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., Civil Appeal No. 1390 of 2022, 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

Legal RoundUpWeekly Rewind


TOP STORY OF THE WEEK


Anganwadi Workers/Helpers entitled to payment of gratuity; ‘Time to take serious note of their plight’ 

In a relief to the Anganwadi workers and helpers working tirelessly at the grassroot level, the Supreme Court has held that the Anganwadi Workers and Helpers are employed by the State Government for wages in the establishments to which the Gratuity Act applies, hence, they are entitled to payment of Gratuity.  

The Court also observed that the Anganwadi Workers/Helpers have been entrusted with the important tasks of providing food security to children in the age group of 6 months to 6 years, pregnant women as well as lactating mothers, apart from rendering pre-school education. And for all this, they are being paid very meagre remuneration and paltry benefits. 

Therefore, it is high time that the Central Government and State Governments take serious note of the plight of Anganwadi Workers/Helpers who are expected to render such important services to the society. 

Read more… 


SUPREME COURT


Producing false/fake certificate is a grave misconduct; Dismissal of service justified in such cases 

In a case where an employee had produced a fake certificate for seeking employment, the Supreme Court has held that producing the false/fake certificate is a grave misconduct and dismissal of service is a justified punishment in such cases. 

In the case at hand, while the disciplinary authority had imposed a punishment of dismissal from service on the delinquent, the Bombay High Court had directed reinstatement of the respondent without any back wages and other benefits.  

The Supreme Court, however, agreed with the disciplinary authority’s decision and observed:  

“The question is one of a TRUST. How can an employee who has produced a fake and forged marksheet/certificate, that too, at the initial stage of appointment be trusted by the employer? Whether such a certificate was material or not and/or had any bearing on the employment or not is immaterial. The question is not of having an intention or mens rea. The question is producing the fake/forged certificate.” 

Read more… 


‘Can’t allow mass absorption of over 11,000 workers based on a flawed Report’. SC forms new Committee to put an end to the long drawn LIC versus temporary employees’ battle  

In a long drawn battle between Life Insurance Corporation of India (LIC) and its temporary/badli/part-time employees over claim for absorption, a 3-judge bench of Supreme Court has appointed a two-member committee to carry out fresh verification of the claims of workers who were working between 20 May 1985 and 4 March 1991 and who claim to have been employed for at least 70 days in Class IV posts over a period of three years or 85 days in Class III posts over a period of two years shall be carried out. 

Finding the report of the previous committee faulty, the Supreme Court observed, 

“A public employer such as LIC cannot be directed to carry out a mass absorption of over 11,000 workers on such flawed premises without following a recruitment process which is consistent with the principles of equality of opportunity governed by Articles 14 and 16 of the Constitution. Such an absorption would provide the very back-door entry, which negates the principle of equal opportunity and fairness in public employment.” 

Read all about the newly formed committee and its tasks and timelines on the SCC Online Blog.  

Read more… 


High Courts


Madras High Court| Ban the practice of two-finger test on victims of sexual offences by medical professionals

Stating that two-finger test cannot be permitted to be continued, the Division Bench of Madras High Court directed the State Government to ban the practice of two-finger test on victims of sexual offences by the medical professionals. 

Court observed that, 

“…it is necessary for us to put an end to the practice of the two-finger test. We find that the two-finger test is being used in cases involving sexual offences particularly, on minor victims.” 

Read more… 


Bombay High Court| Advocate to maintain dignity & decorum of Court, no room for arrogance and no license to intimidate Court

In a matter wherein an Advocate alleged that the Court was giving priority to certain matters and to certain advocates, the Court observed that an advocate as an Officer of the Court is under an obligation to maintain the dignity and decorum of the Court. There is no room for arrogance and there is no license to intimidate the Court, make reckless accusations and allegations against a Judge and pollute the very fountain of justice. 

Bench also expressed that, “It has to be borne in mind that casting scurrilous aspersions not only has the inevitable effect of undermining the confidence of the public in the judiciary but also has the tendency to interfere with the administration of justice.” 

Read more… 


Bombay High Court| Declaration of reciting religious verses at someone’s residence: Act of breaching personal liberty of another person?

Stating that, “Great power comes with greater responsibility”, the Division Bench of Bombay HC expressed that, the expectation of responsible behaviour or responsible conduct from those persons who are active in public life cannot be an extra expectation but would be a basic one. 

High Court stated that the declaration of the petitioners that they would recite religious verses either in the personal residence of another person or even at a public place is firstly,  encroachment upon another person’s personal liberty and secondly, if a declaration is made with particular religious verses would be recited on the public street, the State government is justified in carrying an apprehension that such act would result in disturbance of law and Order. 

Read more… 


Delhi High Court| Whether absence of rule of law or utter disregard for the same propels a country towards inevitable ruin? 

Expressing that, attempts to circumvent or undermine judicial decisions need to be viewed seriously in order to ensure that the functioning of our country is unhindered, especially during turbulent times, Delhi High Court held that, 

“It is only the rule of law which not only cements the civilised functioning of a country, but also drives a country towards progress and development.” 

With regard to contempt, the Court observed that, 

“The underlying purpose of the law of contempt is meant to serve public interest and build confidence in the judicial process. This flows from how the functioning of a democratic society is sustained by the rule of law and wilful violation of the same would enable anarchy.” 

Read more… 


Legislation Updates 


IFSCA issues framework for FinTech entity in IFSCs 

The International Financial Services Centres Authority (IFSCA) has issued a detailed “Framework for FinTech Entity in the IFSCs” in order to develop and regulate financial products, financial services and financial institutions in the International Financial Services Centres (IFSC) and to encourage promotion of financial technologies (‘FinTech’) across the spectrum of banking, insurance, securities, and fund management in IFS. 

Read more… 


SEBI (Custodian) (Amendment) Regulations, 2022 

The Securities and Exchange Board of India has issued the Securities and Exchange Board of India (Custodian) (Amendment) Regulations, 2022 to amend Securities and Exchange Board of India (Custodian) Regulations, 1996. 

The amendment modifies Regulation 8 dealing with Procedure and grant of certificate and inserts clause (7) to provide that a custodian holding a certificate of registration as on the date of commencement of the Securities and Exchange Board of India (Custodian) (Amendment) Regulations, 2022, may provide custodial services in respect of silver or silver related instruments held by a mutual fund only after taking prior approval of the Board. 

Read more…  


Income-tax (Ninth Amendment) Rules, 2022 

On April 21, 2022, the Central Board of Direct Taxes (CBDT) has issued the Income-tax (Ninth Amendment) Rules, 2022 to amend Income-tax Rules, 1962 and introduces Conditions for furnishing return of income by persons referred in section 139 (1) of the Act.  

Read more … 


 

 

Case BriefsTribunals/Commissions/Regulatory Bodies

Income Tax Appellate Tribunal, Chandigarh (ITAT): The Coram of Sanjay Garg (Judicial Member) and Annapurna Gupta (Accountant Member) examined the issue as to the taxability of the amount of gift received by the assessee from his ‘HUF’.

An appeal was preferred by the assessee against the Principal Commissioner of Income Tax against revision order passed under Section 263 of the Act, whereby the PCIT had set aside the assessment order passed by the Assessing Officer with a direction to make the assessment afresh under Section 143(3) read with Section 147 of the Income Tax Act.

Factual Background

The assessee had filed his return of income declaring an income of Rs 14,32,982 and the assessment was completed by the Assessing Officer under Section 143(3) of the Act accepting the returned income.

Subsequently, the assessing officer reopened the assessment under Section 147 read with Section 148 on the ground that the assessee during the year under consideration had received a gift of Rs 5,90,000 from the Hindu Undivided Family.

In the opinion of the Assessing Officer, since the amount of said gift was more than Rs 50,000, hence the same was exigible to tax as ‘income from other sources’ under Section 56(2)(vii) of Income Tax Act.

PCIT while invoking his jurisdiction under Section 263 of the Act, set aside the order passed by the Assessing Officer, held that HUF does not fall in the definition of relative in the case of an ‘individual’ as provided in the explanation to clause (vii) to Section 56(2).

Though, the definition of a relative in the case of a ‘HUF’ has been extended to include any member of the ‘HUF’, yet, in the said extended definition, the converse case is not included that is to say in the case of an individual, the ‘HUF’ has not been mentioned in the list of relatives.

Thus, PCIT formed a view that though a gift from a member to the ‘HUF’ was not exigible to taxation as per the provisions of Section 56(2)(vii) of the Act, however, a gift by the HUF to a member exceeding a sum of Rs 50,000 was taxable.

To claim an exemption under Section 10(2) of the Act, the member ‘HUF’ must receive any amount for consideration out of the income of the ‘HUF’. That since the assessee had received the aforesaid amount of Rs 5,90,000/- without consideration, hence, the same was not tax-exempt.

Further, the PCIT set aside the order of the Assessing Officer and directed the AO to make the assessment afresh.

On being aggrieved with the order of the PCIT, the assessee filed the appeal.

Analysis, Law and Decision

Coram expressed that the order of the Assessing Officer cannot be said to be erroneous and therefore, the PCIT wrongly exercised jurisdiction under Section 263 of the Act and the same cannot be held to be justified.

Assessee had taken a plea that the gifts had been received by the assessee out of the income of the ‘HUF’ and that the same was exempt under Section 10(2) of the I.T. Act. It was noted that there was no rebuttal or denial either in the order of the Assessing Officer or in the order of the PCIT in respect of the contention of the assessee that the amount in question was received out of the income of the HUF. In view of the said, the assessee was entitled to exemption under Section 10(2) of the Act.

In case an individual member throws his elf-acquired property into a common pool of ‘HUF’, the ‘HUF’ or other members of the ‘HUF’ do not have any pre-existing right in the self-acquired property of a member. If such an individual member throws his own/self-earned or self-acquired property in common pool, it will be an income of the ‘HUF’, however the same will be exempt from taxation as the individual members of the ‘HUF’ have been included in the meaning of ‘relative’.

In view of the above, the HUF had not been included in the definition of relative in explanation to Section 56(2) (vii) as it was not so required whereas in case of HUF, members of the HUF find mention in the definition of ‘relative’.

Hence, the amount received by the assessee from the ‘HUF’ , being its members, was a capital receipt in his hands and was not exigible to income tax.[Pankil Garg v. Pr. CIT, Karnal; 2019 SCC OnLine ITAT 13321, decided on 17-7-2019]

Case BriefsHigh Courts

Delhi High Court: The Division Bench of Manmohan and Dinesh Kumar Sharma, JJ., expressed that just because the scholarship advertisement was published in the Urdu language, does not mean that it was targeted at students belonging to a particular community only.

Appellant’s Counsel submitted that the Income Tax Tribunal while passing the impugned order overlooked the fact that the Assessing Officer had found that the Respondent-assessee had given merit-cum-scholarship/financial assistance to candidates predominantly belonging to a particular religious community which is violative of Section 13(1)(b) of the Act. He further stated that the advertisement for an educational scholarship was published by the assessee in Urdu language and, that too, in one newspaper only.

Primary Issue


Whether in the facts and circumstances of the case, the Income Tax Appellate Tribunal was correct in allowing the appeal of the assessee ignoring the fact that the assessee had paid most of the scholarship amount to the students of a particular religious community which was a clear violation of Section 13(1)(b) of the Income Tax Act, 1961?

Analysis and Decision


High Court found that the Commissioner of Income Tax (Appeal) and Tribunal gave a concurrent finding of fact that the benefit of scholarship to the poor and needy students was not confined to students of a particular community and a perusal of the list submitted by the assessee showed that the benefit had been granted to students from all communities without any discrimination.

The Bench expressed that,

 “…just because advertisement was published in Urdu language and that too in one newspaper, it cannot be presumed that it was targeted at the students belonging to a particular community only.”

Adding to the above, Court stated that undoubtedly, the principle of res judicata and estoppel are not applicable in taxation matters.

Stating that consistency of approach must be maintained, High Court held that no substantial question of law arose in the present appeals. [Commr. Of Income Tax {Exemption) v. Hamdard National Foundation (India), 2022 SCC OnLine Del 979, decided on 6-4-2022]


Advocates before the Court:

For the Appellant: Abhishek Maratha, Sr. Standing Counsel.

For the Respondent: Salil Aggarwal, Sr. Advocate with Madhur Aggarwal and Uma Shankar, Advocates

Case BriefsSupreme Court

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

Facts Background

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

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

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

Analysis

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

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

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

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

The Court observed,

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

Ruling on facts

The Court specifically noticed that, in the present case,

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

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

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

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

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

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


*Judgment by: Justice S. Ravindra Bhat


Counsels

For Petitioner: Advocate Raj Bahadur Yadav

For respondents: Advocate Kavita Jha

Legal RoundUpSupreme Court Roundups

 

“Women are subject to a patriarchal mindset that regards them as primary caregivers and homemakers and thus, they are burdened with an unequal share of family responsibilities. Measures to ensure substantive equality for women factor in not only those disadvantages which operate to restrict access to the workplace but equally those which continue to operate once a woman has gained access to the workplace.”

Justice Dr. DY Chandrachud

SK Nausad Rahaman v. Union of India

2022 SCC OnLine SC 297


TOP STORIES


All India Bar Exams| From 1/4th negative marking to limiting the validity of Bar exam for three years; SC issues notice to BCI to respond to suggestions

“The right to practice a profession, also being a fundamental right, a balance has to be maintained between the same and the requirement to monitor the legal profession for its better ethics.”

Read more…

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POCSO| Is investigation of disclosure of victim’s identity permissible without Magistrate’s permission? SC gives split verdict

The bench of Indira Banerjee and JK Maheshwari, JJ has given split verdict on the issue as to whether the Special Court is debarred from taking cognizance of an offence under Section 23 of the Protection of Children from Sexual Offences Act, 2012 (POCSO Act) and obliged to discharge the accused under Section 227 CrPC, only because of want of permission of the jurisdictional Magistrate to the police, to investigate into the offence.

