detention under Section 129 was unfounded and baseless.

Dr Tushara James, counsel appearing on behalf of the respondent contended that as per Section 33 of the GST Act, there is an obligation on every person, who makes supply for consideration and who is liable to pay tax for such supply, to prominently indicate in all documents relating to assessment, tax invoice and other like documents, the amount of tax which shall form part of the price at which such supply is made. Referring to the provisions of Section 129, the respondent further contended that the goods in question were being transported under cover of documents that had been raised in contravention of the provisions of Section 33. It was further argued that, the e-way bill being a document akin to a tax invoice, in relation to an assessment to tax, and not having carried the details regarding the tax amount, the transportation itself had to be viewed as in contravention of the Act and Rules for the purposes of Section 129.

As per the statutory provisions applicable to the instant case, a person transporting goods is obliged to carry only the documents enumerated in Rule 138(A) of GST Rules, during the course of transportation. The said documents are

  • the invoice or bill of supply or delivery challan, as the case may be and
  • the copy of e-way bill in physical form or e-way bill number in electronic form etc.

The Court pointed out that if a prescribed form under the GST Act does not contain a field for entering the details of the tax payable in the e-way bill, then the non-mentioning of the tax amount cannot be seen as an act in contravention of the GST Rules.

Nevertheless, the Court held that the e-way bill has to be in FORM GST EWB-01, and in that format, there is no field wherein the transporter is required to indicate the tax amount payable in respect of the goods transported and that the transpiration was covered by a valid tax invoice, which clearly showed the tax collected in respect of the goods and an e-way bill in the prescribed format.[M.S Steel and Pipes v. Asst. State Tax Officer, 2020 SCC OnLine Ker 3214, decided on 12-08-2020]

Case BriefsSupreme Court

Supreme Court: The 3-judge bench of RF Nariman, Navin Sinha and Indira Banerjee, JJ has held that the expression “may” in sections 61 and 62 of the Major Ports Trust Act, 1963 (MPT Act) cannot be read as “shall”, subject  to the caveat that as the “State” under Article 12 of the Constitution, a Port Trust must act reasonably, and attempt to sell the goods within a reasonable period from the date on which it has assumed custody of them.

The Court was dealing with a reference made in Chairman, Board of Trustees Cochin v. Arebee Star Maritime Agencies Private Ltd., (2018) 4 SCC 592 wherein five issues were framed for larger bench’s consideration.

Issues referred:

  1. Whether in the interpretation of the provision of Section 2(o) of the MPT Act, the question of title of goods, and the point of time at which title passes to the consignee is relevant to determine the liability of the consignee or steamer agent in respect of charges to be paid to the Port Trust;
  2. Whether a consignor or a steamer agent is absolved of the responsibility to pay charges due to a Port Trust, for its services in respect of goods which are not cleared by the consignee, once the bill of lading is endorsed or the delivery order is issued;
  3. Whether a steamer agent can be made liable for payment of storage charges/demurrage, etc. in respect of goods which are not cleared by the consignee, where the steamer agent has not issued a delivery order; if so, to what extent;
  4. What are the principles which determine whether a Port Trust is entitled to recover its dues, from the steamer agent or the consignee;
  5. While the Port Trust does have certain statutory obligations with regard to the goods entrusted to it, whether there is any obligation, either statutory or contractual, that obliges the Port Trust to destuff every container that is entrusted to it and return the empty containers to the shipping agent.

Larger Bench’s answer to reference

The Court explained that when section 2(o) defines “owner”, it defines owner in relation to goods separately from owner in relation to any vessel. In sub-clause (i) of section 2(o), when owner is defined in relation to “goods”, the definition is an inclusive one. Secondly, it includes persons who are owners of the goods, or persons beneficially entitled to the goods, such as the consignor, consignee and the shipper and then also includes agents for sale, custody, loading or unloading of such goods.

Further, under section 42(2), a Board may, if so requested by the “owner”, take charge of the goods for the purpose of performing services, and shall give a receipt in such form as the Board may specify. It is obvious that if the ship-owner or its agent are not “owners”, the Board cannot take the charge of the goods from the ship-owner or its agent for the purpose of performing services, a result which would lead to startling consequences. Once goods have been taken charge of and a receipt given for them, no liability for any loss or damage which may occur to them shall attach to any person to whom a receipt has been given (this would include any of the persons mentioned in section 2(o)(i), including the vessel’s agents), or to the master or owner of the vessel from which the goods have been landed or transhipped.

