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In ITA No.7427/Del/2018 - ITAT - Assessing Officer cannot replace business strategy of a taxpayer as per his personal whims and fancies: ITAT (Delhi)
Members Chandra Mohan Garg (Judicial) & Pradip Kumar Kedia (Accountant) [02-06-2023]

Read Order: The ACIT, Circle-47(1), New Delhi v. Ashish Bansal

 

 

Chahat Varma

 

New Delhi, June 5, 2023: In a recent case, the Delhi bench of the Income Tax Appellate Tribunal has held that it is a well-accepted principle in tax jurisprudence that an Assessing Officer (AO) cannot sit on the arm chair of a businessman assessee to replace his business strategy by his own whims and fancies.

 

Briefly stated facts of the case were that the Revenue filed an appeal, arguing that the Commissioner of Income Tax (Appeals) had made an error in deleting the addition of gross profit (GP) amounting to Rs. 1,72,35,965/-. The Revenue claimed that there was a significant decrease in the gross profit for the current year compared to the previous year, and the assessee failed to provide any cogent reason for the same. The assessee contended that the AO, without complying with the requirement of Section 145(3) of the Income Tax Act, had proceeded to estimate the income of the assessee under best judgement assessment by taking 1% of the total turnover as against 0.41% as declared by the assessee, therefore, the CIT(A) was right in deleting the addition made by the AO without any basis.

 

The sole allegation taken by the AO for enhancing GP rate from 0.41% to 1% of turnover was that there was significant rise in the turnover of jewellery segment but the GP rate was reduced abnormally.

 

The Tribunal held that the AO only noted abnormal fall in GP rate of jewellery without pointing out any defects or discrepancies in the audited books of accounts of assessee and this approach without any other positive material or evidence, only on standalone basis was not correct and justified.

 

In Writ Petition No. 3711 of 2022 – BOM HC – Bombay High Court orders restoration of Trafigura Global Services' refund application for examination by Deputy Commissioner, says it needs to be determined whether the petitioner was entitled to the law laid down in Chromotolab and Biotech Solutions case
Justice Nitin Jamdar & Justice Abhay Ahuja [12-04-2023]

Read Order: Trafigura Global Services Pvt. Ltd v. Central Board of Indirect Taxes And Customs And Another

 

Chahat Varma

 

New Delhi, June 5, 2023: The Bombay High Court has directed the restoration of the Trafigura Global Services Pvt. Ltd.’s (petitioner) refund application with a direction to the Deputy Commissioner to provide an opportunity of hearing to the Petitioner and subsequently pass an appropriate order in accordance with the law.

 

In this case, the petitioner, engaged in providing administrative and support services to foreign companies, claimed a refund of integrated tax under a Letter of Undertaking as per Section 16 of the Integrated Goods and Service Tax Act, 2017 (IGST Act). The petitioner received a notice under Form GST-RFD-08, proposing to reject the refund application on the grounds of time limitation. The petitioner responded by informing that while the application was submitted on the common portal, the supporting documents were submitted online and manually. However, the Commissioner rejected the refund application, stating that the statutory limit of sixty days would apply only to physical submission of the application. The Commissioner relied on Circular No. 17/17/2017 dated 15 November 2017 in support of this decision.

 

The court observed that the petitioner had referred to a decision of the Gujarat High Court in the case of M/s. Chromotolab and Biotech Solutions vs. Union of India [LQ/GujHC/2022/13166], wherein the Gujarat High Court had held that the date on which the online application is filed should be taken into consideration and not the date of physical application.

 

The court noted that no contrary decision was presented, however, it was opined that even if the Gujarat High Court decision was applicable, the facts of the petitioner's case would still need to be examined to determine whether the petitioner was entitled to the law laid down and this enquiry will have to be conducted by the Deputy Commissioner.

 

In Civil Appeal No. 1700/2023 - SC –Supreme Court rules Notification levying Tax for conducting business in Goa, did not give rise to a legal wrong that affected the petitioning company within the territory of Sikkim; removes State of Goa from list of respondents in writ petition pending before Sikkim High Court
Justice S. Ravindra Bhat & Justice Dipankar Datta [14-03-2023]

Read Order: The State of Goa V. Summit Online Trade Solutions (P) Ltd & Ors

 

Chahat Varma

 

New Delhi, June 5, 2023:  The Supreme Court has set aside the order of the Sikkim High Court, stating that the High Court of Sikkim had erred in dismissing the applications filed by the State of Goa (appellant) without considering the contents of the petition memo. The court observed that the petition memo did not provide any evidence or pleading to establish that any part of the cause of action arose within the jurisdiction of the Sikkim High Court or that any rights were affected within the territory of Sikkim.

