Legal RoundUpWeekly Rewind


Top Story of the Week


Aadhaar Card for Sex Workers| Supreme Court bats for sex workers’ right to dignity; directs UIDAI to issue Aadhaar Card without insisting on address proof 

The Supreme Court has upheld sex workers right to identity and issued detailed directions for their protection and upliftment. The directions ranged from prohibiting police actions against consenting sex workers, police and medical protections for sex workers being victim of sexual assault, holding media accountable for voyeurism on revealing identity of sex workers to directing UIDAI to issue Adhar Card for them without insisting on address proof. 

It was observed that  

“…basic protection of human decency and dignity extends to sex workers and their children, who, bearing the brunt of social stigma attached to their work, are removed to the fringes of the society, deprived of their right to live with dignity and opportunities to provide the same to their children.” 

Read here: https://www.scconline.com/blog/post/2022/05/26/aadhaar-sex-workers-without-address-proof-supreme-court-india-judgement-legal-news-updates-research-rights/  


Supreme Court


Insurance companies refusing claims on flimsy/technical grounds must stop! Don’t ask for documents that insured can’t produce 

Insurance companies refusing claims on flimsy/technical grounds must stop! This is what the Supreme Court observed while dealing with  a case where an Insurance Company had refused to settle an insurance claim on non-submission of the duplicate certified copy of certificate of registration of the stolen vehicle. The COurt held that while settling the claims, the insurance company should not be too technical and ask for the documents, which the insured is not in a position to produce due to circumstances beyond his control. 

The Court was dealing with a case where a truck was stolen when and the Court observed the appellant had produced the photocopy of certificate of registration and the registration particulars as provided by the RTO, solely on the ground that the original certificate of registration (which has been stolen) is not produced, non-settlement of claim can be said to be deficiency in service. Therefore, the appellant has been wrongly denied the insurance claim. 

Read here: https://www.scconline.com/blog/post/2022/05/23/insurance-claim-rejection-technical-ground-insurance-company-non-production-document-supreme-court-india-judgments-mr-shah-legal-reserach-updates-news/  

Hindu widow’s pre-existing right to maintenance automatically ripens into full ownership when she is in settled legal possession of the property 

Observing that a Hindu woman’s right to maintenance is not an empty formality, the Supreme Court has held that by virtue of Section 14(1) of the Hindu Succession Act, 1956, the Hindu widow’s limited interest gets automatically enlarged into an absolute right, when such property is possessed by her whether acquired before or after the commencement of 1956 Act in lieu of her right to maintenance. 

Where a Hindu widow is found to be in exclusive settled legal possession of the HUF property, that itself would create a presumption that such property was earmarked for realization of her pre-existing right of maintenance, more particularly when the surviving co-parcener did not earmark any alternative property for recognizing her pre-existing right of maintenance. 

Read here: https://www.scconline.com/blog/post/2022/05/25/hindu-woman-right-to-maintenance-settled-possession-absolute-ownership-section-14-hindu-succession-act-supreme-court-judgment-india-legal-research-updates-news/  

IGST on Ocean Freight for imports unconstitutional; Won’t create a level playing field but will drive Indian shipping lines out of business 

In the case where the constitutionality of two Central Government notifications related to IGST was under scanner, the Supreme Court has held that since the Indian importer is liable to pay IGST on the ‘composite supply’, comprising of supply of goods and supply of services of transportation, insurance, etc. in a CIF contract, a separate levy on the Indian importer for the ‘supply of services’ by the shipping line would be in violation of Section 8 of the CGST Act. 

The Court observed that, 

“If Indian shipping lines continue to be taxed and not their competitors, it would drive the Indian shipping lines out of business.” 

Read here: https://www.scconline.com/blog/post/2022/05/21/igst-ocean-freight-imports-unconstituional-indian-importers-shipping-lines-supreme-court-india-legal-research-updates-tax-law-news/  


High Courts


Kerala High Court| Right of Press to report truthfully and faithfully; Press shall NOT indulge in sensationalism

Stating that, though the Press has a duty to inform the public, the Division Bench of Devan Ramachandran and Sophy Thomas, JJ., observed that, it is the well-accepted thumb rule that the Press shall not indulge in sensationalism; or in speculating upon the guilt or otherwise of any accused or other individual; or to create an opinion about the comportment or character of a person involved in the Trial; and not to embellish, by impelling or sponsoring an opinion they seek. 