“This would again make it clear that the master or owner of the vessel and their agents, from this point on, have been absolved from liability for loss or damage to the goods, as  the Board has now taken over the custody of the goods from such master or owner of the vessel.”

Answering the question number 1 in negative, the Court held that

“the point of time at which title to the goods passes to the consignee is not relevant to determine the liability of the consignee or steamer agent in respect of charges to be paid to the Port Trust.”

On question number 2 and 3 that dealt with the responsibility/liability of the consignor/streamer agents to pay charges/demurrage, the Court answered the questions together and said that the bill of lading being endorsed by the steamer agent is different from the bill of lading being endorsed by the owner of the goods. In the first case, the endorsement leads to delivery; in the second case, the endorsement leads to passing of title.

“… both stages are irrelevant in determining who is to pay storage charges – we have held that upto the point that the Port Trust takes charge of the goods, and gives receipt therefor, the steamer agent may be held liable for Port Trust dues in connection with services rendered qua unloading of goods, but that thereafter, the importer, owner, consignee or their agent is liable to pay demurrage charges for storage of goods.”

On question number 4 dealing with Port Trusts right to recover its dues, from the steamer agent or the consignee, the Court said that

Until the stage of landing and removal to a place of storage, the steamer’s agent or the vessel itself may be made liable for rates payable by the vessel for services performed to the vessel. Post landing and removal to a place of storage, detention charges for goods that are stored, and demurrage payable thereon from this point on, i.e. when the Port Trust takes charge of the goods from the vessel, or from any other person who can be said to be owner as defined under section 2(o), it is only the owner of the goods or other persons entitled to the goods (who may be beneficially entitled as well) that the Port Trust has to look to for payment of storage or demurrage charges.

The Court divided question number 5 into two parts:

whether carrying goods in a container would make any difference to the position that only the owner of the goods or person entitled to the goods is liable to pay for demurrage:

After referring to the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, the Court noticed that the value of imported goods shall be the transaction value of identical goods, as defined, or similar goods, as defined – whichever rule applies to the facts of each particular case. It is clear that whether identical goods or similar goods are taken into account, the price of the container never enters, as the only “goods” that are to be looked at are the goods that are “imported”, i.e. goods that are stuffed in the containers.

It further explained that for the purposes of customs valuation, addition to the transaction value of the imported goods is made only when the cost of containers is treated as being one with the goods in question. Even in such a situation, what is then imported is the “goods” and the container – the container not having to be destuffed, and therefore being cleared along with the goods contained therein for home consumption.

“In such a case, where containers do not have to be returned, but are imported along with the goods contained within it, after the Board takes custody of such container and the goods within it, the vessel or steamer agent is no longer liable – even containers that do not need to be destuffed will then incur demurrage along with the goods contained within it, which are then payable by the importer, owner, consignor or agent thereof.”

The Court also noticed that there is a difference between containers which go along with the goods contained therein “suitable for long-term use”, from containers “suitable for repetitive use”, hence, the containers of the latter type cannot be classified with the goods contained therein for payment of customs duty.

whether the Port Trust is obliged to destuff containers that are entrusted to it and return empty containers to the shipping agent:

a container which has to be returned is only a receptacle by which goods that are imported into India are transported. Considering that the container may belong either to the consignor, shipping agent, ship-owner, or to some person who has leased out the same, it would be the duty of the Port Trust to destuff every container that is entrusted to it, and return destuffed containers to any such person within as short a period as is feasible in cases where the owner/person entitled to the goods does not come forward to take delivery of the goods and destuff such containers. What should be this period is to be determined on the facts of each case, given the activities of the port, the number of vessels which berth at it, together with the volume of goods that are imported. This may lead to the “short period” in the facts of a particular case being slightly longer than in a case where a port is less frequented, and goods that are stored are lesser in number, given the amount of space in which the goods can be stored.

“While it does not lie in the mouth of the Port Trust to state that it has no place in which to keep goods after they are destuffed – as in the facts in the present case – yet a court may, in the facts of an individual case, look into practical difficulties faced by the Port Trust.”