 

Briefly stated issue involved the present case was that a private limited company, engaged in the business of purchase and sale of lottery tickets run, conducted and organized by the Government of Sikkim both within the State of Sikkim as well as outside the State, challenged various notifications issued under the Central Goods and Services Tax Act, 2017 (CGST Act) and the Integrated Goods and Services Tax Act, 2017 (IGST Act). Specifically, the challenge was directed towards a notification dated June 30, 2017, bearing No. 01/2017, issued by the Government of Goa under the Goa Goods and Services Tax Act, 2017 (GGST Act). This notification imposed a 14% tax on lotteries authorized by State Governments. The writ petitioners had approached the High Court of Sikkim, invoking its prerogative writ jurisdiction, seeking a declaration that the impugned notification was unconstitutional and illegal.

 

The appellant was one of the multiple respondents in the Writ petitions, pending before the High Court of Sikkim. Separate applications in the said writ petitions were filed by the appellant seeking its deletion from the array of respondents. The appellant had argued that a notification issued by them was being challenged in the writ petitions, and if there were grounds for challenging the notification, the appropriate court for seeking remedy would be the High Court of Bombay at Goa.

 

However, the High Court of Sikkim, in a common judgment and order dismissed the appellant's applications.

 

The division bench of Justice S. Ravindra Bhat and Justice Dipankar Datta observed that when addressing an objection regarding lack of territorial jurisdiction to entertain a writ petition, the high court must assess the contents of the petition memo and treat the averments made in it as true and correct. It is a fundamental principle to determine whether at least part of the cause of action had been claimed to arise within the jurisdiction of the High Court. After examining the petition memo of W.P.(C) No. 38 of 2017, the bench found no indication of how any part of the cause of action pleaded by the petitioning company had arisen within the territorial jurisdiction of the High Court of Sikkim.

 

The bench remarked, “Here, tax has been levied by the Government of Goa in respect of a business that the petitioning company is carrying on within the territory of Goa. Such tax is payable by the petitioning company not in respect of carrying on of any business in the territory of Sikkim. Hence, merely because the petitioning company has its office in Gangtok, Sikkim, the same by itself does not form an integral part of the cause of action authorizing the petitioning company to move the High Court of Sikkim. “

 

The bench noted that the petitioning company had to bear the liability of paying tax @14% imposed by the Government of Goa for the sale of lottery tickets in the State of Goa, as per Schedule IV of the disputed notification. However, upon examining the petition memo, the bench found no indication of how the impugned notification, which levied tax for conducting business in Goa, gave rise to a legal wrong that affected the petitioning company within the territory of Sikkim.

 

The bench concluded that the appellant shall be removed from the list of respondents in W.P.(C) Nos. 36, 38, and 59 of 2017. Furthermore, the interim order staying the proceedings before the High Court stood vacated. As a result, the court directed that the Sikkim High Court may proceed to decide the writ petitions against the other respondents according to law.

 

 

 

In FAO 179 of 2019 - DEL HC- NHAI was well within its right to levy penalty vis-a-vis liquidated damages against Contractor for not submitting collection of User Fee at Kharik Toll Plaza, Tribunal traversed beyond the agreed terms of Contract Agreement: Delhi High Cour
Justice Manoj Kumar Ohri [02-06-2023]

Read Order: National Highway Authority of India v M/S Suresh Chandra

 

Simran Singh

 

New Delhi, June 5, 2023: The Delhi High Court allowed the appeal under Section 37(1)(c) of the Arbitration & Conciliation Act, 1996, wherein the appellant had impugned the order passed by the Arbitral Tribunal whereby its objections filed under Section 34 of the Arbitration Act against the Award, were dismissed. It was stated that the Tribunal erred in misapplying rules of interpretation by abandoning the plain language used in Clause 25(b) to fit in ‘partial reduction of traffic' in the Clause 25(b), as a Force Majeure event. There was no reason cited by the Tribunal, or was otherwise apparent from the facts and records, if the parties had intended to include ‘partial reduction in traffic’ in Clause 25(b).

 

 

The Single-Judge Bench of Justice Manoj Kumar Ohri opined that the Tribunal’s decision to direct refund to the Contractor was contrary to Clause 9 of the Contract Agreement and was premised on the misunderstanding that the partial reduction in traffic was a Force Majeure event, and hence untenable. “Thus, the award of interest also was set aside and consequently, the appeal was allowed and the award dated 27.07.2018 was set aside.”

 

 

In the matter at hand, the appellant had engaged the respondent as a Contractor for collection of User Fee at Kharik Toll Plaza at km 333.150 pursuant to an e-tender issued by the appellant. The respondent alleged loss of revenue and lodged a claim for damages to the tune of Rs.1,35,26,024/- on account of reduction in the collection of User Fee in the period from 03.07.2014 to 24.11.2014. The respondent had also sought return of penalty amount of Rs. 88,93,346.00 levied on it by the appellant. Additionally, interest @ 18% p.a. was claimed on the principal sum awarded along with cost of litigation. Aggrieved by the award dated 27.07.2016, granted by the Tribunal, the appellant filed objections under Section 34 of the Arbitration Act, inter-alia including the ground that Tribunal has travelled beyond the agreed terms of the Contract Agreement and erred in the interpretation of clause 25. The Objections were however, dismissed by the Court vide the impugned order.