Read more…

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Supreme Court fixes outer limit for claiming COVID-19 death compensation; Claims to be filed within 90 days from now on

The Court agreed with the submission that by now all genuine claimants must have approached the authorities by establishing their claims and that if there is no outer time limit fixed, then the process of receiving the claims would go endless and, in that case, there is all possibility of submitting false claims.

Read more…


Women burdened with an unequal share of family responsibilities yet discriminated at workplace; State must consider family life while framing any policy

Speaking about the systemic discrimination on account of gender at the workplace which encapsulates the patriarchal construction that permeates all aspects of a woman’s being from the outset, including reproduction, sexuality and private choices, within an unjust structure, the bench of Dr. DY Chandrachud* and Vikram Nath, JJ has observed that it becomes necessary for the Government to adopt policies through which it produces substantive equality of opportunity as distinct from a formal equality for women in the workplace.

Read more…

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Issue of accommodation in a Domestic Violence dispute between husband and wife shall not affect landlord’s right to get possession of his property

The Court was hearing an appeal against the Delhi High Court verdict [2021 SCC OnLine Del 2109] wherein the Trial Court’s order granting the possession of the suit property on favour of the landlord was upheld. The appellant wife, in the present case, had challenged the Trail Court’s order on the ground that her husband should provide her accommodation as per the Domestic Violence Act, 2005.

Read more…

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‘IBC’s object is not to kill the company’; Builder’s Insolvency Proceedings closed as 82 out of 128 home buyers choose possession over refund/compensation

“If the original applicants and the majority of the home buyers are not permitted to close the CIRP proceedings, it would have a drastic consequence on the home buyers of real estate project.”

Read more…

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Permanent Injunction can’t be granted against true owner once the title dispute is settled

Supreme Court reverses three concurrent findings.

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EXPLAINED


Which law to prevail if provisions of Bihar Public Works Contracts Disputes Arbitration Tribunal Act, 2008 are in conflict with the Arbitration and Conciliation Act, 1996?

Can step-children claim property right in mother’s mehar after her death? Does a registered mehar deed become unenforceable for being nominal?

Can employees appointed for fixed period in temporary unit be absorbed/regularised by creating supernumerary posts?

Compensation under Section 4 of Employee’s Compensation Act, 1923 to be awarded from the date of accident or the date of Commissioner’s order? 

Can voluntary retiree seek retrospective promotion as a matter of right? 

Can State discriminate between persons having experience in home State from those having experience in other States? Is there any intelligible differentia?


More Stories


7-year-old’s “brutal” rape and murder: SC commutes Death sentence; No premature release/remission during 30 years’ LI as “conscience of the society cannot be ignored”

“The heinous nature of crime like that of present one, in brutal rape and murder of a seven-year-old girl child, definitely discloses aggravating circumstances, particularly when the manner of its commission shows depravity and shocks the conscience. But,…”

Read more…

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Refusal to continue to execute a contract unless reciprocal promises are performed by the other party is not abandonment of contract

“A party to a contract may abandon his rights under the contract leading to a plea of waiver by the other party, but there is no question of abandoning an obligation.”

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Where post import, factum of sale isn’t disputed, no exemption from market fee can be claimed under Karnataka Agricultural Produce Marketing Act of 1966

“It is the sale within the market area that attracts levy of market fee, and not the first purchase that was outside the market area.”

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Confiscation of Truck loaded with cow progeny despite acquittal in criminal proceedings amounts to arbitrary deprivation of property

“…to deprive any person of their property, it is necessary for the State, inter-alia, to establish that the property was illegally obtained or is part of the proceeds of crime or the deprivation is warranted for public purpose or public interest.”

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Promotion cannot be granted retrospectively to give benefit and seniority from the date of notional vacancy

The bench of Sanjay Kishan Kaul and MM Sundresh*, JJ has observed that a right to promotion and subsequent benefits and seniority would arise only with respect to the rules governing the said promotion, and not a different set of rules which might apply to a promoted post facilitating further promotion which is governed by a different set of rules.

Read more…

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Supreme Court lays down detailed guidelines for leave to defend in summary suits

Grant of leave to defend is the ordinary rule and denial is an exception.

Read more…

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APMCs liable to pay service tax under the category of ‘renting of immovable property service’

“In a taxing statute, it is the plain language of the provision that has to be preferred”.

Read more…

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Consent award cannot be the basis to determine compensation in other acquisition, especially, when there are other evidences on record

In case of a consent award, one is required to consider the circumstances under which the consent award was passed and the parties agreed to accept the compensation at a particular rate.

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“A bus by bus, a mini-bus by mini-bus and not bus by a mini-bus” isn’t a correct way to interpret the expression “same nature”

The Division Bench comprising of K.M. Joseph and Pamidighantam Sri Narasimha*, JJ., held that Rule 174(2)(c) of the Kerala Motor Vehicle Rules,1989 is valid and salutary and does not go beyond the scope of Section 83 of the MV Act, 1988. While interpreting the expression “same nature” the Bench observed that such expressions are better kept open ended to enable courts to subserve the needs of changing circumstances.

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Clarification vis-à-vis substantial alteration of commercial agreement; SC considers legality of retrospective application of modifications in agreement

The Division Bench comprising of Ajay Rastogi and Abhay S. Oka, JJ., held that a modification changing tariff for inadvertent drawal from temporary supply rate to the regular supply rate cannot be considered to be a mere clarification and is rather a substantial alteration which cannot be made applicable retrospectively.

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Withdrawal of  Inter-Commissionerate Transfers not invalid but Recruitment Rules 2016 may be revisited to accommodate posting of spouses, disabled persons and compassionate grounds

The bench of Dr. DY Chandrachud* and Vikram Nath, JJ has upheld the Kerala High Court verdict that had held that the Central Excise and Customs Commissionerates Inspector (Central Excise, Preventive Officer and Examiner) Group ‘B’ Posts Recruitment Rules 2016 (RR 2016) withdrawing the Inter-Commissionerate Transfers (ICTs) is not invalid as ICTs would violate the unique identity of each cadre envisaged under Rule 5 of RR 2016.

Read more…

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Is Railway’s decision to disqualify persons with history of lasik surgery for the post of constables (RPF) just and reasonable?

Supreme Court directs constitution of experts committee to answer.

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Eligibility Criteria fixed by UGC must be followed by all Universities

“… prescribing the eligibility criteria shall not be left to the sweet will of the search committee. It may lead to arbitrariness and different search committees in absence of any statutory guidelines and/or   prescription, may prescribe different eligibility criteria.”

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HC spends 9 months on deciding appeal from an ‘unappealable’ adjournment order. SC imposes Rs. 5 Lakhs exemplary cost on litigant for wasting ‘precious judicial time’

“Such unwarranted proceedings at the behest of the parties who can afford to bear the expenses of such litigations, must be discouraged.”

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SC reiterates the duties of Competent Authority and Court while issuing and testing externment orders

“An Order of Externment is an extraordinary measure which should be used sparingly”.

Read more…

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Declaration under the Income Declaration Scheme cannot lead to non-declarant’s immunity from taxation

The protection given, is to the declarant, and for a limited purpose.

Read more…

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OLX Frauds| SC sets aside P&H HC order directing deletion and re-listing of OLX advertisements with proofs

In recent years, in Districts of Gurugram, Faridabad, Rewari, Palwal and Mewat, hundreds of FIRs have been registered, in which accused persons, by using OLX platform, have given various advertisements regarding sale of gold (in different form) or sale of vehicles like motorcycle or car at cheaper price or asking for professional service like architect or accountants have allured many innocent persons and thus, have committed the offence of cheating and forgery.

Read more…

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[Bomikhal Flyover Collapse] Is permanent debarment of guilty contractor too harsh? What makes an order a pre-determined one? Supreme Court answers

“Merely because the show cause notice was issued after the inquiry committee report was considered and thereafter the State Government took the decision to initiate proceedings for blacklisting, that by itself it cannot be said that the order of blacklisting was predetermined as observed by the High Court.”

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Murder convict seeks remission of sentence on the ground of being 100% visually impaired. Can disability be a ground for remission? SC answers

The appellant had contended that since he is visually impaired to the extent of suffering permanently from 100% blindness and that was not a result of any voluntary act of the prisoner, the aforementioned provision would come to his aid for consideration of his case for release from serving out the remaining sentence.

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SC allows RPSC to go ahead with RAS Mains Exam; Candidates challenging Pre exam result allowed to sit in Mains

In a breather to the candidates challenging the RAS Pre-examination result, the bench of KM Joseph and Hrishikesh Roy, JJ has confirmed the Rajasthan High Court’s division bench directing Rajasthan Public Service Commission (RPSC) to go ahead with the RAS/RTS Combined Competitive Examination-2021 mains examination. It has, however, allowed the 243 candidates, who had approached the Courts, to sit in the Mains Examination to be conducted on March 20-21, 2022.

Read more…

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‘Business to business’ dispute not a consumer dispute

The bench of L. Nageswara Rao and BR Gavai*, JJ interpreted the true scope of a “consumer” in terms of Section 2(1)(d) of the Consumer Protection Act, 1986 and has held that the ‘business to business’ disputes cannot be construed as consumer disputes.

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Frivolous petitions defeating the noble object behind PILs and burdening SC and HCs; Bonafides of Litigants must be examined carefully

“Although the jurisprudence of Public Interest Litigation has matured, many claims filed in the Courts are sometimes immature.”

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Mere allegation of bias is not fatal to disciplinary inquiry unless supported by materials

Non-supply of demanded documents is not sufficient to challenge a disciplinary inquiry unless it is showed what prejudice has been caused due to non-supply.

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Law on filing false affidavit: Can defaulter get benefit of equity? Read what made the Supreme Court reverse concurrent findings of Courts

“Once an affidavit has been filed which is on the face of it false to the knowledge of the executants, no benefit can be claimed on the ground that delivery of possession was given.”

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‘Lotteries’ a species of ‘betting and gambling’; States Legislatures competent to levy tax

High Courts of Kerala and Karnataka were wrong in holding so as the Legislatures of the State of Karnataka and Kerala were fully competent to enact the impugned Acts and levy taxes on the activity of ‘betting and gambling’ being organised and conducted in the said respective States, including lotteries conducted by the Government of India or the Government of any State.

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Interchangeability of unfilled posts of SC/ST category can be done only by the department concerned, not by appointing authority

Also, rejection of claims of appellants by the departmental authorities relying upon wrong instructions or mentioning incorrect fact of withdrawal of Policy letter would not confer any right to appellants to claim the reliefs.

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Trap party recovers tainted currency notes from Tax Officer accused of demanding bribe. Supreme Court acquitted the officer in spite of proved recovery

In an interesting case relating to corruption, the Division Bench of Ajay Rastogi and Abhay S. Oka*, JJ., acquitted a Commercial Tax Officer in spite of proved recovery of tainted currency notes from her. The Bench observed that though the recovery was proved in the absence of demand being conclusively proved conviction cannot be made under Sections 7 and 13(1)(d) read with Section 13(2) of the PC Act.

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Borrower’s offer to pay Rs.71 lakhs as a purchaser of mortgaged property will not discharge him from entire outstanding liability of approx 1.8 crores

The Division Bench of M. R. Shah* and Sanjiv Khanna, JJ., held that  the entire liability outstanding against the borrower could not be discharged on making the payment i.e. Rs.65.65 lakhs against the total dues Rs.1,85,37,218.80 and that the Division Bench of the High Court had erred in directing to release the mortgaged property/secured property and to handover the possession along with the original title deeds to the borrower on payment of a total sum of Rs.65.65 lakhs only.

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Irregular Disciplinary Enquiry: Court cannot reinstate employee as such; Matter must be remanded to Enquiry Officer/Disciplinary Authority

In a case where it is found that the enquiry is not conducted properly and/or the same is in violation of the principles of natural justice, the Court cannot reinstate the employee as such and the matter is to be remanded to the Enquiry Officer/Disciplinary Authority to proceed further with the enquiry from the stage of violation of principles of natural justice is noticed.

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How will the higher Court know why review jurisdiction was exercised? Courts must mention what was that error apparent on the face of the record

“Unless such reasons are given and unless what was that error apparent on the face of the record is stated and mentioned in the order, the higher forum would not be in a position to know what has weighed with the Court while exercising the review jurisdiction and what was that error apparent on the face of the record.”

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Arakonam Naval Station dispute: Supreme Court puts a stop to over 3 decades long commercial dispute

“By going into the minute details of the evidence led before the learned Sole Arbitrator with a magnifying glass and the findings returned thereon, the Appellate Court has clearly transgressed the limitations placed on it.”

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Is amount spent by pharmaceutical companies in gifting freebies to the doctors “business expenditure” under IT Act when act of accepting freebies by doctors is an offence? SC answers

“…the statutory regime requiring that a thing be done in a certain manner, also implies (even in the absence of any express terms), that the other forms of doing it are impermissible.”

Read more…


Supreme Court Cases


2022 SCC Vol. 1 Part 2

In this part, read a very pertinent decision of the Supreme Court, Amazon.com NV Investment Holdings LLC v. Future Retail Ltd.2021 SCC OnLine SC 557 wherein while holding that an award passed by Emergency Arbitrator is enforceable under the Arbitration and Conciliation Act, 1996, a Division Bench of R.F. Nariman and B.R. Gavai, JJ. has ruled in favour of Amazon in the infamous Future-Amazon dispute. It has been held that the interim award in favour of Amazon, passed by the Emergency Arbitrator appointed under the Arbitration Rules of the Singapore International Arbitration Centre is enforceable under the Indian Arbitration Act.

2022 SCC Vol. 1 Part 3

In this part read the Supreme Court decision in Jaypee Kensington Boulevard Apartments Welfare Association v. NBCC (India) Ltd.,(2022) 1 SCC 401, wherein the Court while the Adjudicating authority has the authority to disapprove the resolution plan approved by the Committee of Creditors (CoC), it cannot modify the same.