[Chairman, Board of Trustees Cochin v. Arebee Star Maritime Agencies Private Ltd , 2020 SCC OnLine SC 622 , decided on 05.08.2020]

Jharkhand High Court
Case BriefsHigh Courts

Jharkhand High Court: A Division Bench of H.C Mishra and Deepak Roshan JJ., dismissed the present writ application as it had no merits in it.

The writ petitioner firm has a business of fireworks and its truck was apprehended by the Investigating Bureau Revenue, Jamshedpur Division, at Jamshedpur, while transporting crackers from Shivkashi in Tamil Nadu to the petitioner’s firm at Ranchi and produced an expiry road permit. It further revealed the transaction was entered into between the petitioner’s firm and the selling dealer at Shivkashi in Tamil Nadu on 03-12-2012 whereas the road permit expired much prior to the date of transaction between the petitioner firm and the selling dealer. In the aforesaid background, the Assessing Authority, vide order dated 14-12-2012 imposed the penalty to the tune of Rs 8,98,258.20 equal to three times the tax on the value of goods, i.e., Rs 21,38,710. The order passed by the Assessing Authority was affirmed by the Appellate Authority in appeal, as well as by the Tribunal in revision. 

Aggrieved by the order, hence the instant petition.

Advocates Sumeet Gadodia and Ritesh Kumar Gupta for the writ petitioner vehemently argued that the impugned orders passed by the Revenue Authorities as well as the Tribunal cannot be sustained in the eyes of law because the goods were being carried with a road permit but due to unforeseen circumstance that the fire had broken out in the premises of the selling dealer, the road permit had expired in the meantime, and there was no intention to evade the tax, as all the goods were duly accounted for in the books of accounts. 

Counsel for the State,  Atanu Banerjee and Pooja Kumari opposed the prayer submitting that the case is fully covered by the decision in Economic Transport Organisation Ltd. v. State of Jharkhand, 2020 SCC Online Jhar 145, wherein also in a similar manner when the road permit had already expired, it was deemed to be a case of no road permit. 

The Court held that in the instant case the ground of unforeseen circumstance is of no help and there is no merit in the writ application.

In view of the above, the writ petition stands dismissed and disposed of. [Trade Friends v. State of Jharkhand, 2020 SCC OnLine Jhar 214, decided on 27-02-2020]

National Consumer Disputes Redressal Commission
Case BriefsTribunals/Commissions/Regulatory Bodies

National Consumer Disputes Redressal Commission (NCDRC): Justice V.K. Jain (Presiding Member) while dismissing the present revision petition, held that,

“If the goods in deliverable state are delivered by the seller to the purchaser, the property in the goods passes from the seller to the purchaser unless they have contracted otherwise.”

In the present matter, it has been noted that the petitioner obtained a Marine Transit Insurance Policy from the respondent company. The stated policy covered goods to the extent of Rs 2 crore against all risk of transit. Complainant sent 1009 TV Sets from Dehradun to East India Technology Pvt. Ltd. in Tamil Nadu. Further, the goods were to be supplied to the Government of Tamil Nadu, which on inspection rejected the said TV sets. Consequently, East India Technology Pvt. Ltd. transported the goods back to the complainant and on the way, the goods got damaged when the truck in which they were being carried met with an accident.

Thus in view of the stated, a claim was lodged for reimbursement in terms of the insurance policy.

On being aggrieved by the repudiation of the claim, the complainant approached the District Forum wherein the consumer complaint was allowed, the insured approached he concerned State Commission by way of an appeal. State Commission allowed the appeal and consequently dismissed the said consumer complaint on not having any insurable interest in the goods.

Further, the complainant reached before this Commission. The question that was raised was:

“Whether  the petitioner had any insurable interest in the goods, at the time when they were damaged while being transported from Tamil Nadu to Dehradun?”

Counsel for the petitioner/ complainant submitted that despite invoice raised in favour of East India Technology Pvt. Ltd., the ownership of the goods continued to vest with the complainant since the price of the goods was to be paid by the East India Technology Pvt. Ltd., within 60 days of inspection of the goods by ELCOT which is stated to be an agency of Government of Tamil Nadu and therefore, the complainant continued to have insurable interest in the goods by the time when they were damaged on account of road accident.

Commission rejected the above contention.