 

 

In the claim petition, the Contractor claimed that there were restriction/partial closure of Bhaina river bridge for heavy vehicles due to heavy rains and floods, which had caused damages and the passage of traffic at the toll plaza reduced significantly resulting in loss to the tune of Rs.1.25 lacs per day. Vide letter dated 22.07.2014, the Contractor sought reduction of weekly collection remittances that it was supposed to make to the appellant. A similar request was made for additional rebate of Rs.1 lac per day with respect to Bhaijini-Fulwaria bridge as well as for the Paras Banni bridge.

 

 

The Project Director, National Highway Authority of India (NHAI) vide letter dated 05.09.2014 recommended reduction of weekly remittance from Rs.28,82,352/- to Rs.22,33,840/- with effect from 26.07.2014. The said recommendation was claimed to be based on a survey conducted by a third party for the period from 09.08.2014 to 16.08.2014. The said recommendation was rejected by the Regional Officer of NHAI on the ground that Force Majeure clause was not applicable as there was no suspension of traffic under Clause 25 of the Agreement and also for the reason that the bridges affected were not in the same section as the toll plaza. On 02.03.2015, Regional Officer of the NHAI submitted its opinion that Contractor’s claim was not tenable. The recommendation of the Project Director was also rejected by the 3 Chief General Manager Committee of NHAI.

 

 

The issue that arose for consideration before the Tribunal was whether the aforesaid events would fall under Clause 9 or 25(b) of the Contract Agreement.  Admittedly, the events did not fall within the purview of Clause 25(a). Clause 9(b) prohibited the Contractor from making any claim on account of reduction in traffic on the ground of diversion of traffic as per Clause 9(a) which casted an obligation on the Contractor to survey the section of national highway or the said bridge or surrounding area and taking into consideration all such access or diversion of traffic due to deterioration of road condition or closure of road for maintenance work, whether existing or likely to come in future. The Tribunal interpreted the Contract Agreement and concluded that the events highlighted by the Contractor were squarely covered by Clause 25(b) of the Contract Agreement.

The Bench perused the clauses of the contract agreement which provided for ‘Diversions’ and ‘Force Majeure and its procedure’. The Court noted that as per the Contract Agreement, the contract period was from 25.03.2014 to 24.03.2015 however, the claim pertained to the period from 03.07.2014 to 24.11.2014.

 

 

The Bench stated that indisputably, there were reduction of traffic at the Kharik toll plaza in the period from 03.07.2014 to 24.11.2014. However, the moot question was whether reduction in traffic volume qualified as Force Majeure, as contemplated by the parties in Clause 25. In Clause 25(b)(ii), only complete blockade of ‘the road’ due to floods/earthquake was contemplated as a Force Majeure event.

 

 

The Bench referred to National Highway Authority of India v. TGV Projects & Investment Pvt. Ltd. wherein the Court had held the clause contemplated complete blockade of ‘the road’ affected by floods and not a mere reduction in traffic on account of a remote event of flood occurring, thereby affecting the flow of traffic leading to the contract road.  Accordingly, the Court was of the view that the interpretation of Clause 25(b) (ii) adopted by the Tribunal appeared to be contrary to the intent of the parties that was reflected in the plain words of Clause 25(b) i.e., complete blockade.

 

 

Thus the Court stated the Award in question was vulnerable to challenge on the ground that the award was contrary to the contractual provisions and thus squarely fell within the scope of Section 34 (2)(b)(ii) of the Arbitration Act.  “In terms of Clause 19 of the Contract Agreement, NHAI was well within its right to levy penalty (which to my mind are liquidated damages) @ 0.2% per day for initial one month of delay in depositing remittances and 0.5% for further delay beyond one month.”

 

 

In Excise Appeal No. 41661 of 2013 - CESTAT – CESTAT (Chennai) dismisses Bharat Heavy Electricals Limited’s appeal; rules finalization of provisional assessment to be done on monthly basis as per Rule 7 of Central Excise Rules
Members P. Dinesha (Judicial) & Vasa Seshagiri Rao (Technical) [31-05-2023]

Read Order: Bharat Heavy Electricals Limited v. The Commissioner of Central Excise

 

Chahat Varma

 

New Delhi, June 5, 2023: The Chennai bench of the Customs, Excise and Service Tax Appellate Tribunal has ruled that on a conjoint reading of Rule 7 of the Central Excise Rules, 2002 along with the Instructions given in Chapter 3 of the C.B.E.C.’s Excise Manual for Supplementary Instructions issued under Rule 31 of the Central Excise Rules, finalization of provisional assessment is required to be done on monthly basis.