2022 SCC Vol. 2 Part 1

In this part read a very important matter, wherein a relative committed rape on the prosecutrix and none of the family members believed her and in fact beat her up when she narrated the incident, Supreme Court found it unfortunate that even the sister-in-law (Jethani) and mother-in-law though being women did not support the prosecutrix. [Phool Singh v. State of Madhya Pradesh, 2021 SCC OnLine SC 1153]

2022 SCC Vol. 2 Part 2


Case BriefsSupreme Court

Supreme Court: The bench of UU Lalit and S. Ravindra Bhat*, JJ has held that the declaration under the Income Declaration Scheme (IDS) cannot lead to immunity from taxation in the hands of a non-declarant.

The Court explained that the objective of Income Declaration Scheme (IDS), introduced by Chapter IX of the Finance Act, 2016, was to enable an assessee to declare her (or his) suppressed undisclosed income or properties acquired through such income. It is based on voluntary disclosure of untaxed income and the assessee’s acknowledging income tax liability. This disclosure is through a declaration (Section 183 of the Income Tax Act) to the Principal Commissioner of Income Tax within a time period, and deposit the prescribed amount towards income tax and other stipulated amounts, including penalty.

Facially, Section 192 of the Income Tax Act affords immunity to the declarant: “…nothing contained in any declaration made under section 183 shall be admissible in evidence against the declarant for the purpose of any proceeding relating to imposition of penalty…” Therefore, the protection given, is to the declarant, and for a limited purpose.

The assessee, in the case at hand, is a private limited company and had filed return of income for the AY 2010-11 on 25.9.2010. The return was accepted under section 143(1) of the Act without scrutiny.

The assessment was re-opened after search proceedings conducted in the case of one Shirish Chandrakant Shah, an accommodation entry provider in Mumbai, it was observed that huge amounts of unaccounted moneys of promoters/directors were introduced in closely held companies of the assessee’s group.

Further, the reasons to believe also stated that the chairman of M.R. Shah Group, during the statement- recorded under Section 132(4), disclosed that Garg Logistics Pvt. Ltd. had declared ₹ 6.36 crores as undisclosed cash utilized for investment in the share capital of the assessee, M.R. Shah Logistics Pvt. Ltd. through various companies. The assessee company’s chairman voluntarily  disclosed the statements made by Garg Logistics under Section 132 of the Act, about the declaration by Garg Logistics P Ltd, under the Income Declaration Scheme (IDS).

It can be seen that in the present case, the declarant was Garg Logistic Pvt Ltd and not the assessee. The Court, hence, held that the assessee could not claim immunity in the present case.

[Deputy Commissioner of Income Tax v. M. R. Shah Logistics Pvt. Ltd., 2022 SCC OnLine SC 365, decided on 28.03.2022]


*Judgment by: Justice S. Ravindra Bhat


For Assessee: Advocate Guru Krishnakumar

Case BriefsSupreme Court

Supreme Court: In the instant appeals, the Market Committees located in Rajasthan raised their grievance over the decision of CESTAT that respective Market Committees are liable to pay service tax under the category of ‘renting of immovable property service’ for the period upto 30.06.2012. The Division Bench of M.R. Shah* and B.V. Nagarathna, JJ., while observing that in a taxing statute, it is the plain language of the provision that has to be preferred, where language is plain and is capable of determining defined meaning; dismissed the appeals and held that on and after 01.07.2012, such activities carried out by the Agricultural Produce Market Committees is placed in the Negative List. If the intention was to exempt such activities of the Market Committees from levy of service tax, then there was no necessity to place such activity of the Market Committees in the Negative List. Therefore, it can be safely said that that, the Market Committees were not exempted from payment of service tax on such activities.

Facts: Krishi Upaj Mandi Samitis (Agricultural Produce Market Committees) were established in Rajasthan under the provisions of Rajasthan Agricultural Produce Markets Act, 1961. The committees regulate sale of agricultural produce in the notified markets. They charged “market fee” for issuing license to traders, agents, factory/storage, company or other buyers of other agricultural produce. They also rented out the land and shops to traders and collect allotment fee/lease amount for such land/shop.

The Revenue was of the view that the appellants are liable to pay the service tax on the services rendered by them by renting/leasing the lands/shops. The same was challenged by the appellants. However CESTAT noted that with the introduction of Negative List Regime of taxation w.e.f. 01.07.2012, the services in question were excluded from the tax liability and therefore the appellant(s) being an Agricultural Produce Market Committee was/were excluded from tax liability on and after 01.07.2012; i.e. Market Committees are not liable to service tax for the period after 01.07.2012, however CESTAT held that Market Committees are liable to pay service tax under the category of “renting of immovable property service” for the period upto 30.06.2012.

The grievance of the appellants was centered around Circular No.89/7/2006 dated 18.12.2006. As per the Circular, activities performed by the sovereign / public authorities under the provisions of law being mandatory and statutory functions and the fee collected for performing such activities is in the nature of a compulsory levy as per the provisions of the relevant statute and it is deposited into the Government Treasury, no service tax is leviable on such activities. Paragraph 3 of the Circular, specifically clarifies that if such authority performs a service, which is not in the nature of a statutory activity and the same is undertaken for consideration, then in such cases, service tax would be leviable, if the activity undertaken falls within the ambit of a taxable service.

Contentions: The counsels for the appellants Prakul Khurana and Ms. Divyasha Mathur, submitted before the Court that the activity of allotting shops/premises/spaces to traders and brokers by the respective Market Committees for the purpose of storage and/or marketing of agricultural produce is in the nature of a statutory activity as mandated under S. 9 of Rajasthan Agricultural Produce Markets Act, 1961 and, therefore, the Market Committees are exempted from payment of service tax on such services as per Circular. They further contended that the fees collected by the respective Market Committees on renting/leasing the land/shop will be deposited in the Market Committee Fund and the same shall be ultimately used for the betterment of the market area, thus when the Market Committees are the public authorities under the 1961 Act and when they perform the statutory duty / function of allotment/renting/leasing of land/shop, then such Market Committees are entitled to the exemption provided under the 2006 Circular.

The counsel for the respondent, Nisha Bagchi submitted before the Court that the activities of allotment/renting/leasing of the shop/shed/platform/land cannot be said to be a mandatory statutory activity and therefore, the Market Committees are not exempted from service tax as per 2006 Circular. She further argued that as per the language used in the legislation, S. 9 of the 1961 Act, is an enabling provision and does not cast a mandatory duty over the Market committees to allot/rent/lease the shop/land/platform.  Therefore the activities of renting/leasing by the Market Committees to the traders cannot be said to be a statutory activity, hence the market committees are not entitled to claim any exemption under the 2006 circular. The respondents further contended that exemption notification should be strictly construed and given meaning according to legislative intent and that the statutory provisions providing for exemption have to be interpreted in light of the words employed in them and there cannot be any addition or subtraction from the statutory provisions.

Observation: Perusing the 2006 Circular, the Court noted that language used is clear and unambiguous. Applying the principles of interpretation of statutes, the Court observed that, “It is settled law that the notification has to be read as a whole. If any of the conditions laid down in the notification is not fulfilled, the party is not entitled to the benefit of that notification. An exception and/or an exempting provision in a taxing statute should be construed strictly and it is not open to the court to ignore the conditions prescribed in the relevant policy and the exemption notifications issued in that regard”.

The Court observed that the contention of the appellants stating that the activity of rent/lease/allotment of shop/land/platform/space is a statutory activity and the Market Committees are performing their statutory duties under S. 9 hence the entitlement to exemption, holds no substance.

After carefully perusing the words used in S. 9, the Court stated that the activity cannot be said to be a mandatory statutory activity as contended by appellants since the fee collected is not deposited into the Government Treasury; it will go to the Market Committee Fund and will be used by the market committees. Thus such a fee collected cannot have the characteristics of the statutory levy/statutory fee. Thus, under the1961 Act, it cannot be said to be a mandatory statutory obligation of the Market Committees to provide shop/land/platform on rent/lease. “If the statute mandates that the Market Committees have to provide the land/shop/platform/space on rent/lease then and then only it can be said to be a mandatory statutory obligation otherwise it is only a discretionary function. If it is discretionary function, then, it cannot be said to be a mandatory statutory obligation/statutory activity. Hence, no exemption to pay service tax can be claimed”.

[Krishi Upaj Mandi Samiti v. Commissioner of Central Excise and Service Tax, 2022 SCC OnLine SC 224, decided on 23-02-2022]


*Judgment by: Justice MR Shah


Sucheta Sarkar, Editorial Assistant has put this report together

Legal RoundUpSupreme Court Roundups

“No doubt, that a Judicial Officer while discharging his/her duties, is expected to be independent, fearless, impassionate and non-impulsive. But a Judicial Officer is also a human being. A Judicial Officer is also a parent. He/she could be a father or a mother. “

X v. High Court of MP

2022 SCC OnLine SC 171


STORY OF THE MONTH


Harassed, transferred, left with no choice but to resign: Read how this MP District Judge won half the battle in alleged sexual harassment case as SC orders her reinstatement

The resignation by the petitioner was on account of exasperation and frustration actuated by a thought, that injustice was being meted out to her by the very Institution of Judiciary.

The Court observed that,

“… in a gruesome battle between a mother and a Judicial Officer, the Judicial Officer lost the battle to the mother.”

Read more…


UNMISSABLE STORIES


Fraudulent Trading| SEBI must disclose all relevant material, including Investigation Report, to noticee except certain sensitive information

“If the report of the investigation authority under Regulation 9 has to be considered by the Board before satisfaction is arrived at on a possible violation of the regulations, the principles of natural justice require due disclosure of the report.”

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Supreme Court rejects default bail plea of Rahul Modi, MD of Adarsh Group

“Filing of the charge-sheet within stipulated period is sufficient compliance u/s 167 of CrPC.”

Read more…

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Amazon-Future-Reliance Dispute| SC allows Future Group to approach Delhi HC for continuation of merger deal with Reliance Group

The 3-judge bench of NV Ramana, CJ and AS Bopanna and Hima Kohli, JJ has granted liberty to Future Retail Limited (FRL) to approach the Delhi High Court by filing an application seeking continuation of the NCLT proceedings beyond the 8th Stage i.e. Meeting of Shareholders and creditors.

Read more…

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Section 498A IPC| Husband’s relatives cannot be forced to undergo trial in absence of specific allegations of dowry demand

“A criminal trial leading to an eventual acquittal also inflicts severe scars upon the accused.”

Read more…

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Supreme Court furthers SOP for evidence recording via video-conferencing in cases related to child victims/witnesses of human trafficking

“It is well known that our country is a technological powerhouse and if we are unable to take advantage of the resources available with us and fully utilise the benefits of technology through computers and the internet for the benefit of children, our status as a technological powerhouse would be in jeopardy and would remain only on paper.”

Read more…

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POCSO Offenders Deserve No Leniency; “A Message Must Be Conveyed To The Society At Large”

“Cases of sexual assault or sexual harassment on the children are instances of perverse lust for sex where even innocent children are not spared in pursuit of such debased sexual pleasure.”

Read more…

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Bullet Train Project: Even Republic of India can’t deviate from terms and conditions of a fully foreign funded contract; SC sets aside Delhi High Court verdict

Japan International Cooperation Agency (JICA) has invested Rs.1 lakh crores in the Bullet Train Project.

Read more…


EXPLAINERS



MORE STORIES


Not mandatory to register partition document only detailing how the properties are to be dealt with in future

The Court was deciding a case where the panchayatdars had passed an award in the form of a resolution in relation to a family property.

Read more…

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Lok Adalat Award cannot be a basis for redetermination of the compensation under Section 28A of the LA Act

An Award passed under Section 19 of the 1987 Act is a product of compromise. Sans compromise, the Lok Adalat loses jurisdiction.

Read more…

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Applications under Section 156 (3) Cr.P.C. being filed only to harass other; Filing of affidavit a must

In a case where the Magistrate had passed an order under Section 156(3) CrPC even in absence of an affidavit duly sworn by the complainant, the bench of BR Gavai* and Krishna Murari, JJ that many a times the applications under Section 156 (3) of the Cr.P.C. are filed in a routine manner without taking any responsibility only to harass certain persons and hence, such applications are to be supported by affidavits.

Read more…

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Minor penalties, without cumulative effect, are still a proof of tainted service record; Benefit of Selection Grade can’t be claimed as a right

In a case where a former employee of Rajasthan State Road Transport Corporation sought benefit of Selection Grade, 7 years after his compulsory retirement, the bench of Dr. DY Chandrachud and Surya Kant, JJ has held that the grant of the Selection Grade is not a matter of right and is subject to the stipulated terms and conditions which, in the present case, included a clean and untainted service record.

Read more…

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Merely writing “cancelled” on registered power of attorney wouldn’t make it null and void

The Division Bench of K.M. Joseph* and Pamidighantam Sri Narasimha, JJ., held that mere writing the word “cancelled” or drawing a line would not render Power of Attorney null and void as there must be cancellation and it must further be brought to the notice of the third party at any rate.

Read more…

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Law passed by legislature is good law till it is declared unconstitutional by a Court

The Supreme Court held that, the Manipur Legislature was not competent to introduce a saving clause in the Repealing Act 2018.

Read more…

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Consent decree cannot be modified/ altered unless the mistake is a patent or obvious one

“Even assuming there is a mistake, a consent decree cannot be modified/ altered unless the mistake is a patent or obvious mistake. Or else, there is a danger of every consent decree being sought to be altered on the ground of mistake/ misunderstanding by a party to the consent decree.”

Read more…

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IBC Amendment, 2018; Supreme Court elaborates conditions for disqualification of Resolution Professional under S. 29A(h) of IBC

“…what is required to earn a disqualification under the said provision is a mere existence of a personal guarantee that stands invoked by a single creditor, notwithstanding the application being filed by any other creditor seeking initiation of insolvency resolution process subject to further compliance of invocation of the said personal guarantee by any other creditor.”

Read more…

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Compassionate Appointment cannot be denied to children born from the second wife of a deceased employee

“A policy cannot discriminate against a person only on the ground of descent by classifying children of the deceased employee as legitimate and illegitimate and recognizing only the right of legitimate descendant.”