Further, the Commission referred to Sections, 20, 23(2) and 26 of the Sale of Goods Act, 1930 and stated that on a reading of all of these Sections, it shows that,

“If the goods in deliverable state are delivered by the seller to the purchaser, the property in the goods passes from the seller to the purchaser unless they have contracted otherwise.”

Commission stated that it would be difficult to say that the complainant continued to be the owner of the goods in question even after having sold and delivered the goods to East India Technology (P) Ltd. The commission while reaching the conclusion added that considering that the complainant had not only sold the goods but had also delivered the same to East India Technology (P) Ltd. without reserving any right for the disposal of goods, it cannot be said to have retained insurable interest in the said goods in term of Section 7 of the Indian Maritime Insurance Act, 1963.

Goods were returned by the purchaser to the complainant at the risk of the purchaser and therefore, at the time they were damaged/destroyed, the ownership of the goods vested in the purchaser. Therefore, the complainant would be entitled to have a valid claim against the purchaser to recover the price of the goods which it had sold and delivered to the purchaser.

The complainant was left with no insurable interest in the goods, once they were sold and delivered to the purchaser since the transaction of sale stood completed on the sale and delivery of the goods.

Thus, it was East India Technology Pvt. Ltd., which owned the goods at the time they were destroyed/damaged on account of being involved in a road accident.

Hence the revision petition is dismissed in view of the above reasons. [E-Durables v. Oriental Insurance Co. Ltd., 2019 SCC OnLine NCDRC 747, decided on 24-12-2019]

Case BriefsTribunals/Commissions/Regulatory Bodies

Custom, Excise and Service Tax Appellant Tribunal (CESTAT), Chennai: Sulekha Beevi C.S. (Judicial Member) modified the order of the Commissioner (Appeals) in favor of the appellant.

The appellant had filed a bill of entry for the importation of Arecanuts and had declared its value as Rs 1,06,14,272. On verification, the department held that the goods did not conform to the Food Safety and Standards Act of India [FSSAI] standards. After due process of law, the original authority ordered confiscation of the goods and directed to re-export the goods. He also imposed redemption fine of Rs 20 lakhs and a separate penalty of Rs 10 lakhs. In the appeal, the Commissioner (Appeals) upheld the findings of the adjudicating authority but, reduced the redemption fine to Rs 5 lakhs and penalty to Rs 2 lakhs. The appellants were aggrieved by this order and filed an appeal.

The appellant challenged the redemption fine and penalty imposed, submitting before the Court that they were willing to re-export the goods. If the goods were re-exported, the redemption fine imposed would not have any basis. The Judgment in Sankar Pandi v. Union of India, 2001 SCC OnLine Mad 1240  was relied upon which was upheld by Supreme Court too. The Authorised Representative for the Revenue submitted that the appellants have imported goods violating the provisions of FSSAI regulations and, therefore, had been rightly confiscated by the department.

The Court reiterated that the appellant only contested the redemption fine and penalty imposed upon them. Since the appellant was willing to re-export the goods, the Court set aside the redemption fine imposed on them and further stated that with regard to the penalty imposed, the appellant had suffered huge container charges and their goods have been detained for nearly nine months. Since the goods have been ordered to be re-exported and also taking note of the fact that they are not prohibited goods, the Court was of the view that the penalty imposed was on the higher side. The same is reduced to Rs 25,000.

The appeal was partly allowed and the impugned order was modified by setting aside the redemption fine and upholding the direction to re-export the goods. The penalty was also reduced to Rs 25,000.[Arihant Groups v. Commissioner of Customs, 2019 SCC OnLine CESTAT 275, decided on 16-09-2019]

Kerala High Court
Case BriefsHigh Courts

Kerala High Court: Raja Vijayaraghavan V, J. allowed a civil writ petition filed by a company and directed release of its vehicles and goods that had been detained by the tax officer due to the expiry of its e-way bills.

Petitioner herein was a logistics company which was involved in the transportation of Maruti cars. Petitioner’s vehicle was obstructed, and on inspection, it was found that the validity of the e-way bills had expired. Hence, both – the vehicle and the goods – were detained. This had led to the filing of this writ petition seeking a certiorari quashing of notice issued under Section 129 of Goods and Services Tax Act, 2017 whereby his goods were seized; and sought a writ of mandamus directing the 1st respondent to release the goods by accepting a penalty of Rs 500.