 

Bharat Heavy Electricals Limited (appellant) in this case was supplying boiler components to various power projects in India on contract basis under provisional assessment of duty in terms if Rule 7(1) of the Central Excise Rules. The Adjudicating Authority determined that the appellant had passed on the excess amount of duty as CENVAT Credit to M/s. Bharat Petroleum Corporation Ltd. (BPCL), Kochi through Central Excise cenvatable invoices issued under Rule 11 of the Central Excise Rules. Due to this, the appellant's request for adjustment against short payment was denied. In response, the appellant appealed the Order-in-Original to the First Appellate Authority, arguing that the entire contract should be assessed as a single entity rather than on a monthly basis. They contended that the reason for denial was incorrect and that according to Rule 7(5) of the Central Excise Rules, any excess payment should be refunded.

 

The bench comprising of P. Dinesha (Judicial) and Vasa Seshagiri Rao (Technical) observed that the assessment should be finalized for each month individually. They noted that Rule 7(4) specifically refers to the ‘month’, indicating that the payment of differential duty is required on a monthly basis.

 


The bench further observed that the adjudication order contained a clear finding that the burden of duty had been borne by M/s. BPCL, the consignee of the goods, rather than M/s. BHEL. Therefore, the refund of the excess payment was not granted because the duty burden had been passed on to M/s. BPCL, which falls under the provisions of Rule 7(6). Additionally, M/s. BPCL had utilized the CENVAT Credit of the excess duty payment based on the Central Excise cenvatable invoices issued under Rule 11 of the Central Excise Rules.

 

Based on these observations, the bench concluded that there was no error in the order issued by the lower adjudicating authority.

In W.A.Nos313, 833 of 2022-MADR HC-Teachers appointed prior to July 29, 2011 are exempt from passing TET only for purpose of continuance in post of secondary grade teacher or BT Assistant without promotional prospects, clarifies Madras HC
Justices R. Mahadevan & Mohammed Shaffiq [02-06-2023]

Read Order:The Director Of School Education D.P.I. Campus And Ors Vs. M. Velayutham And Ors 

 

Tulip Kanth

 

Chennai, June 5, 2023:  The Madras High Court has clarified that any teacher appointed as Secondary Grade Teacher or Graduate Teacher/BT Assistant prior to July 29,2011 would continue in service and also receive increments and incentives, even if they do not possess/acquire a pass in TET but for future promotional prospects, irrespective of their dates of original appointment, they must necessarily possess TET, failing which they will not be eligible for promotion.

 

“The Government being an employer, must act in accordance with the rules and regulations framed by it. It should respond to the legitimate aspirations of the employees and create trustworthiness to them”, the Division Bench of Justice R. Mahadevan & Justice Mohammed Shaffiq said.

 

By a notification, the National Council for Teacher Education laid down certain minimum qualifications for a person to be eligible for appointment as a Teacher in Classes I to VIII in a school. Subsequently, by a 2011 notification, the NCTE made certain amendments & as per the G.Os possessing TET qualification had become essential and mandatory for the teaching faculties from August 23,2010 (subsequently extended by NCTE notification to July 29, 2011) in the State.

 

There was a requirement in the Notification that the TET should be conducted atleast once in every year and there would be no restriction on the number of attempts a person could take for acquiring a TET Certificate and a person who had qualified the TET may also appear again for improving his/her score.However, it had been brought to notice that the TET had not been conducted annually in the State of Tamil Nadu in the years 2014, 2015, 2016 and 2018. Thus, taking this situation that TET had not been conducted, the persons appointed during the period from August 23, 2010 to July 12, 2012 had claimed exemption from passing TET, particularly when it was not in dispute that the TET had been conducted during the years 2012, 2013 and 2017 and they have had sufficient opportunity to prepare and appear for the TET during the said period. 

 

The key issues before the Bench were- 

 

-Whether passing of the Teacher Eligibility Test (TET) is mandatory for promotion to the post of B.T. Assistant/Graduate Teacher, from the cadre of Secondary Grade Teacher (already in service).

 

-Whether non-possession/non-acquisition of a pass in TET by a teacher appointed prior to July 29, 2011 would affect his/her continuance in service and drawal of increment, without seeking for further promotion to the post of BT Assistant/Graduate Teacher.

 

At the outset, on the maintainability of the petitions, the Bench said, “This Court while dealing with a matter of public employment under Article 16, cannot reject the petitions on hyper technical ground of non-maintainability.”

 

The Bench was of the view that that those appointed prior to July 29, 2011 and in order to extend the benefit to the date of passing of 2011  Memorandums, those appointed prior to November 15, 2011 either in the post of Secondary Grade teacher or Graduate Teacher/BT Assistant were exempted from passing TET for continuance in the said posts. 

 

“However, for promotion to the post of Graduate Teacher from the post of Secondary Grade teacher or appointment to the post of Secondary Grade teacher or Graduate teacher/BT Assistant by any channel or mode of appointment by either direct recruitment or promotion or by transfer, a pass in Teacher Eligibility Test is mandatory in accordance with the RTE Act read with the NCTE notifications”, the Bench added.

 

The Bench said, “Any teacher appointed as Secondary Grade Teacher or Graduate Teacher/BT Assistant prior to 29.07.2011 shall continue in service and also receive increments and incentives, even if they do not possess/acquire a pass in TET. At the same time, for future promotional prospects like promotion from secondary grade teacher to B.T. Assistant as well as for promotion to Headmasters, etc., irrespective of their dates of original appointment, they must necessarily possess TET, failing which they will not be eligible for promotion.”