High Court also observed that,

“Press has a duty to inform the public, the publication of lurid details and other sensitive investigative inputs, which are within the sole jurisdiction of the courts to decide upon, certainly require to be put on a tight leash.” 

Read here: https://www.scconline.com/blog/post/2022/05/25/right-of-press-to-report-truthfully-and-faithfully-legal-news-legal-updates-law-kerala-highcourt/

Chhattisgarh High Court| Would pledge of ornaments kept for marriage of a daughter and use for self without knowledge of husband would amount to cruelty? 

In a matter pertaining to mental cruelty, the Division Bench of Kerala HC, expressed that, if a spouse by her own conduct, without caring about the future of the daughter, parts with ornaments which were meant for the marriage, it will be within the ambit of mental cruelty done by the wife. 

The Bench also added to its observation that, during the marriage ceremony in the Indian household, the presentation of the ornament is normally done for which the parents start the effort, from an early date. 

Read here: https://www.scconline.com/blog/post/2022/05/24/would-pledge-of-ornaments-kept-for-marriage-of-a-daughter-and-use-for-self-without-knowledge-of-husband-would-amount-to-cruelty-chhattisgarh-high-court-law-legal-news-legal-updates/ 

P&H High Court| Can an act of dissent be labeled as sedition? 

Expressing that, in a democratic set-up, there always would be voices of dissent and opinions against rules and protest against actions, P&H HC, observed that, some protests may have aggression but still an act of dissent would not be ordinarily labeled as sedition. 

Bench added to its observation that, to attract an offence such as Section 124-A IPC, there must be deliberate resistance and conscious defiance of authority with a conceived plan aimed to unsettle elected government. 

Read here: https://www.scconline.com/blog/post/2022/05/26/can-an-act-of-dissent-be-labelled-as-sedition-punjab-and-haryana-high-court-law-legal-news-legal-updates/ 

Delhi High Court| Once tenant starts paying rent, can he/she turn around and challenge title of landlord? 

In a matter with regard to the grant of leave to defend, Subramonium Prasad, J., expressed that, the tenant cannot merely make allegations that the landlord has other premises without producing some material to substantiate the same. 

High Court added to its observations that, it is a well-settled position that a tenant may take all kinds of pleas in its application for leave to defend but the Rent Controller has to ensure that the purpose of Chapter III of the Rent Control Act is not defeated by granting leave to defend in every frivolous plea raised by the tenant which may result in protracting the case. 

Read here: https://www.scconline.com/blog/post/2022/05/27/once-tenant-starts-paying-rent-can-he-she-turn-around-and-challenge-title-of-landlord-delhi-high-court-law-legalnews-legal-updates/ 


Legislations


Motor Vehicles (Third Party Insurance Base Premium and Liability) Rules, 2022 

On May 25, 2022, the Ministry of Road Transport and Highways, in consultation with the Insurance Regulatory and Development Authority of India, has published Motor Vehicles (Third Party Insurance Base Premium and Liability) Rules, 2022 in order to revise the base premium for third party insurance for unlimited liability. The rules shall come into force on 1st June, 2022. 

Read here: https://www.scconline.com/blog/post/2022/05/26/base-premium-for-third-party-insurance-for-unlimited-liability-revised-vide-motor-vehicles-third-party-insurance-base-premium-and-liability-rules-2022/  

IFSCA (Fund Management) Regulations, 2022 

The International Financial Services Centers Authority has revised the Application and Registration Fee under IFSCA (Fund Management) Regulations, 2022. 

Read here: https://www.scconline.com/blog/post/2022/05/23/fee-structure-under-ifsca-fund-management-regulations-2022-revised/  


New Releases 


 

Case BriefsSupreme Court

Supreme Court: In the case where the constitutionality of two Central Government notifications related to levy of Integrated Goods and Services Tax (IGST) was under scanner, the 3-judge bench of Dr. DY Chandrachud*, Surya Kant and Vikram Nath, JJ has held that since the Indian importer is liable to pay IGST on the ‘composite supply’, comprising of supply of goods and supply of services of transportation, insurance, etc. in a CIF contract, a separate levy on the Indian importer for the ‘supply of services’ by the shipping line would be in violation of Section 8 of the CGST Act.

