Gist of a few significant judgement on the issues concerning indirect taxes – Part-II

By Mr. Shailesh Sheth

Gist of a few significant judgement delivered by the Hon’ble Justice Mr. Sanjeev Khanna as an SC or HC judge on the issues concerning indirect taxes:

Part-II

1. COMMERCIAL TAXES OFFICER, CIRCLE-B, BHARATPUR Versus BHAGAT SINGH

• 2021 (46) G.S.T.L. 3 (S.C.)
• Assessment under Rajasthan Sales Tax Act, 1954 – Casual Trader – Limitation – Section 10B(1)(iii), read with Section 10A of Rajasthan Sales Tax Act, 1954 providing a maximum limit of 2 years from date of transaction in respect of Casual Dealer – Revenue’s plea that a trader has to undertake plural transactions occasionally to fall under definition of “Casual Trader” not acceptable – Legislature could not have intended that a person with 2-3 transactions would only be casual trader and not a person with single transaction – In view of this, assessment orders of authorities below made 3 years after purchase of truck/trailer would be barred by limitation – Section 10B(1)(iii) of Rajasthan Sales Tax Act, 1954.
• Interpretation of statute – Singular vis-à-vis plural words – Well settled that in construing a statutory provision, singular words include plural words and vice versa, unless repugnant to context in which such expression has been used.
• Interpretation of statute – Grammatical construction vis-à-vis Legislative intent – Court must interpret a statute in a manner which is just, reasonable and sensible – Grammatical construction should not be resorted to if it leads to absurdity or repugnancy or inconsistency with legislative intent, as may be deduced by reading Statute as a whole.

2. TELEWORLD MOBILES PVT. LTD. Vs COMMISSIONER OF TRADE & TAXES

• 2018 (17) G.S.T.L. 202 (Del.)
• Commissioner (VAT) – Delegation of powers – Sub-delegation – Search and seizure (VAT) – Authority to enter premises and seize records and goods – Circular/Order No. F. No. 7(4)/DVAT/LSC/15-16/326-331, dated 23-3-2016 issued by Commissioner empowering an officer not below rank of Special Commissioner to grant authority to such officer/persons so appointed in Form DVAT-50 for exercise of powers by them – Commissioner has authority to delegate powers to subordinate authorities – Maxim of “delegatus non potest delegare” not applicable universally – Power to authorize survey/investigation or search different and distinct from power exercised by officers so authorized and who actually undertake search and survey – Circular/Order does not exceed power of delegation granted to Commissioner – Circular/Order, dated 23-3-2016 override order dated 12-11-2013 in respect of delegation of power under Chapter X of Delhi Value Added Tax Act, 2004 – However Special Commissioner cannot appoint an officer contrary to Rule 48 of Delhi Value Added Tax Rules, 2005 and empower person below rank of Value Added Tax Officer in case investigation was to be done under sub-sections (1) and (2) to Section 60 of Delhi Value Added Tax Act, 2004 – Requirement that power under Chapter X of the Act would be only exercised by jurisdictional officer as specified in order dated 12-11-2013 no longer be applicable – Issue Form DVAT 50 was never shown to petitioner/dealer at the relevant time one of disputed question of fact – Authorities had placed on record Form DVAT, Department’s version was to be accepted – Direction to Authorities to ensure that when said Form is shown to dealer at time of search or survey/investigation, signatures of party ought to be obtained to avoid such controversy – Sections 59, 60, 66, 67, 68 of Delhi Value Added Tax Act, 2004 – Rule 65 of Delhi Value Added Tax Rules, 2005.