 

It was also held by the High Court that any appointment made to the post of Secondary Grade Teacher after July 29, 2011 must necessarily possess TET and any appointment made to Graduate Teacher/BT Assistant, after such date, whether by direct recruitment or promotion from the post of Secondary Grade Teacher, or transfer, must necessarily possess TET.

 

“The Special Rules for the Tamil Nadu School Educational Subordinate Service issued in GO (Ms.) No.13 School Education (S.E3(1)) Department dated 30.01.2020 insofar as it prescribes “a pass in Teacher Eligibility Test (TET)” only for direct recruitment for the post of BT Assistant and not for promotion thereto in Annexure-I (referred to in Rule 6) is struck down, thereby meaning that TET is mandatory/essential eligibility criterion for appointment to the post of BT Assistant even by promotion from Secondary Grade Teachers’, the Bench affirmed while also adding, “The language employed in G.O. (Ms) No. 181 dated 15.11.2011 is to be read and understood to the effect that for continuance in service without promotional prospects, TET is not mandatory.”

 

Considering the fact that teachers had not been appointed for the last ten years inspite of being qualified with a pass in TET, the Bench directed the State Government to conduct TET periodically and make direct recruitment of teachers and promotion from among TET qualified candidates at the earliest.


 

In W.P.(C) 5975/201-DEL HC- Merely because Co-operative Store is losing emerging business is not sufficient to declare amendment made to Sec.35(10)(cc) of Delhi Co- operative Societies Act, 2003 by 2011 Amendment as ultra vires when its insertion by 2004 Amendment is not challenged: Delhi HC
Justices Manmohan & Saurabh Banerjee [02-06-2023]

Read Order: THE SUDHAR SABHA CONSUMER CO-OPERATIVE STORE LTD v. THE DELHI CONSUMER CO-OPERATIVE WHOLESALE STORE LTD. & ORS 

 

Tulip Kanth

 

New Delhi, June 5, 2023: While observing that an amendment made to an existing Statute cannot be modified, looked into or set aside simply because the same is not viable or suitable to a party, the Delhi High Court has found no reasons for declaring the provisions of Section 35(10)(cc) of the Delhi Co- operative Societies Act, 2003 to be ultra-vires as there is no mala fide and/ or personal gain to anyone or the legislature in inserting Section 35 (10)(cc) vide the 2004 Amendment and the later amendment thereto vide the 2011 Amendment

 

“In the opinion of this Court, the said insertion of Section 35(10)(cc) vide the 2004 Amendment proved to be a lifeline for a Society that was hitherto starving with hardly any business activity. In light of the aforesaid, no mala fide or personal gain can be attributed to any of the respondents or the legislature in incorporating the impugned Section 35(10)(cc) in the 2003 Act”, the Division Bench of Justice Manmohan & Justice Saurabh Banerjee held.

 

This petition had been filed by a member store of the respondent Society-The Delhi Consumer Co-operative Wholesale Store Limited which was registered in the year 1962 under The Bombay Co-operative Societies Act, 1912 later under The Delhi Co-operative Societies Act, 1972 (repealed by The Delhi Co- operative Societies Act, 2003) with the principal object of doing wholesale and retail business in consumer goods as per their bye-laws. As per bye-law 22(a) of the Society, the petitioner’s Managing Committee consisted of nine members, out of which five members including the President, Vice-President, Secretary and two members, were to be nominated by the Administrator, third respondent - Delhi Government and the remaining four members, were to be elected at the general meeting. 

 

The Society had more than 300 members contributing more than 75% of their issued equity share capital. Presently, 98 out of 200 registered member stores are reported to be active members. The elections of the Managing Committee of the Society were held after a gap of 27 years on June 24, 2001 and in 2002, a Show Cause Notice u/s 32 of the 2003 Act was issued by the second respondent Registrar to the Society, whereafter few primary member stores of the Society filed a petition which was disposed of with a direction to hold elections within a period of 8 weeks. Thereafter, a similar writ petition filed by another member of the Society was also disposed of by a Co-ordinate Bench, once again, with a direction to hold elections within 6weeks.

 

The petitioner approached the High Court with the petition in question seeking declaration of Section 35(10)(cc) of the 2003 Act as ultra vires and for passing of a writ of mandamus or any other writ or direction(s) to the Society and Delhi Government to conduct time bound elections of the Committee within a period of 3 months based on membership records along with any other relief/s against the Society, Registrar and the Delhi Government.

 

According to the Bench, as the percentage of issued equity shares held by the Delhi Government and the percentage of members of the Committee to be nominated by it already stood introduced/ changed/ proportionately increased way back in the year 2003, the only change vide the 2011 Amendment to Section 35(10)(cc), as challenged by the petitioner herein, was with respect to the increase of percentage of members to be nominated to the Committee.