Read more…

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No Corporation/Planning Authority can be compelled to acquire an unusable or unsuitable land and be compelled to pay compensation to landowners

“Once by operation of law, the reservation is deemed to have lapsed, it is lapsed for all purposes and for all times to come.”

Read more…

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Default/Delay in payment of EPF by employer: Mens rea or actus reus not an essential element for imposing civil penalty/damages

The bench of Ajay Rastogi and Abhay S. Oka, JJ has held that any default or delay in the payment of EPF contribution by the employer under the Employees Provident Fund & Miscellaneous Provisions Act, 1952 is a sine qua non for imposition of levy of damages under Section 14B and mens rea or actus reus is not an essential element for imposing penalty/damages for breach of civil obligations/liabilities.

Read more…

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Advocate an officer of the Court; May be appointed by CMM/DM to assist in execution of order passed under Section 14(1) of SARFAESI Act

The Court was called upon to decide whether the past practice followed by most of the courts across the country in recognising the power of the CMM/DM to appoint an advocate as a commissioner to assist him in merely taking possession of the secured assets and documents relating thereto and to forward the same to the secured creditor, needs to be discontinued as being prohibited owing to insertion of sub-Section (1A) of Section 14 of SARFAESI Act?

Read more…

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Benefit conferred on one or a set of people, without legal basis or justification, cannot multiply and be relied upon as a principle of parity

“A principle, axiomatic in this country’s constitutional lore is that there is no negative equality.”

Read more…

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Is independent suit questioning a compromise decree maintainable or one has to approach the same Court which recorded the compromise to challenge it? SC answers

“If clever drafting of the plaint has created the illusion of a cause of action, the court will nip it in the bud at the earliest so that bogus litigation will end at the earlier stage.”

Read more…

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Bank Employees misappropriate funds. Confession by one leads to mild penalty; No evidence against another leads to dismissal! SC directs reinstatement

“A reading of the disciplinary authority’s order reveals that his past record of minor misconduct played a major role in determining his guilt, despite lack of evidence, and the extreme penalty of dismissal.”

Read more…

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Section 138 NI Act| Prima-facie indication as to complaint by a company through an authorised employee having knowledge of the case enough for Magistrate to take cognizance

The 3-judge bench of NV Ramana, CJ and AS Bopanna* and Hima Kohli, JJ has held that when the complainant/payee for a complaint filed under Section 138 of NI Act is a company, an authorized employee can represent the company. Such averment need not be in any particular manner and prima facie material is sufficient for the Magistrate to take cognizance and issue process.

Read more…

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SC discusses law on compensation for injurious affection; Summarises items under S. 23(1) of LA Act to be considered by court while determining compensation

“Railway line is not like a roadway. Roads can take diversion easily, but not railway lines.”

Read more…

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Can sale pursuant to a public auction, be set aside at the instance of strangers to the auction proceeding? SC decides

if there was any error in the decision-making process adopted by the authority, the remedy available was to question the sale deed in an appropriate proceeding available under the law and not by filing a petition under Article 226 of the Constitution of India”.

Read more…

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Financier-in-possession of a motor/transport vehicle liable to pay tax under U.P. Motor Vehicles Taxation Act, 1997

While dealing with the scope of Section 12 of the U.P. Motor Vehicles Taxation Act, 1997, bench of MR Shah* and BV Nagarathna, JJ has held that a financier of a motor vehicle/transport vehicle in respect of which a hire-purchase, lease or hypothecation agreement has been entered, is liable to tax from the date of taking possession of the said vehicle under the said agreements.

Read more…

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Chased and killed in the mid night much after the altercation, even after the deceased reached his house. Cold blooded murder or  culpable homicide not amounting to murder? SC decides

In a case relating to murder versus culpable homicide legal controversy, the Division Bench of M.R. Shah* and B.V. Nagarathna, JJ., held that the Uttaranchal High Court had erred in observing that the case would fall under Fourth exception to Section 300 IPC and had failed to properly appreciate the multiple injuries sustained by the deceased.

Read more…

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Bank entitled to withhold payment where Bond holder’s title is clouded as fraudulent

“Shylock has received their promised pound of flesh but they seem to want more”

Read more…

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Is unstamped Arbitration Agreement enforceable?

Supreme Court holds question being pending before larger Bench will not hinder arbitration proceedings unless issue indicates existence of deadwood.

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Economic Offence| 25 crores siphoned off by forging documents and misusing KYCs of employees; SC cancels Delhi HC’s order granting bail to the suspect

Mere non-misuse of liberty cannot be a ground to confirm the bail order otherwise not sustainable in law.

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5-year moratorium on new Pharmacy Colleges: Chh HC’s interim order directing PCI to consider application for affiliation stayed; Matter to be disposed of in 4 weeks

Supreme Court imposed a stay on the Chattisgarh High Court’s interim order directing the PCI to permit the respondents to submit their application required for the necessary permission and approval and also for grant of necessary affiliation for the academic session 2022-23.

Read more…

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Post Poll Violence| Anticipatory Bail to Mamta’s Banerjee’s Election Agent SK Supiyan in murder case; Must fully cooperate in the probe

The Court made clear that the pre-arrest bail is liable to be cancelled if it is found that the appellant is not cooperating for the investigation.

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By purchasing power at higher rate, Andhra Pradesh DISCOMS have acted contrary to public interest

“Every action of a State is required to be guided by the touch¬stone of non-arbitrariness, reasonableness and rationality. Every action of a State is equally required to be guided by public interest. Every holder of a public office is a trustee, whose highest duty is to the people of the country.”

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Whether lotteries being res extra commercium takes away CCI’s Jurisdiction to entertain anti-competition activities relating to lotteries? SC decides

“A simple aspect of anti-competitive practices and cartelisation had got dragged on for almost ten years in what appears to be a mis-application by the High Court of the interplay of the two Acts, i.e., the Competition Act and the Regulation Act.”

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“Debt arising out of advance payment for supply of goods or services is an operational debt”; SC allows operational creditor to initiate CIRP

“…no doubt that a debt which arises out of advance payment made to a corporate debtor for supply of goods or services would be considered as an operational debt.”

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SC sets aside HC order for applying test of criminal proceedings to departmental proceedings

“No case for interference either on law or on moral grounds”

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IN OTHER NEWS


Supreme Court invites applications seeking conferment of designation of Senior Advocates


SUPREME COURT CASES 

[An overview of the cases reported in the latest volumes of SCC]


2021 SCC Vol. 9 Part 3

In Part 3 of Volume 9, read this very interesting decision, where the Election Commission of India (EC) had sought a direction.

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2021 SCC Vol. 10 Part 1

In Part 1 Volume 10 of 2021, read Supreme Court’s decision in Supertech Ltd. v. Emerald Court Owner Resident Welfare Assn.(2021) 10 SCC 1, wherein the Court made an observation that “illegal constructions have to be dealt with strictly to ensure compliance with the rule of law.”

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2021 SCC Vol. 10 Part 2

In this part, read three really interesting Articles along with some very carefully analysed decisions of the Supreme Court by our editors.

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2021 SCC Vol. 10 Part 3

This part has a very interesting decision from the Supreme Court, wherein the Court issued “general uniform direction” of deduction of 15 per cent of the annual school fees for the academic year 2020-2021 in lieu of unutilised facilities/activities and not on the basis of actual data school-wise.[Indian School v. State of Rajasthan, (2021) 10 SCC 517].

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2021 SCC Vol. 10 Part 4

Evidence Law, Arbitration Law, Service Law and many more interesting decisions covered in this part covering some very pertinent laws.

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2022 SCC Vol. 1 Part 1

In 2022 SCC Volume 1 Part 1, read a very significant decision of Supreme Court wherein it made a very pertinent observation with regard to arbitral awards,

“There is a disturbing tendency of courts setting aside arbitral awards, after dissecting and reassessing factual aspects of the cases to come to a conclusion that the award needs intervention …”

[Delhi Airport Metro Express (P) Ltd. v. DMRC, 2021 SCC OnLine SC 695]


 

Case BriefsSupreme Court

Supreme Court: While dealing with the scope of Section 12 of the U.P. Motor Vehicles Taxation Act, 1997, bench of MR Shah* and BV Nagarathna, JJ has held that a financier of a motor vehicle/transport vehicle in respect of which a hire-purchase, lease or hypothecation agreement has been entered, is liable to tax from the date of taking possession of the said vehicle under the said agreements.

The Court further explained that only in a case, which falls under sub-section (2) of Section 12 and subject to surrender of the necessary documents as mentioned in sub-section (2) of Section 12, the liability to pay the tax shall not arise, otherwise the liability to pay the tax by such owner/operator shall continue.

What Section 12 of the U.P. Motor Vehicles Taxation Act, 1997 state?

Section 12 provides for non-use of vehicle and refund of tax.

As per Section12(1) when any person who has paid the tax in respect of a transport vehicle, proves to the satisfaction of the Taxation Officer in the prescribed manner that the motor vehicle in respect whereof such tax has been paid, has not been used for a continuous period of one / month or more since the tax was last paid, he shall be entitled to a refund of an amount equal to one-third of the rate of quarterly tax or one twelfth of the yearly tax, as the case may be payable in respect of such vehicle for each thirty days of such period for which such tax has been paid.

However, Section 12(2) provides that where the operator or, as the case may be, the owner of a motor vehicle, does not intend to use his vehicle for a period of one month or more he shall, before the date the tax or additional tax, as the case may be is due, surrender the certificate of registration, the token, if any, issued in respect of the motor vehicle and the permit, if any, to the Taxation Officer of the region where the tax or additional tax was last paid and on such surrender, no tax or additional tax under Act, 1997 shall be payable in respect of such vehicle for each complete calendar month of the period during which the vehicle remains withdrawn from use and the aforesaid documents remain surrendered with the Taxation Officer.

As per proviso to sub-section (2) of Section 12 in case such vehicle is found plying during the period when its documents as mentioned in sub-section (2) of Section 12 remain surrendered with the Taxation Officer, such owner or operator, as the case may be, shall be liable to tax and additional tax as if the documents were not surrendered and shall also be liable to penalty equivalent to five times of the tax and additional tax.

Analysis

Going by the scheme of the U.P. Motor Vehicles Taxation Act, 1997, the Court observed that in respect of a transport vehicle, the tax is to be paid in advance as monthly tax or yearly tax, as the case may be, and only thereafter such vehicle shall be put to use.

The owner or operator has to first pay the tax in advance and thereafter if the transport vehicle is not used for a continuous period of one month or more since the tax was last paid, he may have to apply for the refund, which may be granted subject to compliance of the necessary requirements as per first proviso to Section 12 and subject to satisfaction of the Taxation Officer that the transport vehicle has not been used for a continuous period of one month or more since the tax was last paid.

The Court made it clear that there is only one eventuality where no tax or advance tax under the Act, 1997 shall be payable namely under sub-section (2) of Section 12, where the operator or, as the case may be, the owner of a motor vehicle, does not intend to use his vehicle for a period of one month or more, he shall, before the date the tax or additional tax, as the case may be, is due, surrender the certificate of registration, the token, if any, issued in respect of the motor vehicle and the permit, if any, to the Taxation Officer of the region where the tax or additional tax was last paid and only on such surrender, no tax or additional tax under Act, 1997 shall be payable in respect of such vehicle for each completed calendar month of the period during which the vehicle remains withdrawn from use and the aforesaid documents remain surrendered with the Taxation Officer.

If, after the payment of tax, the vehicle is not used for a month or more, then such an owner may apply for refund under Section 12 of the Act, 1997 and has to comply with all the requirements for seeking the refund as mentioned in Section 12, and on fulfilling and/or complying with all the conditions mentioned in Section 12(1), he may get the refund to the extent provided in sub-section (1) of Section 12, as even under Section 12(1), the owner / operator shall not be entitled to the full refund but shall be entitled to the refund of an amount equal to one-third of the rate of quarterly tax or one twelfth of the yearly tax, as the case may be, payable in respect of such vehicle for each thirty days of such period for which such tax has been paid. However, only in a case, which falls under sub-section (2) of Section 12 and subject to surrender of the necessary documents as mentioned in sub-section (2) of Section 12, the liability to pay the tax shall not arise, otherwise the liability to pay the tax by such owner/operator shall continue.

The Court, hence, upheld the Allahabad High Court judgment wherein it was held that a financier-in-possession of the transport vehicle is liable to pay tax under the U.P. Motor Vehicles Taxation Act, 1997.

[Mahindra and Mahindra Financial Services v. State of UP, 2022 SCC OnLine SC 219, decided on 22.02.2022]


*Judgment by: Justice MR Shah


Counsels

For appellant: Advocate Prashant Kumar

For State: Senior Advocate Garima Prasad

Legal RoundUpSupreme Court Roundups

“Merit is not solely of one‘s own making. The rhetoric surrounding merit obscures the way in which family, schooling, fortune and a gift of talents that the society currently values aids in one‘s advancement.”

Neil Aurelio Nunes v. Union of India, 2022 SCC OnLine SC 75


STORY OF THE MONTH


“Reservation is not at odds with merit”; Here’s why SC upheld OBC reservation in NEET PG and UG Admissions in AIQ quota

In a detailed judgment, the bench of Dr. DY Chandrachud and AS Bopanna, JJ has upheld the Constitutional validity of the reservation for OBC candidates in the AIQ seats for PG and UG  medical and dental courses and noticed that while an open competitive exam may ensure formal equality where everyone has an equal opportunity to participate, however, widespread inequalities in the availability of and access to educational facilities will result in the deprivation of certain classes of people who would be unable to effectively compete in such a system.

Read more…


UNMISSABLE STORIES


COVID-19/Omicron surge yet again forces Supreme Court to extend period of limitation for filing of cases

After the Supreme Court Advocates-on-Record Association approached the Court in light of the spread of Omicron, the new variant of the COVID-19 and the drastic surge in the number of COVID cases across the country, the 3-judge bench of NV Ramana, CJ and L. Nageswara Rao and Surya Kant, JJ restored the order dated 23.03.2020 and directed that the period from 15.03.2020 till 28.02.2022 shall stand excluded for the purposes of limitation as may be prescribed under any general or special laws in respect of all judicial or quasi judicial proceedings.