The Court relied on the earlier judgment of a Division Bench  in Renji Lal Damodaran v. State Tax Officer (Order dated 06-08-2018 in WA No. 1640 of 2018) in which it was directed to release the goods of the appellant furnishing bank guarantee for tax and penalty found due and a bond for the value of goods in the form as prescribed under Rule 140(1) of the Central Goods and Services Tax Rules, 2017. So, applying the ratio of that judgment, the Court directed the respondent authorities to release the petitioner’s goods and vehicle on the execution of a bank guarantee for tax and penalty found due, and a bond for the value of goods in the form as prescribed under Rule 140(1) of the CGST Rules.

This petition was disposed of in the above terms.[OSL Logistics Private Ltd. v. Assistant State Tax Officer, 2019 SCC OnLine Ker 1554, decided on 14-05-2019]

Case BriefsTribunals/Commissions/Regulatory Bodies

Authority for Advance Ruling, Chhattisgarh: The Members comprising of Kalpana Tiwari, Joint Commissioner of State Tax and Rajesh Kumar Singh, Additional Commissioner of CGST and Central Excise, held that a supplier is required to charge GST upon service recipient on the total amount including cost of diesel provided by recipient company for transportation of its goods.

Applicant herein (supplier) had an agreement for transporting cement of a company named Shree Raipur Cement (service recipient). It was agreed that the diesel required for said transportation would be provided by the service recipient. The applicant sought clarification as to whether the supply of diesel by the service recipient would be included or excluded while charging GST on freight amount to be charged by the applicant.

The Authority noted that in the instant case, the service recipient, i.e., cement company was providing diesel to the vehicles used by the applicant for transporting cement/clinker in the course of business of cement by the service recipient. Diesel so provided by it to the applicant, was an important and integral component of this business process, without which the process of supply of cement could not be materialised.

It was opined that as per Sections 7(1) and 15(2)(b) of the Central Goods and Services Tax Act, 2017 which define ‘supply’ and ‘value of supply’ respectively, any amount that the supplier is liable to pay in respect of supply but which has been incurred by the recipient of supply and not included in the price actually paid or payable for the goods or services or both, is includible in value of supply of goods/ services.

Thus, the applicant was required to charge GST upon Shree Raipur Cement on the total amount including the cost of diesel, i.e., on the total freight amount inclusive of the cost of diesel so provided by the service recipient.[Advance Ruling No. STC/AAR/10 A/2018, In an application filed by M/s Shri Navodit Agarwal, Order dated 26-03-2019]

Case BriefsHigh Courts

Madras High Court: While setting aside the FIR registered against the officials of the Bank for an offence under Section 379 Penal Code, a bench of S. Vaidyanathan J ruled that no criminal action could be taken against the financier/ financial institution for repossessing the goods hypothecated with them in case of default in repayment of loan.

In the instant case, a loan agreement was signed between the petitioner and the 2nd respondent for a sum of Rs.9,00,000/- for purchase of a car. The petitioner seized the car on default in the repayment of loan and kept it in their custody. The 2nd respondent filed a case against the officials of the Bank for an offence under Section 379 IPC. After registering the case, the 1st respondent Police sent a communication to the bank, asking them to surrender the vehicle, as the same is required for investigation as well as for production before the Court. Aggrieved by the same, the petitioner filed the present petition under Section 482 of CrPC to quash the FIR pending on the file of the 1st respondent Police.

The Court referred K.A. Mathai  v. Kora Bibikutty, (1996) 7 SCC 212 where it was held that in case of default to make payment of installments financier had a right to resume possession even if the hire purchase agreement does not contain a clause of resumption of possession for the reason that such a condition is to be read in the Agreement. The Court also referred Anup Sarmah vs. Bhola Nath Sharma, (2013) 1 SCC 400 where it was held that in an Agreement of hire purchase, the purchaser remains merely a trustee/bailee on behalf of the financier / financial institution and ownership remains with the latter. Accordingly, the Court made it clear that in case vehicle is seized by the financier, no criminal action can be taken against him as he is repossessing the goods owned by him, and in such an eventuality, it cannot be held that the financier had committed an offence of theft and that too, with the requisite mens rea and requisite dishonest intention. [HDFC Bank Limited v. State, 2015 SCC Online Mad 10573, decided on 21.12.2015]