 

“In any event, the petitioner having not challenged the insertion of Section 35(10)(cc) in the 2003 Act vide the 2004 Amendment till the filing of the present writ petition, wherein it has sought to challenge a subsequent amendment carried out by the 2011 Amendment, leads this Court to conclude that the petitioner is most certainly guilty of delay, laches and acquiescence”, the Bench held while also adding, “Merely because the petitioner is losing emerging business/ economic opportunities is not sufficient for this Court to declare the amendment made to Section 35(10)(cc) of the 2003 Act by the 2011 Amendment as ultra vires without challenging the insertion thereof by the 2004 Amendment.”


 

The fact that none of the other similarly situated member stores like the petitioner herein had approached the  Court till now led the Bench to safely infer that neither they were aggrieved by the incorporation of Section 35(10)(cc) in the 2003 Act nor they were anymore actively carrying on with their business activities. 

 

Noting that there was a reasonable nexus of the said incorporation and amendment to Section 35(10)(cc) with the object of aiding public policy as it was able to sustain and aid the Society, the Bench observed that the insertion of Section 35(10(cc) in the 2003 Act by the 2004 Amendment and the subsequent amendment thereof by the 2011 Amendment were both made after due deliberation and taking proper precaution at every level from time to time.

 

Referring to the judgment of the Top Court in Daman Singh and Others v. State of Punjab and Others, the Bench reaffirmed that a member in/ of a Society ceases to represent the self and has no individual existence, right, title or interest of its own as it is a part of a communion. 

 

Considering the fact that even the petitioner, despite repeated asking, had been unable to show any activity done by it in the past decade, as the Society had hardly any miniscule active primary member stores that were carrying on business when the amendment to Section 35 (10)(cc) was carried out vide the 2011 Amendment, the Bench held, “Having found so and admittedly as the Delhi Government is now having issued equity share capital of 95.4%, i.e. above ninety percent in the Society, this Court finds no reason for issuing any directions to either the Society or the Registrar to conduct elections to the Committee.”

 

Thus, the petition was dismissed.

 

 

In W.P. (C) 6613 of 2023- DEL HC- The authority issuing tender was the best judge to know requirements of tender and Courts cannot interfere with the decisions unless the decision was biased: Delhi High Court while dismissing plea claiming SAIL’s action of rejecting petitioner’s bid was arbitrary
Chief Justice Satish Chandra Sharma and Justice Subramonium Prasad [02-06-2023]

Read Order: Kalinga Commercial Corporation Limited v Steel Authority of India

 

Simran Singh

 

New Delhi, June 5, 2023: The Delhi High Court has dismissed a plea challenging the decision taken by the Steel Authority of India (SAIL) in rejecting the petitioner’s bid in respect of a tender stating that the petitioner had not been able to demonstrate as to how the decision arrived at by the tendering authority in rejecting the petitioner’s bid as not being compliant of Clause 3.28 and Clause 6.1.2 of the bid document, was perverse.

 

 

“The tender issuing authority cannot be asked to wait for an unlimited period awaiting an opinion which is sought to be procured by the tenderer. The tender has been evaluated by experts and this Court is not inclined to sit as an Appellate Authority over the Tender Evaluating Committee which has come to the conclusion that the bid of the Petitioner does not meet with the financial criteria.”

 

 

The Division Bench of Chief Justice Satish Chandra Sharma and Justice Subramonium Prasad stated that the law relating to interference by Courts in matters of tender were well settled. “The authority issuing the tender is the best person to know the requirements of the tender and the clauses contained therein. Courts can interfere with the decisions taken by the authorities issuing the tender only if the decision is arbitrary or perverse or intended to favour someone or is biased against the person whose bid is sought to be rejected.”

 

 

 

The issue for consideration was:

  1. Whether the action of SAIL in rejecting the bid of the petitioner on the ground that Net Worth of the petitioner was not in compliance with the eligibility criteria (financial) was correct or not?
  2. Whether it warrants interference by this Court while exercising its jurisdiction under Article 226 of the Constitution of India?

 

 

The Court navigates through clause 3.28 of the Bid which defined ‘Net Worth’ and clause 6.1.2 of the Bid document which provided the qualifying criteria (financial) of the NIT. The Bench referred to a Supreme Court case of Afcons Infrastructure Limited v. Nagpur Metro Rail Corporation Limited which had observed that Constitutional Courts must defer to the understanding and appreciation of the author of the tender documents unless there was malafide or perversity in the understanding or appreciation in application in the terms of the tender.

 

 

The Bench referred to another Supreme Court case of  Silippi Constructions Contractors v. Union of India which had discussed the aspect of judicial intervention in matters of contract involving state instrumentalities and had held that the authority which floated the contract or tender, and had authored the tender documents was the best judge regarding interpretation of the same and any interference by the Court had to be for the purposes of preventing arbitrariness, irrationality, bias, malafide or perversity.