Read more

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PM Modi Security Lapse: “War of words no solution”; SC appoints Committee headed by Justice Indu Malhotra to look into the matter

After a massive security lapse that left Prime Minister Narendra Modi stuck on a highway in Punjab for 20 minutes on January 5, 2022, the 3-judge bench of NV Ramana, CJ and Surya Kant and Hima Kohli, JJ has formed a committee to be chaired by Justice Indu Malhotra, former Supreme Court Judge.

Read more…

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NEET 2021-22: Supreme Court allows Counselling with 27% Quota for OBCs and 10% Quota for EWS in All India Quota

 Considering the urgent need to commence the process of Counselling, the bench of Dr. DY Chandrachud* and AS Bopanna, JJ, has directed that counselling on the basis of NEET-PG 2021 and NEET- UG 2021 shall be conducted by giving effect to the reservation as provided by the notice dated 29 July 2021, including the 27 per cent reservation for the OBC category and 10 per cent reservation for EWS category in the All India Quota seats.

Read more…

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Suspension of 12 Maharashtra BJP MLAs for one year “grossly illegal”; worse than expulsion, disqualification or resignation

In a big relief to the 12 BJP MLAs who were suspended by the Maharashtra Legislative Assembly, by resolution dated 05.07.2021, for a period of 1 year due to “indisciplined and unbecoming behavior resulting in maligning the dignity of the House”, the 3-judge bench of AM Khanwilkar*, Dinesh Maheshwari and CT Ravikumar, JJ has held that the said resolution is unconstitutional, grossly illegal and irrational to the extent of period of suspension beyond the remainder of the concerned (ongoing) Session.

Read more…

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“Can’t allow Devas and its shareholders to reap the benefits of their fraudulent action”; SC upholds NCLAT’s order to wind up Devas  

“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.”

Read more…

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Arcelor Mittal Nippon Steel India Limited to pay the purchase tax of Rs. 480 Crores as SC sets aside Gujarat HC verdict

In a major blow to Essar Steel Limited, now Arcelor Mittal Nippon Steel India Limited), the bench of MR Shah* and Sanjiv Khanna, JJ has set aside the Gujarat High Court verdict wherein it was held that Essar was entitled to the exemption from payment of purchase tax as per the Notification dated 05.03.1992, which was issued under Section 49(2) of the Gujarat Sales Tax Act, 1969. As a result Essar will now have to pay the purchase tax of Rs.480.99 crores.

Read more…

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Dowry Death| Woman meting out cruelty to another woman deserves no leniency. Mother-in-law must protect daughter-in-law, not harass her: SC

“Being a lady, the appellant, who was the mother-in-law, ought to have been more sensitive vis-à-vis her daughter-in-law.”

Read more…

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Can Demand of Money for Construction of a House be Treated as a Dowry Demand? SC answers in a 2002 case where a 5-months pregnant woman set herself on fire

“A push in the right direction is required to accomplish the task of eradicating this evil which has become deeply entrenched in our society.”

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Pension is not a bounty; Lack of financial resources no excuse for taking away vested rights by way of retrospective amendments

The bench of Ajay Rastogi and Abhay S. Oka, JJ has held that an amendment having retrospective operation which has the effect of taking away the benefit already available to the employee under the existing rule indeed would divest the employee from his vested or accrued rights and that being so, it would be held to be violative of the rights guaranteed under Articles 14 and 16 of the Constitution.

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Cal HC had no jurisdiction to quash CAT Principle Bench’s transfer order in Alapan Bandhopadhyay Case, holds SC, based on this Constitution Bench Law holding ground since 1997

The 2-judge bench of AM Khanwilkar and CT Ravikumar, JJ has reiterated the position laid down by the Constitution Bench in L. Chandra Kumar v. Union of India, (1997) 3 SCC 261, that any decision of such a Tribunal, including the one passed under Section 25 of the Administrative Tribunals Act, 1985 could be subjected to scrutiny only before a Division Bench of a High Court within whose jurisdiction the Tribunal concerned falls.

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EXPLAINERS



MORE STORIES


“Not a case of lack of promotional opportunities”; No financial upgradation to employee refusing regular promotion for personal reasons

The bench of R. Subhash Reddy and Hrishikesh Roy*, JJ has held that if a regular promotion is offered but is refused by the employee before becoming entitled to a financial upgradation, she/he shall not be entitled to financial upgradation only because she/he has suffered stagnation.

Read more…

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Life cannot be breathed into the stillborn charge memorandum; SC holds where prior approval is the rule the defect cannot be cured by post-facto approval

“What is non-existent in the eye of the law cannot be revived retrospectively.”

Read more…

Cheque gets deposited to the account of account holder with strikingly similar name. Bank blames customer. Read why SC was “surprised” at NCDRC’s ruling

In an interesting case where one SBI account holder was left with a balance of Rs. 59/- only in his account due to the existence of another bank account with strikingly similar name in the same branch, the bench of Sanjiv Khanna and Bela M. Trivedi*, JJ has set aside the “highly erroneous” impugned order passed by the National Consumer Disputes Redressal Commission solely relying upon the suo-moto report called for from SBI during the pendency of the revision application.

Read more…

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Reservation in promotion: The 6 issues settled by Supreme Court on collection of quantifiable data on inadequacy of representation

The 3-judge bench of L. Nageswara Rao*, Sanjiv Khanna and BR Gavai has answered 6 crucial questions in relation to quantifiable data showing inadequacy of representation in promotional posts.

Read more…

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Delinquent employee doesn’t have an absolute right to be represented in departmental proceedings by the agent of his choice

In a case where the Rajasthan High Court had permitted the respondent employee who is facing disciplinary proceedings to represent through ex-employee of the Bank, the bench of MR Shah* and Sanjiv Khanna, JJ has interpreted Regulation 44 of the Rajasthan Marudhara Gramin Bank (Officers and Employees) Service Regulation, 2010 read with clause 8.2 of the Handbook Procedure to hold that the delinquent employee has no absolute right to avail the services by ex-employee of the Bank as his DR in the departmental proceedings.

Read more…

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COVID-19| A Biological Weapon? Most misconceived! SC rules it is for the elected Government to take necessary action if any

While addressing a petition making bizarre claim that virgin Coconut Oil can dissolve Covid-19 virus, the Division Bench of Sanjay Kishan Kaul and M.M. Sundresh, JJ., held that it cannot let every person who believes that he has some solution to the virus, to come up in a petition under Article 32 of the Constitution.

Read more…

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High Court’s Revisional jurisdiction under Section 401 Cr.P.C re power to reverse acquittal. SC answers important questions

“Though the High Court has revisional power to examine whether there is manifest error of law or procedure etc., however, after giving its own findings on the findings recorded by the court acquitting the accused and after setting aside the order of acquittal, the High Court has to remit the matter to the trial Court and/or the first appellate Court, as the case may be.”

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P&H HC directs State to provide sports quota of 3% in Government Medical/Dental Colleges instead of 1% provided in policy decision. Such mandamus impermissible, holds SC

Explaining the scope of writ jurisdiction, the bench of MR Shah* and BV Nagarathna, JJ has held that the State Government’s action taking a policy decision to prescribe a particular percentage of reservation/quota for a particular category of persons, cannot be interfered with by issuance of a writ of mandamus, directing the State Government to provide for a particular percentage of reservation for a particular category of persons other than what has been provided in the policy decision taken by the State Government.

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Person with 54% disability pinned to the ground, throttled by neck and consequently killed by strangulation; SC cancels HC order granting bail to the accused

Finding the order of the High Court cryptic and casual, de hors coherent reasoning, the Bench invoked the latin maxim “cessante ratione legis cessat ipsa lex” to hold that “reason is the soul of the law, and when the reason of any particular law ceases, so does the law itself”.

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Civil Court has no jurisdiction in dispute relating to property governed by the Haryana (Control of Rent & Eviction) Act, 1973: SC

The Court was deciding the dispute relating to suit property situated within the municipal limits of Kaithal which is governed by the Haryana (Control of Rent & Eviction) Act, 1973.

Read more…

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Traffic blockage due to agitation, failure to deliver consignment within validity period of e-way bill; SC imposes cost of Rs. 59000 on Sales Tax Officer for illegally imposing penalty

“When the undeniable facts, including the traffic blockage due to agitation, are taken into consideration, the State alone remains responsible for not providing smooth passage of traffic.”

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Whether adoption of parent Government Resolution by an undertaking leads to automatic adoption of subsequent modifying resolutions?

“There are limitations or qualifications to the applicability of the doctrine of ‘equal pay for equal work’.”

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State ‘exclusivity’ for disallowance of certain fee, charge, etc. is to be viewed from the nature, not the number of undertakings on which the levy is imposed

The Division Bench of R. Subhash Reddy* and Hrishikesh Roy, JJ., held that to determine State Monopoly for disallowance of certain fee, charge, etc. in the case of State Government Undertakings the aspect of ‘exclusivity’ has to be viewed from the nature of undertaking on which levy is imposed and not on the number of undertakings on which the levy is imposed.

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Failure to provide occupancy certificate a deficiency in service under the Consumer Protection Act and also a continuing wrong

The bench of Dr. DY Chandrachud* and AS Bopanna, JJ has held that failure on the part of the builder to provide occupancy certificate is a continuing breach under the Maharashtra Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act 1963 and amounts to a continuing wrong.

Read more…

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Whether charitable education institutions exempted from levy of electricity duty under Maharashtra Electricity Act, 2016? Supreme Court interprets

The Division Bench comprising of M. R. Shah* and Sanjiv Khanna, JJ., reversed the impugned order of the High Court whereby the High Court had held that education institutions run by charitable societies are exempted from payment of electricity duty.

Read more…

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Non-consideration for subsequent preference post after being declared ineligible for first post preference: Is it unjust? Supreme Court answers

While addressing the issue as to whether a candidate is entitled to claim appointment on a subsequent post in his preference list after having being considered for his first preference and being declared not suitable for the said post due to non-fulfilment of physical requirements, the Division Bench of Dr Dhananjaya Y Chandrachud and A.S. Bopanna*, JJ., replied in negative.

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“Democratic interests cannot be judicially aborted to preserve unfettered freedom to conduct business, of the few”; Govt. decision to ban MTTs in PPE products ensures adequate PPE in India: SC

“This Court must be circumspect that the rights and freedoms guaranteed under the Constitution do not become a weapon in the arsenal of private businesses to disable regulation enacted in the public interest.”

Read more…

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Order de hors reasoning cannot result in grant of bail! SC holds informant has a right to assail bail orders bereft of reasons before a higher forum

“It would be only a non speaking order which is an instance of violation of principles of natural justice. In such a case the prosecution or the informant has a right to assail the order before a higher forum.”

Read more…

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Scrap picker beaten to death; incident recorded in CCTV: State failed to protect victim’s rights by not challenging Guj HC’s order releasing accused on bail; SC cancels bail

In a case where a scrap picker was beaten to death and the Gujarat High Court had released one of the accused on bail despite the entire incident been recorded in the CCTV footages and the mobile phone, the bench of MR Shah and BV Nagarathna, JJ has cancelled the bail and has observed that by not filing the appeals by the State against the impugned judgments and orders releasing the accused on bail in such a serious matter, the State has failed to protect the rights of the victim.

Read more…

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Gift deed by an old illiterate woman: SC approves not legalistic but holistic approach by lower courts to determine validity of deed. HC’s verdict set aside

In an issue relating to the alleged gift deed by an old illiterate woman, the bench of MR Shah and Sanjiv Khanna*, JJ has held that when a person obtains any benefit from another, the court would call upon the person who wishes to maintain the right to gift to discharge the burden of proving that he exerted no influence for the purpose of obtaining the document.

Read more…

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No more uncertainty over fixation of percentage of reservation for OBC and SC/ST candidates; SC interprets Section 3 Second Proviso of CEI Act, 2006

The bench of L. Nageswara Rao and Hima Kohli, JJ has held that the formulae for fixing the percentage of reservation for the SC and ST candidates and for determining the percentage of seats to be reserved for OBC candidates under the second proviso of Section 3 of the Central Educational Institutions (Reservation in Admission) Act, 2006, ought to be gathered from the same source and any other interpretation would lead to uncertainty.

Read more…

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3-year old raped and strangulated to death; Read why Supreme Court commuted Death Sentence to life imprisonment

The Fast Track Court, Raigarh had convicted the appellant for the offences punishable under Sections 363, 366, 376(2)(i), 377, 201, 302 read with Section 376A of the Penal Code, 1860 and Section 6 of the POCSO Act, 2012 and vide the same judgment and order, the appellant was sentenced to death for the offence punishable under Section 302 of the IPC. Subsequently, vide the impugned judgment and order, the High Court had confirmed the death penalty.

Read more…

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Mere recommendation of the SP at the initial stage not sufficient to claim a right for promotion: SC explains Punjab Police Rules, 1934

In a case where a Constable’s name was recommended by the Superintendent of Police but the same was dropped down by the Inspector General of Police for promotion under the 10% quota of outstanding performance for inclusion in the B-I List for promotion to the post of Head Constable in the year 2004, the bench of KM Joseph and PS Narsimha, JJ has held that mere recommendation of the SP at the initial stage is not sufficient to claim a right for promotion.

Read more…

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No scaling down of sentence to 10 years as per NDPS Act for man sentenced to 26 years in prison by Mauritius SC for being in possession of over 150 gms of heroin

In a case where a man was arrested in Mauritius after being found to be in possession of 152.8 grams of heroin and was sentenced to 26 years in prison by the Supreme Court of Mauritius, the bench of L. Nageswara Rao and BR Gavai has upheld the Central Government’s decision rejecting the request for scaling down the sentence from 26 years to 10 years and has found it to be in accordance with the provisions of the Repatriation of Prisoners Act, 2003 and the agreement entered into between India and Mauritius.