The Court observed that,

“If Indian shipping lines continue to be taxed and not their competitors, namely, the foreign shipping lines, the margins arising out of taxation from GST would not create a level playing field and drive the Indian shipping lines out of business.”

Issue

Whether an Indian importer can be subject to the levy of Integrated Goods and Services Tax (IGST) on the component of ocean freight paid by the foreign seller to a foreign shipping line, on a reverse charge basis?

Discussion

It was argued before the Court that the transaction between the foreign exporter and the respondents is already subject to IGST under Sections 5 of the IGST Act read with Sections 3(7) and 3(8) of the Customs Tariff Act as “supply of goods”. An additional levy of IGST on imported goods, that is on the supply of transportation service, by designating the importer as the recipient would amount to double taxation.

The Court explained that any Ocean Freight transaction involves three parties- the foreign exporter, the Indian importer and the shipping line. The first leg of the transaction involves a CIF contract, wherein the foreign exporter sells the goods to the Indian importer and the cost of insurance and freight are the responsibility of the foreign exporter. In other words, the foreign exporter is liable to ensure that the goods reach their place of destination and the Indian importer pays the transaction value to the exporter. The second leg of the transaction involves an agreement between the foreign exporter and the shipping line (whether foreign or Indian) for providing services for transport of goods to the destination, i.e., in the territory of India.

On the first leg of the transaction, between the foreign exporter and the Indian importer, the latter is liable to pay IGST on the transaction value of goods under Section 5(1) of the IGST Act read with Section 3(7) and 3(8) of the Customs Tariff Act. Although this transaction involves the provision of services such as insurance and freight it falls under the ambit of ‘composite supply’.

The Union Government had, however, submitted that the impugned levy is on the second leg of the transaction, which is a standalone contract between the foreign exporter and the foreign shipping line. Thus, the contract between the foreign exporter and the foreign shipping line- of which the Indian importer is not a party- cannot be deemed to be a part of ‘composite supply’.  The Court, however, refused to agree with the submission and observed,

“The Union of India cannot be heard to urge arguments of convenience – treating the two legs of the transaction as connected when it seeks to identify the Indian importer as a recipient of services while on the other hand, treating the two legs of the transaction as independent when it seeks to tide over the statutory provisions governing composite supply.”

This observation was made in reference to the fact that the Court had agreed to Union of India’s submission to hold that when the place of supply of services is deemed to be the destination of goods under Section 13(9) of the IGST Act, the supply of services would necessarily be “made” to the Indian importer, who would then be considered as a “recipient” under the definition of Section 2(93)(c) of the CGST Act. The supply can thus be construed as being “made” to the Indian importer who becomes the recipient under Section 2(93)(c) of the CGST Act.

Stating that the Court is bound by the confines of the IGST and CGST Act to determine if this is a composite supply, the Court said that it would not be permissible to ignore the text of Section 8 of the CGST Act and treat the two transactions as standalone agreements.

The Court explained that the supply of service of transportation by the foreign shipper forms a part of the bundle of supplies between the foreign exporter and the Indian importer, on which the IGST is payable under Section 5(1) of the IGST Act read with Section 20 of the IGST Act, Section 8 and Section 2(30) of the CGST Act. Hence, to levy the IGST on the supply of the service component of the transaction would contradict the principle enshrined in Section 8 and be in violation of the scheme of the GST legislation.

It was, hence, held that while the impugned notifications are validly issued under Sections 5(3) and 5(4) of the IGST Act, it would be in violation of Section 8 of the CGST Act and the overall scheme of the GST legislation.

Conclusion

(i) The recommendations of the GST Council are not binding on the Union and States for the following reasons:

(a) The deletion of Article 279B and the inclusion of Article 279(1) by the Constitution Amendment Act 2016 indicates that the Parliament intended for the recommendations of the GST Council to only have a persuasive value, particularly when interpreted along with the objective of the GST regime to foster cooperative federalism and harmony between the constituent units;

(b) Neither does Article 279A begin with a non-obstante clause nor does Article 246A state that it is subject to the provisions of Article 279A. The Parliament and the State legislatures possess simultaneous power to legislate on GST. Article 246A does not envisage a repugnancy provision to resolve the inconsistencies between the Central and the State laws on GST. The ‘recommendations’ of the GST Council are the product of a collaborative dialogue involving the Union and States. They are recommendatory in nature. To regard them as binding edicts would disrupt fiscal federalism, where both the Union and the States are conferred equal power to legislate on GST. It is not imperative that one of the federal units must always possess a higher share in the power for the federal units to make decisions. Indian federalism is a dialogue between cooperative and uncooperative federalism where the federal units are at liberty to use different means of persuasion ranging from collaboration to contestation; and