 

 

The Bench perused respondent's letter dated 11.03.2023 which showed that the net worth of the petitioner as calculated by the respondent by referring to audited financial statements of the petitioner for the FY 2021-22 showed that the net worth of the company was INR 393.73 crores. The respondent vide letter dated 10.04.2023 had sought clarification from the respondent pertaining to the consideration of deferred tax liability as part of net worth. The petitioner had replied to the same clarifying its stance by relying upon a report of its statutory auditor, a certificate from an independent chartered accountancy firm and a registered valuer in support of its treatment of deferred tax liability in computing net worth. The petitioner had also stated that they have sought an opinion from the ICAI regarding the same. However, vide the impugned letter, the respondent had rejected the bid of the petitioner.

“The purpose of calculating net worth should be primarily left with the tender issuing authority and the evaluating committee and the Court cannot dictate as to how the net worth should be calculated unless the decision is contrary to law.”

 

 

The Bench thus opined that it could not be said that the action of the respondent in not considering deferred tax liability as a part of net worth and rejecting the bid of the petitioner for not meeting the qualification criteria was so arbitrary that it would warrant interference by this Court under Article 226 of the Constitution of India. With these observations, the petition was dismissed.

In W.P.(C) 8397 of 2022- DEL HC- Delhi High Court refuses to mandatorily direct AICTE to provide admission through lateral entry to second year, B.Tech. programme for diploma holders in engineering and technology
Justice Purushaindra Kumar Kaurav [02-06-2023]

Read Order: Shivam Chaudhary v. All India Council for Technical Educations

 

 

Simran Singh

 

 

New Delhi, June 3, 2023: The Delhi High Court has dismissed a petition seeking direction to the respondents to provide admission through the lateral entry process to second year, B.Tech. programme for diploma holders in engineering and technology.

 

 

The Single Judge Bench of Justice Purushaindra Kumar Kaurav stated that “Having considered the source of power to frame the Regulations, 2007 and the language employed in the Regulations, 2007, this court is of the opinion that the Regulations, 2007 are enabling and directory in nature and cannot be considered to be mandatory. If the Universities or technical institutions to whom the Regulations, 2007 applies decides to go for admission through lateral entry, the Regulations, 2007 would be the minimum threshold criteria to be adhered to, subject to any other higher standards to be prescribed by respective Universities.”

 

 

The Court clarified that All India Council for Technical Education (AICTE) Admission of Students in Degree Engineering Programmes through Lateral Entry Regulations, 2007 (Regulations, 2007) could not be forced upon the Universities to compulsorily provide for admission through lateral entry and therefore, was not inclined to interfere with the instant writ petition or to issue any mandatory directions against the respondents to mandatorily provide for admission through lateral entry.

 

 

In the matter at hand, the petitioner were diploma holders/final year students of three year diploma course in engineering. The petitioners sought admission to second year B.Tech. programme in Public Universities through lateral entry process as per the guidelines laid down by AICTE for admission of students in the Degree Engineering Programme through the Regulations, 2007. Issues for consideration was that whether the Regulations, 2007 was mandatory or directory in nature

 

 

The Court referred to Abhijay v. A.I.C.T.E. and observed that Division Bench of this court, had stated that if the Regulations, 2007 were independently considered, the same would not result in any converse opinion. This legal position was based upon the decision of the Supreme Court in the case of Bharathidasan University v. All India Council for Technical Education.

 

 

The Bench stated that this view was taken keeping in mind the binding precedents of the Supreme Court of India and the source of power exercised by the AICTE in framing the Regulations, 2007 which were framed in exercise of power under sub-Section (1) of Section 23 read with Section 10(b), (o) and (v) of the AICTE Act, 1987. Section 10 of the AICTE Act, 1987 calls upon the AICTE to take all such steps as it may think fit for ensuring coordinated and integrated development of technical education, maintenance of standards and for the purpose of performing its functions under the AICTE Act, 1987.

 

 

The Court stated that Sub-Section (1) of Section 23 of the AICTE Act, 1987 required that the Council may, by notification in the Official Gazette, make Regulations not inconsistent with the provisions of the All Indian Council for Technical Education Act, 1987 (AICTE, 1987) and the rules generally, to carry out the purpose of the AICTE Act, 1987. It was provided for framing of guidelines for admission of students to technical institutions and Universities imparting technical education.

 

 

“A source of the power which was exercised in framing the Regulations, 2007 was itself in the nature of guideline. It was not a case where any of the Universities were granting admission through lateral entry in defiance of the Regulations, 2007. No doubt, the Universities could not dilute the basic minimum standard laid down under the provisions of AICTE Act, 1987 or the Rules and Regulations made thereunder. However, the Universities were entitled to lay down higher standards than the ones laid down by the AICTE.”

 

 

The Court stated that the purpose of the Regulations, 2007 was to provide for admission to diploma holders and B.Sc. graduates into second year degree programme in engineering and technology through lateral entry. It was upto the Universities to evolve a mechanism in accordance with the Regulations, 2007 or with a higher standard to provide a mode for such students.