Read more…

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No Pensionary Benefits To WALMI Employees; Employees Of Autonomous Bodies Can’t Claim Benefits On A Par With Government Employees As Matter Of Right

“… the employees of the autonomous bodies cannot claim, as a matter of right, the same service benefits on par with the Government employees.”

Read more…

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Whether the term “school children” includes university students while interpreting Government Memo exempting buses carrying school children from Passengers Tax? SC clarifies

While holding that the term “school children” will include college and university as well while interpreting government memo exempting passengers tax in respect of Stage Carriage (buses) owned by educational institution and used for the transportation of children to and from such institutions, the Division Bench of Dinesh Maheshwari and Vikram Nath, JJ., remarked,

“It gets perforce reiterated that the broad expression “children”, obviously, refers to the students taking instructions in educational institutions, irrespective of their class or standard or level.”

Read more…


CASES REPORTED IN SCC


2021 SCC Vol. 9 Part 1

Ranging from Arbitration, Service Law to Family Law, this Volume 9 Part 1 brings in some very carefully and expertly analysed Judgments

2021 SCC Vol. 9 Part 2

In this part read a very interesting decision expertly analysed by our editors. Supreme Court ruled that the trustees are required to

SCC Snippets

Are Clients Or Courts Bound By Lawyer’s Statements Or Admissions As To Matters Of Law Or Legal Conclusions?


Case BriefsSupreme Court

Supreme Court: In a major blow to Essar Steel Limited, now Arcelor Mittal Nippon Steel India Limited), the bench of MR Shah* and Sanjiv Khanna, JJ has set aside the Gujarat High Court verdict wherein it was held that Essar was entitled to the exemption from payment of purchase tax as per the Notification dated 05.03.1992, which was issued under Section 49(2) of the Gujarat Sales Tax Act, 1969. As a result Essar will now have to pay the purchase tax of Rs.480.99 crores.

Factual Background

The Government of Gujarat vide Resolution dated 26.07.1991 announced a scheme known as “The Scheme for Special Incentives to Prestigious Units 1990-95 (modified)” for attracting investments in core sector industries. Under the said scheme, a prestigious unit was eligible for incentives up to 90% of the fixed capital investment.

Essar, engaged in the activity of manufacture and sale of Hot Briquetted Iron (HBI) and Hot Rolled Coil (HRC), invested approximately Rs.5000 crores for manufacture of HRC. The said exemption was provided as per Entry 255 of the notification issued by the Government of Gujarat under Section 49(2) of the Act, 1969. The Unit No.2 of the ESL was granted Sales Tax exemption in terms of Entry No.255(2) of the Notification dated 05.03.1992 issued under Section 49(2) of the Act, 1969 for the period from 22.02.1993 to 21.02.2007 up to a maximum monetary limit of Rs. 2050 crores.

This exemption as per Entry No.255(2) vide Notification dated 05.03.1992 was subject to fulfilling following conditions:

  1. The eligible unit was required to furnish to the selling dealer a certificate in Form No.26 declaring inter alia that the goods are required for use by him/it within the State of Gujarat as raw materials, processing materials or consumable stores in the manufacture of goods for sale within the State of Gujarat or as packing materials in packing of goods so manufactured; and
  2. The eligible unit shall actually use the goods purchased within the State of Gujarat as raw materials, processing materials or consumable stores in the manufacture of goods for sale within the State of Gujarat or outside the State of Gujarat as packing materials for the packing of the goods so manufactured.

Analysis

Before adverting to the case at hand, the Court explained the scope of interpretation of a taxing statute and observed that the notification has to be read as a whole. If any of the conditions laid down in the notification is not fulfilled, the party is not entitled to the benefit of that notification. An exception and/or an exempting provision in a taxing statute should be construed strictly and it is not open to the court to ignore the conditions prescribed in industrial policy and the exemption notifications.

The exemption notification should be strictly construed and given meaning according to legislative intendment. The Statutory provisions providing for exemption have to be interpreted in the light of the words employed in them and there cannot be any addition or subtraction from the statutory provisions.

In the taxing statute, it is the plain language of the provision that has to be preferred, where language is plain and is capable of determining defined meaning. Strict interpretation to the provision is to be accorded to each case on hand. Purposive interpretation can be given only when there is an ambiguity in the statutory provision or it alleges to absurd results, which is so not found in the present case.

The Supreme Court observed that the Scheme of the Statute does not in any manner indicate that the incentive provided has to continue for the consecutive years irrespective of the fulfilling of the eligibility conditions.

“Applicability of the incentive is directly related to the eligibility and not dehors the same. If it is found that the industrial undertaking does not fulfil the eligibility criteria, it cannot claim the incentive/exemption.”

Hence, Essar, the eligible unit was found not entitled to the exemption from payment of purchase tax under the original Entry No.255(2) dated 05.03.1992, firstly, on the ground that it did not fulfill the eligibility criteria/conditions mentioned in the original Entry No.255(2) dated 05.03.1992 and secondly that there was a breach of declaration in Form No.26 furnished by Essar.

The Court also rejected the contention that as in the earlier assessment years benefit of exemption was granted to the respondent and, therefore, in the subsequent assessment years also, despite the fact that it is found that the respondent was/is not eligible for the benefit of exemption under the original Notification/Entry No.255(2). The Court observed that if such a submission is accepted in that case it will be perpetuating the illegality and granting the benefit of exemption to ‘ineligible industry’, who did not fulfill and/or comply with the eligibility criteria/conditions mentioned in the exemption notification. The principle of promissory estoppel shall not be applicable contrary to the Statute.

“Merely because erroneously and/or on misinterpretation, some benefits in the earlier assessment years were wrongly given, cannot be a ground to continue the wrong and to grant the benefit of exemption though not eligible under the exemption notification.”

[State of Gujarat v. Arcelor Mittal Nippon Steel India Limited, 2022 SCC OnLine SC 76, decided on 21.01.2022]


*Judgment by: Justice MR Shah


Counsels

For State: Senior Advocate Maninder Singh

For Assessee: Senior Advocate Ritin Rai,

Case BriefsSupreme Court

Supreme Court: Explaining the scope of jurisdiction of ITAT, the bench of MR Shah* and BV Nagarathna, JJ has held that the powers under Section 254(2) of the Income Tax Act are only to correct and/or rectify the mistake apparent from the record and not beyond that.

In the present case, a detailed order was passed by the ITAT when it passed an order on 06.09.2013, by which the ITAT held in favour of the Revenue. The said order was then recalled on 18.11.2016. It is pertinent to note that the order was recalled while exercising the power under Section 254(2) of the Act as the Assessee had filed miscellaneous application for rectification under Section 254(2) of the Act. While allowing the application under Section 254(2) of the Act and recalling its earlier order dated 06.09.2013, the ITAT had re-heard the entire appeal on merits as if the ITAT was deciding the appeal against the order passed by the C.I.T.

It was argued before the Court that the Revenue itself had in detail gone into merits of the case before the ITAT and the parties filed detailed submissions based on which the ITAT passed its order recalling its earlier order. The Court, however, rejected the said contention and held that,

“Merely because the Revenue might have in detail gone into the merits of the case before the ITAT and merely because the parties might have filed detailed submissions, it does not confer jurisdiction upon the ITAT to pass the order de hors Section 254(2) of the Act.”

In exercise of powers under Section 254(2) of the Act, the Appellate Tribunal may amend any order passed by it under sub-section (1) of Section 254 of the Act with a view to rectifying any mistake apparent from the record only. Therefore, the powers under Section 254(2) of the Act are akin to Order XLVII Rule 1 CPC. While considering the application under Section 254(2) of the Act, the Appellate Tribunal is not required to re-visit its earlier order and to go into detail on merits.

Further, if the Assessee was of the opinion that the order passed by the ITAT was erroneous, either on facts or in law, in that case, the only remedy available to the Assessee was to prefer the appeal before the High Court.

Therefore, it was held that the order passed by the ITAT recalling its earlier order dated 06.09.2013 which has been passed in exercise of powers under Section 254(2) of the Act is beyond the scope and ambit of the powers of the Appellate Tribunal conferred under Section 254 (2) of the Act.

[Commissioner of Income Tax v. Reliance Telecom Ltd., 2021 SCC OnLine SC 1170, decided on 03.12.2021]


Counsels

For Revenue: Additional Solicitor General Balbir Singh

For Respondent: Advocate Anuj Berry


*Judgment by: Justice MR Shah

Know Thy Judge | Justice M. R. Shah

Case BriefsSupreme Court

Supreme Court: In a major setback to Bharti Airtel Ltd., the Division Bench comprising of A.M. Khanwilkar* and Dinesh Maheshwari, JJ., overturned the decision of the Delhi High Court and barred the company from rectifying its form GSTR-3B to claim GST refund of approx  Rs.923 crores. Finding no merit in the grievance raised by the company, the Bench remarked,

The factum of non-operability of Form GSTR-2A, is flimsy plea. Indeed, if the stated form was operational, the same would have come handy to the respondent for self-assessment regarding eligibility of ITC, but it is a feeble excuse given by the respondent to assail the impugned Circular.

Findings of the High Court

The High Court of Delhi, by the impugned judgment had read down paragraph 4 of the Circular No. 26/26/2017GST dated 29-12-2017 issued by the Commissioner (GST), Central Board of Excise and Customs, to the extent it restricted the rectification of Form GSTR-3B in respect of the period in which the error had occurred. The High Court also allowed the company-respondent to rectify Form GSTR-3B for the period in which error had occurred, i.e., from July to September 2017.

Grievance of the Respondent

The respondent contended that due to repeated technical glitches in the electronic common portal introduced by the Department, during the transition phase from the erstwhile regime to the GST regime, he had submitted its monthly Form GSTR-3B based on estimates, for the relevant period of July to September 2017. The respondent submitted that there had been an excess payment of Rs.923 crores in cash for discharging OTL (Outward Tax Liability). In other words, despite the fact that a bona fide error had occurred for reasons beyond the control of respondent, yet he was unable to correct the mistake in Form GSTR3B for the relevant period due to the restriction imposed by paragraph 4 of the Circular dated 29-12-2017.

Factual Analysis

The Bench observed that the Circular in question was issued by the Board after considering various representations received seeking clarifications on various aspects of return filing such as return filing dates, applicability of quantum of late fee, amendment of errors in submitting/filing of Form GSTR3B and other related queries to ensure uniformity in implementation across field formations. Therefore, the said Circular was not the direction issued by the Commissioner (GST) as such, but it was notifying the decision(s) of the Board taken in exercise of its powers conferred under Section 168(1) of the 2017 Act.

Rejecting the contention of the respondent that due to the failure of the Department he had make payment in cash which had resulted in payment of double tax, thereby offered unfair advantage to the tax authorities, the Bench stated that the High Court had failed to enquire into the cardinal question as to whether the respondent was required to be fully or wholly dependent on the auto generated information in the electronic common platform for discharging its obligation to pay OTL for the relevant period between July and September 2017. Answering the aforesaid question in negative, the Bench stated that, the respondent being a registered person was under a legal obligation to maintain books of accounts and records as per the provisions of the 2017 Act and Chapter VII of the 2017 Rules regarding the transactions in respect of which the OTL would occur. The Bench added,

“The common portal is only a facilitator to feed or retrieve such information and need not be the primary source for doing self-assessment. The primary source is in the form of agreements, invoices/challans, receipts of the goods and services and books of accounts which are maintained by the assessee manually/electronically.”

Whether the Impugned Circular was inconsistent with Statutory Mandate?

While ascertaining the legality of the impugned circular, the Bench observed the express provision in the form of Section 39(9) clearly posits that omission or incorrect particulars furnished in the return in Form GSTR3B can be corrected in the return to be furnished in the month or quarter during which such omission or incorrect particulars are noticed. This very position had been restated in the impugned Circular. Therefore, it was held that the impugned circular was not contrary to the statutory dispensation specified in Section 39(9) of the Act and the High Court had noted that there was no such provision in the Act, which restricts such rectification of the return in the period in which the error is noticed.

Findings of the Court

The aspect of statutory obligation fastened upon the registered person to maintain books of accounts and record within the meaning of Chapter VII of the 2017 Rules, are primary documents and source material on the basis of which self-assessment is done by the registered person including about his eligibility and entitlement to get ITC (Input Tax Credit) and of OTL. Form GSTR2A is only a facilitator for taking an informed decision while doing such self-assessment.

Noticing that during the pre-GST regime, the respondent (being registered person/assessee) had been maintaining such books of accounts and records and submitting returns on its own, the Bench stated that non-operability of Form GSTR2A or for that matter, other forms, would be of no avail for the respondent 1 because the dispensation stipulated at the relevant time obliged the registered person to submit returns on the basis of such self-assessment in Form GSTR3B manually on electronic platform. Further, the Bench opined,

“Payment for discharge of OTL by cash or by way of availing of ITC, is a matter of option, which having been exercised by the assessee, cannot be reversed unless the Act and the Rules permit such reversal or swapping of the entries.”

Significantly, the registered person is not denied of the opportunity to rectify omission or incorrect particulars, which he could do in the return to be furnished for the month or quarter in which such omission or incorrect particulars are noticed. Thus, it was not a case of denial of availment of ITC as such, rather it was only a postponement of availment of ITC as the ITC amount remains intact in the electronic credit ledger, which can be availed in the subsequent returns including the next financial year.

Verdict

In the backdrop of above, the Bench held that the assessee-respondent could not be permitted to unilaterally carry out rectification of his returns submitted electronically in Form GSTR3B, which inevitably would affect the obligations and liabilities of other stakeholders, because of the cascading effect in their electronic records.

Further, the challenge to the impugned Circular was declared unsustainable, and the Bench held that stipulations in the Circular including in paragraph 4 were consistent with the provisions of the Act, 2017. The appeal was allowed. The impugned judgment and order was set aside.