(c) The Government while exercising its rule-making power under the provisions of the CGST Act and IGST Act is bound by the recommendations of the GST Council. However, that does not mean that all the recommendations of the GST Council made by virtue of the power Article 279A (4) are binding on the legislature’s power to enact primary legislations;

(ii) On a conjoint reading of Sections 2(11) and 13(9) of the IGST Act, read with Section 2(93) of the CGST Act, the import of goods by a CIF contract constitutes an “inter-state” supply which can be subject to IGST where the importer of such goods would be the recipient of shipping service;

(iii) The IGST Act and the CGST Act define reverse charge and prescribe the entity that is to be taxed for these purposes. The specification of the recipient – in this case the importer – by Notification 10/2017 is only clarificatory. The Government by notification did not specify a taxable person different from the recipient prescribed in Section 5(3) of the IGST Act for the purposes of reverse charge;

(iv) Section 5(4) of the IGST Act enables the Central Government to specify a class of registered persons as the recipients, thereby conferring the power of creating a deeming fiction on the delegated legislation;

(v) The impugned levy imposed on the ‘service’ aspect of the transaction is in violation of the principle of ‘composite supply’ enshrined under Section 2(30) read with Section 8 of the CGST Act. Since the Indian importer is liable to pay IGST on the ‘composite supply’, comprising of supply of goods and supply of services of transportation, insurance, etc. in a CIF contract, a separate levy on the Indian importer for the ‘supply of services’ by the shipping line would be in violation of Section 8 of the CGST Act.

[Union of India v. Mohit Minerals Pvt. Ltd., 2022 SCC OnLine SC 657, decided on 19.05.2022]


*Judgment by: Justice Dr. DY Chandrachud


Counsels

For UOI: ASG N Venkataraman

For respondent: Senior Advocates V Sridharan, Harish Salve, Arvind Datar, Vikram Nankani and Advocate Uchit Sheth

For intervenors: Advocate Rajesh Kumar Gautam

Case BriefsHigh Courts

Gujarat High Court:  A Division Bench comprising of J.B. Pardiwala and A.C. Rao, JJ., declared the tax on Ocean Freight levied for transportation of goods in a vessel by a foreign seller, as ultra vires the Integrated Goods and Services Tax Act, 2017 (IGST).

The writ-applicant moved to the court contending that there is levying of IGST on Ocean Freight for services supplied by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India, by a person located in the non-taxable territory of India. Both the service provider and the recipient were supposed to pay this tax according to a notification issued under this Act. The writ-applicant contended that since on CIF (sum of Cost, Insurance and Freight) basis, both the service provider and the recipients were outside India, such levy of tax goes beyond the mandate of Section 1 of the IGST Act, 2017, which extends to the whole of India but not outside of it. Whereas, in the case of transportation on the basis of Free on Board (FOB), the ocean freight is paid by the writ-applicant to the foreign shipping line which is situated on a port outside India. Thus, it is outside the purview of the tax. The writ-applicant further contended that since they had already paid the “Integrated Tax” on the imported goods under IGST Act, 2017, levying the Ocean Freight under the same Act amounts to double taxation.

The respondents, represented by Nirzar S. Desai, Parth H. Bhatt, Ankit Shah and Dhaval D. Vyas, justified the notifications contending that the notification is not arbitrary and is aimed at providing level playing field to the Indian Shipping Lines and that it does not result in an additional cost to the importer in India.

The Court rejected the arguments of the respondents and held that there is no extraterritorial jurisdiction of the said Act on the non-taxable persons and hence the notification was considered ultra vires to the Act. Strong reliance was placed on the case of the Indian Association of Tour Operators v. Union of India, 2017 SCC Online Del 10178, where the taxable territory of the Finance Act, 1994 did not apply to the State of Jammu and Kashmir.

The Court, hence struck down the impugned notification and held that levy and collection of tax on such Ocean Freight under the impugned notification is not permissible under the law. Therefore, the Court put a stay on the operation of the impugned notification. [Mohit Minerals Pvt. Ltd. v. Union of India, 2020 SCC OnLine Guj 49, decided on 23-01-2020]