3. INDUSTRIAL DEVELOPMENT BANK OF INDIA

Versus

SUPERINTENDENT OF CENTRAL EXCISE AND CUSTOMS

• 2023 (386) E.L.T. 164 (S.C.)
• Liability under Act – First charge – Recovery of Customs dues vis-a-vis recovery of debts due to a secured creditor – Recovery of Customs duties was pending from importing company which had gone under liquidation and an order of winding up was passed on 1-12-2003 – Said company had secured loans from appellant-bank by way of hypothecating of machinery and its components imported by it that were stored in private bonded warehouse and detained and sold/auctioned subsequently by Customs for recovery of Customs duties thereon – Section 529A of Companies Act, 1956, which contains a non obstante clause, would prevail over other provisions of said Act and other enactments in force as on 24-5-1985, with effect from which said section was enforced – As per Section 529A(1)(b), debts due to secured creditors to extent such debts under clause (c) of proviso to Section 529(1) rank pari passu with workmen’s dues are to be paid in priority to all other debts – Taxes, cesses and rates which had become due to Central and State Governments or Local Authorities on relevant date as defined under Section 530(8)(c) and having become due and payable within twelve months next before that date were having preferential status under Section 530(1)(a) and could not have been given priority over payments/debts mentioned in Section 529A – Where provisional liquidator was not appointed, relevant date in terms of Section 530(8)(c) in subject case would date on which winding up order was passed against company i.e. 1-12-2003 and Customs duty on imported goods having become due and payable in terms of adjudication orders, dated 15-9-2000 and 10-10-2000 i.e. prior to twelve months next to relevant date i.e. 1-12-2003 and not within twelve months next before such relevant date; hence, said amount of duty would not fall under category of preferential payments in terms of Section 530(1)(a) – Moreover, Sections 61, 72 and 142 of Customs Act, 1962 relating to warehousing/removal of imported goods and recovery of sums due to Government do not create first charge on customs dues – Government/Customs dues are ranked below overriding preferential payments and have to be paid after payment is made in terms of Sections 529 and 529A of Companies Act, 1956 and secured creditors are entitled to enforce their charge first notwithstanding Government/Customs dues are payable under Customs Act, 1962 – Sections 142 and 142A of Customs Act, 1962 – Sections 529, 529A and 530 of Companies Act, 1956. 
• Liability under Act – First charge – Section 529A of Companies Act, 1956 contains non obstante clause and in case of conflict and disharmony, it has overriding effect over other provisions of said Act and all other enactments for time being in force on 24-5-1985 – Section 142A of Customs Act, 1962 – Section 529A of Companies Act, 1956.
• Liability under Act – First charge – Section 530(1)(a) of Companies Act, 1956 – Terms debt, ‘due’ and debt ‘due and payable’ occurring in said Section are different expressions meant to convey different meaning – A Government debt to be covered under said Section, it must not only be a debt ‘due’, but it must also be a debt ‘due and payable’ within twelve months next before relevant date – Latter phrase is dual and cumulative – Debt ‘due and payable’ prior to twelve months next to relevant date is not a preferential debt in terms of said Section – Such debt will rank pari passu with ordinary or unsecured creditors, without any preferential treatment – Section 142A of Customs Act, 1962 – Section 529A of Companies Act, 1956.
• Liability under Act – First charge – Provision of said Section 142A of Customs Act, 1962 insofar it protects rights of overriding preferential creditors governed and covered by Section 529A of Companies Act, 1956 is clarificatory and declaratory in nature – However, post 8-4-2011 with effect from which said section was inserted, it does confer or create a first charge on dues payable under Customs Act, 1962 notwithstanding any provisions contained under any Central Act, but except in cases covered under Section 529A of Companies Act, 1956, Recovery of Debts Due to Banks and Financial Institutions Act, 1993, Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2000 and Insolvency and Bankruptcy Code, 2016 – Section 142A of Customs Act, 1962, post its enactment, would dilute impact of Section 530 of Companies Act, 1956 which had restricted preferential treatment to Government taxes ‘due and payable’ limited to twelve months prior to ‘relevant date’, without preferential right for taxes that had become ‘due and payable’ in earlier period – Section 142A of Customs Act, 1962 – Section 529A of Companies Act, 1956.

4. COMMISSIONER OF CENTRAL EXCISE Versus GRAND CARD INDUSTRIES

2014 (305) E.L.T. 19 (Del.)

• Cenvat/Modvat – Vis-à-vis exemption notification – Option to – Avail exemption notification or pay duty on final product by taking credit on inputs – Permissible for assessee to choose from said options – Assessee, SSI Unit, was eligible for exemption on clearances up to aggregate value of ` 30 lacs in terms of Notification No. 1/93-C.E. – However, assessee instead of claiming such exemption, sought to take benefit of Modvat credit under Rule 57A of erstwhile Central Excise Rules, 1944 and paid full duty on inputs used in manufacture of final products to avail Modvat credit, which was sought to be utilised for payment of duty on final product – Benefit denied by Department holding that assessee being covered under exemption had no option and Modvat credit was not admissible under Rule 57C ibid – On challenge, Tribunal held that assessee cannot be denied benefit of Modvat credit of duty paid on inputs used in manufacture of final products on which duty was paid, though the final product was covered under the exemption notification as it was for the assessee to claim the concession – Order upheld – Notification being in the nature of beneficial and benevolent provision, as it grants benefit to SSI Units for clearing goods without payment of duty up to a particular limit, same has to be strictly and liberally construed – On the other hand, object of Modvat Scheme is to reduce cost of final product by taking credit for the duty paid on the inputs – Assessee being covered both under the Modvat Scheme as well the exemption notification, had the right to choose to avail benefit of whichever was more attractive and beneficial – Thus, option validly exercised by assessee – Rules 57A and 57C ibid – Section 35G of Central Excise Act, 1944.
• Interpretation of statutes – Exemption notification has to be strictly and liberally construed – Liberal and strict construction of an exemption provision is to be invoked at different stages of interpreting it – When the question is whether a subject falls in the notification or in the exemption clause, then it being in the nature of exemption, is to be construed strictly and against the subject but once the ambiguity or doubt about applicability is lifted and the subject falls in the notification then full play should be given to it and it calls for a wider and liberal interpretation, while keeping the object and purpose as the guiding factor – Notification No. 1/93-C.E. – Section 5A of Central Excise Act, 1944.