[Union of India v. Bharti Airtel Ltd., 2021 SCC OnLine SC 1006, decided on 28-10-2021]


Kamini Sharma, Editorial Assistant has put this report together


*Judgment by: Justice A.M. Khanwilkar

Know Thy Judge| Justice AM Khanwilkar

Case BriefsSupreme Court

Supreme Court: Interpreting Section 263(2) of the Income Tax Act, 1961, the bench of MR Shah* and AS Bopanna, JJ has held that receipt of the order passed under Section 263 by the assessee has no relevance for the purpose of counting the period of limitation provided under Section 263 of the Income Tax Act.

Section 263 (2) of the Income Tax Act, reads as under:-

“(2) No order shall be made under sub¬section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed.”

On a fair reading of sub-section (2) of Section 263, the Court noticed that as mandated by sub¬section (2) of Section 263 no order under Section 263 of the Act shall be “made” after the expiry of two years from the end of the financial year in which the order sought to be revised was passed.

“Therefore, the word used is “made” and not the order “received” by the assessee. Even the word “dispatch” is not mentioned in Section 263(2).”

Hence, once it is established that the order under Section 263 was made/passed within the period of two years from the end of the financial year in which the order sought to be revised was passed, such an order cannot be said to be beyond the period of limitation prescribed under Section 263 (2) of the Act.

Holding that the word used is “made” and not the “receipt of the order”, the Court noticed that,

“As per the cardinal principle of law the provision of the statue/act is to be read as it is and nothing is to be added or taken away from the provision of the statue.”

[Commissioner of Income Tax v. Mohammed Meeran Shahul Hameed, 2021 SCC OnLine SC 901, decided on 07.10.2021]


Counsels:

For Revenue: ASG Vikramjit Banerjee

For Respondents: Senior Advocate R. Sivaraman


*Judgment by: Justice MR Shah

Know Thy Judge | Justice M. R. Shah

Case BriefsSupreme Court

Supreme Court: The 3-judg bench of Dr. DY Chandrachud*, Vikram Nath and BV Nagarathna, JJ has upheld the validity of Sections 52 (1)(a), Section 55(b)(1) and Section 56 of the UP Water Supply and Sewerage Act, 1975 and has held that the levy under Section 52 falls squarely under the ambit of Entry 49 of List II as it is in the nature of a tax and not a fee. The Court also went on to hold that the levy which is imposed under Section 52 is a tax on lands and buildings within the meaning of Entry 49 of List II.

Nomenclature of the Tax imposed 

The Court held that the nomenclature that the legislature has ascribed to the tax does not determine either the nature of the levy or its true and essential character. While the legislature may choose a label for a tax, the said label however will not determine or for that matter clarify the nature of the levy.

“The legislature may choose a label for the tax based on the nature of the levy. On the other hand, the legislature may choose a label having a relationship with the function of the authority which imposes the tax …”

The nature of the levy has to be deduced from the nature of the tax, the provision which specifies the taxing event and, as in the case of Section 52, the unit upon which the levy is to be imposed. The tax has been labelled as the water tax or a sewerage tax simply because it is imposed by the Jal Sansthan constituted under the UP Water Supply and Sewerage Act. That does not alter the nature of the levy which in substance is a tax on lands and buildings within the meaning of Entry 49 of List II of the Seventh Schedule.

Entry 49 List II: Taxes on Lands and Buildings

There can be no manner of doubt that the levy which is imposed under Section 52 is a tax on lands and buildings situated within the area of the Jal Sansthan for the purpose of imposing the tax. The tax is imposed on premises which fall within the territorial area of the Jal Sansthan.

The expression ‘premises’ is defined to mean land and building. The tax is on lands and buildings. The nomenclature of the tax does not indicate its true character and substance. Nor does the fact that the law enables the Jal Sansthan to levy the tax render it a tax on water. The charging section indicates in unambiguous terms that it is a tax on lands and buildings.

The legislature has introduced certain restrictions in Section 55 inter alia stipulating in clause (a) that for land which is exclusively used for agricultural purposes, the tax shall not be levied unless water is supplied by the Jal Sansthan for such purposes to the land and in clause (b) stipulating that

  • the premises should be situated within the prescribed radius from the nearest stand-post or other waterworks at which the water is made available to the public; and
  • the annual value of which does not exceed Rs. 360 and to which no water has been supplied by the Jal Sansthan.

These restrictions do not detract from the nature of the levy nor would the liability which is imposed on the owner and occupier be anything other than a tax on lands and building within the meaning of Entry 49 of List II.

“The water tax and sewerage tax are taxes levied in order to augment the finances of the Jal Sansthan for the purpose of meeting the cost of its operation, maintenance and services, so as to achieve an economic return on its fixed assets. The collection is ultimately for providing water supply and sewerage in the area of the Jal Sansthan, even if it may not be provided to the particular premises.”

The tax is imposed on an occupier or owner of the building or land falling within the area of the Jal Sansthan irrespective of whether a connection of water supply or sewerage has been obtained to the land or building. In another words, the basis for the levy of the taxes is on the location of premises within the area of the Jal Sansthan as notified by the State Government.

Tax and fee – Difference

the practical and even constitutional, distinction between a tax and fee has been weathered down. As in the case of a tax, a fee may also involve a compulsory exaction. A fee may involve an element of compulsion and its proceeds may form a part of the Consolidated Fund. Similarly, the element of a quid pro quo is not necessarily absent in the case of every tax.

Levy under Section 52 (1) is a tax and not a fee

The tax has been imposed by the legislature in Section 52 on premises situated within the area of the Jal Sansthan. The proceeds of the tax are intended to constitute revenue available to the Jal Sansthan to carry out its mandatory obligations and functions under the statute of making water and sewerage facilities available in the area under its jurisdiction. The levy is imposed by virtue of the presence of the premises within the area of the jurisdiction of the Jal Sansthan. The water tax is levied so long as the Jal Sansthan has provided a stand post or waterworks within a stipulated radius of the premises through which water has been made available to the public by the Jal Sansthan. The levy of the tax does not depend upon the actual consumption of water by the owner or occupier upon whom the tax is levied. Unlike the charge under Section 59 which is towards the cost of water to be supplied by the Jal Sansthan according to its volume or, in lieu thereof on a fixed sum, the tax under Section 52 is a compulsory exaction. Where the premises are connected with water supply, the tax is levied on the occupier of the premises. On the other hand, where the premises are not so connected, it is the owner of the premises who bears the tax. The levy under Section 52 (1) is hence a tax and not a fee. Moreover, it is a tax on lands and buildings within the meaning of Entry 49 of List II.

[Jalkal Vibhag Nagar Nigam v. Pradeshiya Industrial and Investment Corporation, 2021 SCC OnLine SC 960, decided on 22.10.2021]


Counsels:

For appellants: Senior Advocate Pradeep Kant

For First Respondent: Madhavi Divan, Additional Solicitor General


*Judgment by: Justice Dr. DY Chandrachud

Know Thy Judge| Justice Dr. DY Chandrachud

Case Briefs

Supreme Court: The 3-Judge Bench comprising of Dr Dhananjaya Y Chandrachud*, Vikram Nath and BV Nagarathna, JJ., has held that the question whether tax can be levied on the supply of electricity by a power generator (which also manufactures sugar) supplying electricity to a distributor is a question of law and existence of alternate remedy would not bar the High Court from entertaining the same. The Bench expressed,

“The issues raised by the appellant were questions of law which required, upon a comprehensive reading of the Bihar Electricity Act, a determination of whether tax can be levied on the supply of electricity by a power generator (which also manufactures sugar) supplying electricity to a distributor…”

The crux of the case was that the Patna High Court had declined to entertain writ petition challenging the validity of electricity duty and penalty imposed on the electricity supplied to Bihar State Electricity Board (BSEB) on the ground that the dispute between the parties was factual in nature and was suitable for adjudication in terms of the statutory remedy provided in the Bihar Electricity Duty Act 19481.

Factual Developments

The appellant, a sugar mill company was engaged in the business of manufacture and sale of white crystal sugar. The waste of sugarcane (bagasse) was used for the production of electricity for its own consumption by the appellant and the surplus energy was supplied to BSEB.

In pursuance of its power under Section 3(1) of the Act, the State had issued a notification dated 21-10-2002 which stipulated that the rate of duty applicable on the consumption or sale of electricity would be fixed at six per cent of the value of energy consumed or sold for any other purposes other than irrigation which was later amended on 04-03-2005 which provided that the rate of duty to be levied on consumption of electrical energy generated by captive power plants would be six per cent of the  value of energy, i.e. energy tariff as fixed by the BSEB. Noticeably on 14-01-2011 another notification was issued by the State, granting a blanket exemption from payment of electricity duty on electricity generated by captive plants for self-consumption.

In the above backdrop, the appellant had challenged the notifications dated 21-10-2002, which was struck down by the High Court on the ground that there were no guidelines in the statute or the notifications for construing the expression ‘value of energy’. Subsequently, the State amended the Act through the Bihar Finance Act 2012 with retrospective effect from 17-10-2002 for defining the term ‘value of energy’.

Once again, the appellant challenged the amendment in the High Court, however, while the petition was pending the State issued a notice to the appellant for its failure to file returns under Section 6B (1) of the Act, concealment of the sale of electricity of approximately Rs 56 crores and for raising a demand of electricity duty and penalty of about Rs 67 crores.

Grievance raised by the Appellant

On behalf of the appellant, the following submissions had been made to substantiate the claim that no tax can be levied on the supply of electricity by the appellant to BSEB for the following reasons:

  1. Under Section 3 of the Act, tax was levied on the ‘value of energy’ and Section 2(ee) only brought the sale to a consumer within the ambit of the phrase ‘value of energy’;
  2. BSEB was a ‘licensee’ and not a ‘consumer’ in view of the definition of ‘licensee’ provided under Section 2(d) of the Act; and the term ‘value of energy’ used in Section 3 for the levy of tax was not applicable to BSEB because the definition of ‘consumer’ excluded a licensee, Section 2 (b) states:

“‘Consumer’ means any person who is supplied with energy but does not include either a licensee or the distributing licensee…”

  1. BSEB was already paying electricity duty for the electricity sold by it to consumers, including the electricity supplied by the company to the Board. The levy of tax on the electricity supplied by the company would thus amount to double taxation;
  2. Even if it was conceded that the State had power to levy tax on the supply of electricity by the generator to the licensee, the Government had not exercised its power, since under Section 3, a notification must be issued for specifying the rate of charge. The notification issued on 21-10-2002 was only providing the rate of duty on ‘consumption or sale of electricity’.
  3. Since the power exercised by the State under Section 3 of the Act to levy electricity duty on sale of electricity by the appellant to BSEB was a jurisdictional issue, the rule of alternate remedy would not apply;

Analysis

In a similarly placed case, which was initially tagged with the instant petition but was later de-tagged, National Thermal Power Corporation Ltd. (NTPC) was supplying electricity exclusively to the Electricity Boards, which had challenged the same issue before the Court, the High Court had held that electricity duty could not be imposed under Section 3 (1) of the Act on a power generation company supplying electricity to a licensee like the Electricity Board, concluding that it was beyond the legislative competence of the State to impose a tax on the sale of electricity which was not a sale for consumption. Moreover, the High Court observed that in terms of the provisions of the Bihar Electricity Act, a power generation company is liable to pay duty only if it is selling electricity to the consumer, as defined in the legislation.

Noticeably, the High Court by its impugned order had declined to entertain the writ petition on two counts: (i) the appellant had an alternate statutory remedy under Section 9A of the Act; and (ii) the dispute involved questions of fact which are not amenable to the writ jurisdiction of the High Court. The Bench observed that it was not the case of the appellant that the respondents had miscalculated the duty and penalty imposed on it. The appellant contended that the State Government did not have power to levy tax on its sale of electricity to BSEB. Thus, the plea stroke at the exercise of jurisdiction by the Government; accordingly, the Bench held,

“The High Court can exercise its writ jurisdiction if the order of the authority is challenged for want of authority and jurisdiction, which is a pure question of law.”

Relying on the decision in Sree Meenakshi Mills Ltd. v CIT, 1956 SCR 691, wherein a three judge Bench had explained succinctly the tests for the identification of questions of fact, questions of law and mixed questions of law and facts, the Bench stated that, “the test that is to be applied for the determination of a question of law is whether the rights of the parties before the court can be determined without reference to the factual scenario.”

Verdict

Hence, the Bench held that the issues raised by the appellant were questions of law which required, upon a comprehensive reading of the Bihar Electricity Act, a determination of whether tax can be levied on the supply of electricity by a power generator (which also manufactures sugar) supplying electricity to a distributor; and whether the State had the legislative competence to levy duty on the sale of electricity to an intermediary distributor.

Resultantly, the Bench was of the view that the High Court made an error in declining to entertain the writ petition and it would be appropriate to restore the proceedings back to the High Court for a fresh disposal. Accordingly, the appeal was allowed and the impugned judgment was set aside.

[M/s Magadh Sugar & Energy Ltd. v. State of Bihar, 2021 SCC OnLine SC 801, decided on 24-09-2021]

___________________________________________________________________________
Kamini Sharma, Editorial Assistant has put this report together

___________________________________________________________________________

Appearance by:

For the Appellant: Advocate SK Bagaria

For the State of Bihar: Sr. Advocate Saket Singh


*Judgment by: Justice Dr Dhananjaya Y Chandrachud

Know Thy Judge| Justice Dr. DY Chandrachud

Case BriefsSupreme Court

Supreme Court: The division bench of Dr. DY Chandrachud and MR Shah, JJ has upheld the validity of Section 54(3) of the Central Goods and Services Tax Act, 2017 (CGST Act) which provides for refund of unutilised input tax credit (ITC) in certain cases.

Provisions in question

Section 54[1] of the CGST Act provides for a refund of tax. Under sub-Section (1) of Section 54, a person claiming a refund of “tax and interest, if any, paid on such tax or any other amount paid” has to make an application within two years of the relevant date.