 

 

“However, the same could not be forced upon the Universities to mandatorily have the provision of lateral entry. It was thus understood that if the Universities decided to grant admission through lateral entry, they had to mandatorily follow the Regulations, 2007 or any higher standards can be prescribed by the Universities. However, the very nature of the Regulations, 2007 and the purpose for which these were enacted, could not be construed to be mandatory in nature to mean that all institutions must grant admission through lateral entry.”

 

 

The Bench stated that in the instant case the Universities had taken categorical stand that they were not under an obligation to grant admission through lateral entry. The decision relied upon by the petitioner were, therefor, distinguishable on facts. “ While interpreting a particular provision to be mandatory or directory, regard must be had to the context, subject matter and object of the statutory provision in question. A careful consideration of the entire scope of the enactment and the reasons behind it need to be considered. The intent of the legislature needed to be given weightage over the language deployed in the statute. The consequence which would follow from construing the legislation, one way or the other, was one of the important parameters. A relative impact on other existing enactments was also required to be considered.”

 

The Court stated that in the instant case, the source of power of framing the Regulations, 2007 itself was directory in nature. All the Universities were set up by their independent Acts either of the State or of the Central Government. The Regulations, 2007 nowhere provided for any consequence in case of their non-compliance. It was thus seen that AICTE, in order to lay down uniform criteria enabling all institutions to grant admission directly in second year B.Tech. programme, had framed the threshold criteria and the same could not be construed as mandatory.

In Excise Appeal No.41577 of 2013 - CESTAT - Surplus freight charges excluded from assessable value for Central Excise Duty: CESTAT (Chennai)
Members Sulekha Beevi C.S. (Judicial) & M. Ajit Kumar (Technical) [01-06-2023]

Read Order: Concrete Products and Construction Co v. Commissioner of GST & Central Excise

 

Chahat Varma

 

New Delhi, June 3, 2023: The Chennai bench of the Customs, Excise and Service Tax Appellate Tribunal has ruled that surplus freight charges collected from customers are not required to be included in the assessable value for the purpose of discharging Central Excise Duty.

 

Briefly stated facts were that Concrete Products and Construction Co. (appellants), engaged in manufacture of Concrete Sleepers, were availing CENVAT Credit facility of duty paid on inputs. On verification of records, it was found that the appellant had collected outward freight chargers from their customers and paid lesser freight to the transporters. They had included only the lesser freight in the assessable value while discharging the excise duty on finished products. The Department was of the view that the appellant had to pay excise duty on the amount of freight charges collected from the customers and not on the lesser freight paid to the transporters.

 

The bench of Sulekha Beevi (Judicial) and M. Ajit Kumar (Technical) referred to the case of Indian Oxygen Ltd. v. Collector of Central Excise [LQ/SC/1988/353], wherein Supreme Court held, “It is clear from Section 4 that the delivery and collection charges have nothing to do with the manufacture as they are for delivery of the filled cylinders and collection of the empty cylinders. These charges have to be excluded from the assessable-value. Insofar as the loading charges incurred for loading the goods within the factory are concerned, they are to be included in the assessable value, irrespective of who has paid for the same but the loading expenses incurred outside the factory gate are excludible. Duty is excise to a tax on the manufacture, not a tax on the profits made by a dealer on transportation.”

 

Consequently, the bench held that the demand cannot be sustained.

In Excise Appeal No. 118 of 2012 - CESTAT - CESTAT (Kolkata) rules benefit of Notification No. 50/2008-CE(NT) applicable retrospectively; sets aside excise duty demanded from Pareshnath Re-Rolling Mills
Members Ashok Jindal (Judicial) & K. Anpazhakan (Technical) [31-05-2023]

Read Order: Pareshnath Re-Rolling Mills Ltd v. Commr. of CGST & CX, Bolpur Commissionerate

 

Chahat Varma

 

New Delhi, June 3, 2023: The Kolkata bench of the Customs, Excise and Service Tax Appellate Tribunal has ruled that the benefit of Notification No. 50/2008-CE(NT) would be applicable retrospectively.

 

The brief facts of the case were that Pareshnath Re-Rolling Mills Ltd. (appellant) had supplied M. S. Angles, Channels, Joists etc. to the SEZ developer M/s. Jindal Stainless Ltd., without payment of duty. The Department considered these supplies as exempted supplies and demanded 10% of the value of the goods cleared to SEZ developer on the ground that the said clearance was not covered under Rule 6 (6) (1) of the Cenvat Credit Rules, 2004. The appellant contended that Notification No.50/2008-CE(NT) dated 31.12.2008 eliminated the distinction between SEZ Unit and developer and the benefit of the Notification had been extended to SEZ developers retrospectively and hence the demand confirmed was not sustainable.

 

The Tribunal based its decision on the case of Union of India vs. Steel Authority of India Ltd. [LQ/ChatHC/2013/184].

 

Holding the appellant eligible for the benefit of Notification No. 50/2008-CE(NT) for the period covered in the impugned order, the demand confirmed in the impugned order was set aside.