Parliament envisaged a specific situation where the credit has accumulated due to an inverted duty structure, that is where the accumulation of ITC is because the rate of tax on inputs is higher than the rate of tax on output supplies. Taking legislative note of this situation, a provision for refund was provided for in Section 54(3) which embodies for refund of unutilised input tax credit (ITC) in cases involving:

(i) zero rated supplies made without payment of tax; and

(ii) credit accumulation “on account of rate of tax on inputs being higher than rate of tax on output supplies”.

Further, the Central Goods and Service Tax Rules 2017 were formulated in pursuance of the rule making power conferred by Section 164 of the CGST Act. Rule 89(5) provides a formula for the refund of ITC, in “a case of refund on account of inverted duty structure”. The said formula uses the term “Net ITC”. In defining the expression “Net ITC”, Rule 89(5)[2] speaks of “input tax credit availed on inputs”.

Case Trajectory

The petitioners approached the Gujarat High Court and the Madras High Court and made the following submissions:

(i) Section 54(3) allows for a refund of ITC where the accumulation is due to an inverted duty structure;

(ii) ITC includes the credit of input tax charged on the supply of goods as well as services;

(iii) Section 54(3) does not restrict the entitlement of refund only to unutilised ITC which is accumulated due to the rate of tax on inputs being higher than the rate of tax on output supplies. It also allows for refund of unutilised ITC when the rate of tax on input services is higher than the rate of tax on output supplies;

(iv) While Section 54(3) allows for a refund of ITC originating in inputs as well as input services, Rule 89(5) is ultra vires in so far as it excludes tax on input services from the purview of the formula; and

(v) In the event that Section 54(3) is interpreted as a restriction against a claim for refund of accumulated ITC by confining it only to tax on inputs, it would be unconstitutional as it would lead to discrimination between inputs and input services.

Gujarat High Court’s judgment

By its judgment dated 24 July 2020, the Division Bench of the Gujarat High Court, held that:

“Explanation (a) to Rule 89(5) which denies the refund of “unutilised input tax” paid on “input services” as part of “input tax credit” accumulated on account of inverted duty structure is ultra vires the provision of Section 54(3) of the CGST Act, 2017.”

The High Court therefore directed the Union Government to allow the claim for refund made by the petitioners before it, considering unutilised ITC on input services as part of “Net ITC” for the purpose of calculating refund in terms of Rule 89(5), in furtherance of Section 54(3).

Madras High Court’s judgment

The Division Bench of the Madras High Court came to a contrary conclusion, after having noticed the view of the Gujarat High Court, and held;

 “63…

(1) Section 54(3)(ii) does not infringe Article 14.

(2) Refund is a statutory right and the extension of the benefit of refund only to the unutilised credit that accumulates on account of the rate of tax on input goods being higher than the rate of tax on output supplies by excluding unutilised input tax credit that accumulated on account of input services is a valid classification and a valid exercise of legislative power.”

The divergent views by both the High Courts led to the case before the Supreme Court.

Supreme Court’s verdict

Upholding the constitutional validity of Section 54(3), the Court held that

“A claim to refund is governed by statute. There is no constitutional entitlement to seek a refund.”

The Court explained that Parliament while enacting the provisions of Section 54(3), legislated within the fold of the GST regime to prescribe a refund. While doing so, it has confined the grant of refund in terms of the first proviso to Section 54(3) to the two categories which are governed by clauses (i) and (ii) i.e.

(i) zero rated supplies made without payment of tax; and

(ii) credit accumulation “on account of rate of tax on inputs being higher than rate of tax on output supplies.

Parliament has in clause (i) of the first proviso allowed a refund of the unutilized ITC in the case of zero-rated supplies made without payment of tax. Under clause (ii) of the first proviso, Parliament has envisaged a refund of unutilized ITC, where the credit has accumulated on account of the rate of tax on inputs being higher than the rate of tax on output supplies.

“When there is neither a constitutional guarantee nor a statutory entitlement to refund, the submission that goods and services must necessarily be treated at par on a matter of a refund of unutilized ITC cannot be accepted. Such an interpretation, if carried to its logical conclusion would involve unforeseen consequences, circumscribing the legislative discretion of Parliament to fashion the rate of tax, concessions and exemptions. If the judiciary were to do so, it would run the risk of encroaching upon legislative choices, and on policy decisions which are the prerogative of the executive.”

Stating that courts are averse to entering the area of policy matters on fiscal issues, the Court said,

“Many of the considerations which underlie these choices are based on complex balances drawn between political, economic and social needs and aspirations and are a result of careful analysis of the data and information regarding the levy of taxes and their collection.”

The Court also found it impossible to accept the premise that the guiding principles which impart a measure of flexibility to the legislature in designing appropriate classifications for the purpose of a fiscal regime should be confined only to the revenue harvesting measures of a statute.

“The precedents of this Court provide abundant justification for the fundamental principle that a discriminatory provision under tax legislation is not per se invalid. A cause of invalidity arises where equals are treated as unequally and unequals are treated as equals.”

Noticing that both under the Constitution and the CGST Act, goods and services and input goods and input services are not treated as one and the same and they are distinct species, the Court said,

“Parliament engrafted a provision for refund Section 54(3). In enacting such a provision, Parliament is entitled to make policy choices and adopt appropriate classifications, given the latitude which our constitutional jurisprudence allows it in matters involving tax legislation and to provide for exemptions, concessions and benefits on terms, as it considers appropriate.”

[Union of India v. VKC Footsteps, 2021 SCC OnLine SC 706, decided on 13.09.2021]


*Judgment by: Justice Dr. DY Chandrachud

Know Thy Judge| Justice Dr. DY Chandrachud

For UOI: N Venkataraman and Balbir Singh, ASG

For Assessee: Senior Advocates V Sridharan and Arvind Datar; Advocates Sujit Ghosh and Uchit Sheth

For Respondents: Advocate Arvind Poddar


[1] “Section 54. Refund of tax

(1) Any person claiming refund of any tax and interest, if any, paid on such tax or any other amount paid by him, may make an application before the expiry of two years from the relevant date in such form and manner as may be prescribed:

Provided that a registered person, claiming refund of any balance in the electronic cash ledger in accordance with the provisions of sub-section (6) of Section 49, may claim such refund in the return furnished under section 39 in such manner as may be prescribed.

[…] (3) Subject to the provisions of sub-section (10), a registered person may claim refund of any unutilised input tax credit at the end of any tax period:

Provided that no refund of unutilized input tax credit shall be allowed in cases other than-

(i) zero rated supplies made without payment of tax;

(ii) where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies (other than nil rated or fully exempt supplies), except supplies of goods and services or both as may be notified by the Government on the recommendations of the Council:

Provided further that no refund of unutilized input tax credit shall be allowed in cases where the goods exported out of India are subjected to export duty:

Provided also that no refund of input tax credit shall be allowed, if the supplier of goods or services or both avails of drawback in respect of central tax or claims refund of the integrated tax paid on such supplies.”

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[2] “(4) […]

(B) “Net ITC” means input tax credit availed on inputs and input services during the relevant period;

[…]

(E) “Adjusted Total turnover” means the turnover in a State or a Union territory, as defined under sub-section (112) of section 2, excluding the value of exempt supplies other than zero-rated supplies, during the relevant period;

(5) In the case of refund on account of inverted duty structure, refund of input tax credit shall be granted as per the following formula: – Maximum Refund Amount= {(Turnover of inverted rated supply of goods) x Net ITC ÷ Adjusted Total Turnover} − tax payable on such inverted rated supply of goods

Explanation:- For the purposes of this sub rule, the expressions “Net ITC” and “Adjusted Total turnover” shall have the same meanings as assigned to them in sub-rule (4).”

Case BriefsSupreme Court

Supreme Court: In an important ruling on taxation law, the bench of Sanjay Kishan Kaul and Hrishikesh Roy*, JJ has held that the proportionate disallowance of interest is not warranted, under Section 14A of Income Tax Act for investments made in tax free bonds/ securities which yield tax free dividend and interest to Assessee Banks in those situations where, interest free own funds available with the Assessee, exceeded their investments.

Issue

Whether Section 14A of the Income Tax Act, 1961, enables the Department to make disallowance on expenditure incurred for earning tax free income in cases where assessees like the present appellant, do not maintain separate accounts for the investments and other expenditures incurred for earning the tax-free income?

What does Section 14A state?

In Section 14, the various incomes are classified under Salaries, Income from house property, Profit & Gains of business or profession, Capital Gains & Income from other sources.

The Section 14A relates to expenditure incurred in relation to income which are not includable in Total Income and which are exempted from tax. No taxes are therefore levied on such exempted income. The Section 14A had been incorporated in the Income Tax Act to ensure that expenditure incurred in generating such tax exempted income is not allowed as a deduction while calculating total income for the concerned assessee.

Legislative history

Section 14A was introduced to the Income Tax Act by the Finance Act, 2001 with retrospective effect from 01.04.1962, in aftermath of judgment in the case of Rajasthan State Warehousing Corporation Vs. CIT, (2000) 3 SCC 126. The said Section provided for disallowance of expenditure incurred by the assessee in relation to income, which does not form part of their total income.

“As such if the assessee incurs any expenditure for earning tax free income such as interest paid for funds borrowed, for investment in any business which earns tax free income, the assessee is disentitled to deduction of such interest or other expenditure.”

Although the provision was introduced retrospectively from 01.04.1962, the retrospective effect was neutralized by a proviso later introduced by the Finance Act, 2002 with effect from 11.05.2001 whereunder, re-assessment, rectification of assessment was prohibited for any assessment year, up-to the assessment year 2000-2001, when the proviso was introduced, without making any disallowance under Section 14A. The earlier assessments were therefore permitted to attain finality. As such the disallowance under Section 14A was intended to cover pending assessments and for the assessment years commencing from 2001-2002.

Facts

  • In the case at hand, the Court was concerned with disallowances made under Section 14A for assessment years commencing from 2001-2002 onwards or for pending assessments.
  • The assessees are scheduled banks and in course of their banking business, they also engage in the business of investments in bonds, securities and shares which earn the assessees, interests from such securities and bonds as also dividend income on investments in shares of companies and from units of UTI etc. which are tax free.
  • None of the assessee banks amongst the appellants, maintained separate accounts for the investments made in bonds, securities and shares wherefrom the tax-free income is earned so that disallowances could be limited to the actual expenditure incurred by the assessee.
  • In absence of separate accounts for investment which earned tax free income, the Assessing Officer made proportionate disallowance of interest attributable to the funds invested to earn tax free income by referring to the average cost of deposit for the relevant year.
  • The CIT (A) had concurred with the view taken by the Assessing Officer.
  • The ITAT in Assessee’s appeal against CIT(A) considered the absence of separate identifiable funds utilized by assessee for making investments in tax free bonds and shares but found that assessee bank is having indivisible business and considering their nature of business, the investments made in tax free bonds and in shares would therefore be in nature of stock in trade. The ITAT then noticed that assessee bank is having surplus funds and reserves from which investments can be made. Accordingly, it accepted the assessee’s case that investments were not made out of interest or cost bearing funds alone and held that disallowance under Section 14A is not warranted, in absence of clear identity of funds.
  • The decision of the ITAT was reversed by the High Court.

Analysis

The Supreme Court took note of the fact that the CIT(A) and the High Court had based their decision on the fact that the assessee had not kept their interest free funds in separate account and as such had purchased the bonds/shares from mixed account. This is how a proportionate amount of the interest paid on the borrowings/deposits, was considered to have been incurred to earn the tax-free income on bonds/shares and such proportionate amount was disallowed applying Section 14A of the Act.

It, however, explained that

“In a situation where the assessee has mixed fund (made up partly of interest free funds and partly of interest-bearing funds) and payment is made out of that mixed fund, the investment must be considered to have been made out of the interest free fund. To put it another way, in respect of payment made out of mixed fund, it is the assessee who has such right of appropriation and also the right to assert from what part of the fund a particular investment is made and it may not be permissible for the Revenue to make an estimation of a proportionate figure.”

The Court, hence, held that if investments in securities is made out of common funds and the assessee has available, non-interest-bearing funds larger than the investments made in tax- free securities then in such cases, disallowance under Section 14A cannot be made.

[South Indian Bank v. CIT,  2021 SCC OnLine SC 692, decided on 09.09.2021]


*Judgment by: Justice Hrishikesh Roy

Know Thy Judge | Justice Hrishikesh Roy

Appearances before the Court by:

For Appellants: Senior Advocates S. Ganesh, S.K. Bagaria, Jehangir Mistri and Joseph Markose,

For Respondent/Revenue: ASG Vikramjit Banerjee and Senior Advocate Arijit Prasad

Legislation UpdatesStatutes/Bills/Ordinances

The Ministry of Finance has passed the Taxation Laws (Amendment) Act, 2021 on August 13, 2021. The Act amends the Income Tax Act, 1961 and the Finance Act, 2012.

Key amendments under the Act are:

Levy of Tax on income earned from the sale of shares outside India: 

Under the Income Tax Act, 1961 the non-residents are required to pay tax on the income accruing through or arising from any business connection, property, asset, or source of income situated in India. The Finance Act, 2012 amended the Income Tax Act, 1961 and clarified that if a company is registered or incorporated outside India, its shares will be deemed to be or have always been situated in India if they derive their value substantially from the assets located in India.  As a result, the persons who sold such shares of foreign companies before the enactment of the Finance Act, 2012, also became liable to pay tax on the income earned from such sale. The Taxation Laws (Amendment) Act, 2021, omits this tax liability if following conditions are met:

  1. An appeal or petition filed in this regard must be withdrawn or the person must submit an undertaking to withdraw it
  2. The notices or claims under such proceedings must be withdrawn or the person must submit an undertaking to withdraw them
  3. The person should submit an undertaking to waive the right to seek or pursue any remedy or claim in this regard, which may otherwise be available under any law in force or any bilateral agreement.

The Act prescribes that if all the above conditions are fulfilled by the concerned person, then all the assessment or reassessment orders issued with respect to such tax liability will be deemed to have never been issued. Also, if a person becomes eligible for refund after fulfilling these conditions, the amount will be refunded to him, without any interest.


*Tanvi Singh, Editorial Assistant has reported this brief.