Information Technology Act, 2000 | Notes

Use of computers to create, transmit and store information is becoming an indispensible part of today’s business.

Legal provisions in most of the statutes in India require paper records and signature of the relevant person.

However, to overcome the hurdle of paper documentation and to match the fast pace of technology, the IT Act had been enacted.

The purpose of Act is

  • to provide legal recognition for transactions carried out by means of electronic data interchange
  • to facilitate electronic filing of documents with the Government agencies

The Act does not apply to

  • a negotiable instrument except cheque
  • a power-of-attorney
  • a trust deed
  • a will
  • any contract for the sale or conveyance of immovable property
  • any such class of documents or transactions as may be notified by the Central Government

The Act provides (relevant provisions):

  • Legal recognition to Electronic Transaction / Record
  • Legal recognition of digital signatures
  • Various types of computer crimes defined and stringent penalties provided under the Act
  • Electronic Governance

Unless there is a specific provision in a law to provide information in paper form, information provided in electronic form shall suffice the requirement

However, Section 8 further prescribes that no department or ministry can be compelled to accept application, return or any communication in electronic form.

If the Compact Disc (CD), Hard Disc, Pen-drive, Floppy etc., were not filled with any information, then, they could have been treated as goods. It would be necessary to know the meaning of electronic record and data etc., by importing the definitions of the same as stated in Information Technology Act. The word “electronic record” is defined under Section 2(1)(t) of the Information Technology Act, 2000, as “electronic record” means data, record or data generated, image or sound stored, received or sent in an electronic form or micro film or computer generated micro fiche.”

The aforementioned provisions make it clear that the information or data stored are part of the electronic record. Therefore, the material which is stored in such Hard Disc, Pen-drives etc., can be termed as electronic files or electronic documents. Such electronic document or records are admissible as per Section 65B(1) of the Evidence Act. The aforesaid provision makes it clear that information contained in the electronic record printed on a paper, stored, recorded or copied in optical or magnetic media produced by a computer shall be deemed to be also a document. Thus, the contention of the petitioner that the Floppies, Pen-drives, CDs etc., seized in this case should be treated as mere goods cannot be accepted. But, they are electronic records/documents. ‘Goods’ under Section 2(22)(e) of Customs Act, 1962 not include ‘documents’ or ‘files’ for purpose of Section 105 read with Section 110. – Stovekraft Pvt. Ltd. v Jt. Dir. [2007 (214) E.L.T. 179 (Kar.)]

Limitation Act, 1963 | Notes

Limitation is required for good of masses and is required from the perspective of both, the assessor and the assessed. – Equity aids the vigilant and not the indolent.

Subject to provisions of sections 4 to 24 of the Limitation Act, every suit instituted, appeal preferred and application made after the ‘prescribed period’ shall be dismissed, although limitation has not been set up as a defence.

‘Period of limitation’ means the period of limitation prescribed for any suit, appeal or application by the schedule to the Act and ‘prescribed period’ means the period of limitation computed as per provisions of the Act.

Where the prescribed period for any suit, appeal or application expires on a day when the court in closed (including for part of a day), then the same may be preferred on the day when court re-opens.

HSN Codes of all Commodities – CLICK HERE 

Possible GST, IGST, CGST & IGST Rates of all Commodities – CLICK HERE 

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Time periods / events to be excluded for the computation of Period of limitation:

  • Period when a person is disabled (as he was minor or insane)
  • First day or day of judgment
  • Time for getting copy of judgment or decree or order or award (against which appeal or application has to be filed
  • Time spent (by mistake or misunderstanding) in proceeding bona fide in the Court without jurisdiction
  • Period of stay or injunction

Fraud nullifies everything : Period of limitation starts only after fraud or mistake is discovered by affected party. limitation starts from the date of knowledge of mistake of law [Vidarbha Veneer Industries Ltd. v. UOI – 1992 (58) ELT 435 (Bom HC)]

Period of limitation restarts from the date of acknowledgment of any right or liability obtained from the party against whom such property, right or liability is claimed

  • Provisions of Section 17 of Limitation Act, 1963 are applicable if wrongful reversal on insistence of Department and limitation period to apply from date of discovery of mistake – Raymond Ltd v CCE, Bhopal [2013 (289) E.L.T. 353 (Tri. – Del.)]

Limitation is a question of law and can be raised at any stage i.e. even at the time of appeal.

Law of Limitation is applicable only to courts and not to tribunals, unless empowered by the statute – Om Prakash v Ashwini Kumar [2010 (258) E.L.T. 5 (S.C.)], Nityanand M Joshi v. LIC [AIR 1970 SC 209], Sakura v. Tanaji [AIR 1985 SC 1279], Birla Cement Works v. G M Western Railway [(1995) 2 JT 59 (SC)].

Section 5: concept of ‘condonation of delay’ and ‘sufficient cause”

  • The words ‘sufficient cause’ in Section 5 of Limitation Act should receive a liberal construction so as to advance substantial justice, when the delay is not on account of any dilatory tactics, want of bona fides, deliberate inaction or negligence on the part of the appellant. – Perumon Bhagvathy Devaswom v. Bhargavi Amma [(2008) 8 SCC 321]
  • However, in absence of no satisfactory or reasonable explanation rendered for condonation of delay, condonation should not be granted – Collector of Central Excise, Madras v. A.MD. Bilal & Co., 1999 [(108) ELT 331 (SC)], Balwant singh v Jagjit Singh 2010 (262) E.L.T. 50 (S.C.)

Important to note that in case of CCE v Hongo India [2009 (236) E.L.T. 417 (S.C.)], the Apex Court held that the time limit prescribed in Section 35H of Central Excise Act, 1944 absolute and not extendable by court under Section 5 of Limitation Act, 1963. Similar decision in the case of Gopinath and Sharma v CST, Chennai [2012 (28) S.T.R. 132 (Tri. – Chennai)]

Important to note that in case of CCE v Hongo India [2009 (236) E.L.T. 417 (S.C.)], the Apex Court held that the time limit prescribed in Section 35H of Central Excise Act, 1944 absolute and not extendable by court under Section 5 of Limitation Act, 1963. Similar decision in the case of Gopinath and Sharma v CST, Chennai [2012 (28) S.T.R. 132 (Tri. – Chennai)]

General Clauses Act, 1897 | Notes

The purpose of the General Clauses Act is to place in one single statute different provisions as regards interpretations of words and legal principles which would otherwise have to be specified separately in many different acts and regulations.

Section 3 : Provides for definitions of words which are applicable in all Central Acts and Regulations, unless there is anything repugnant in the subject or context. Some of important definitions include:

  • Affidavit
  • Document
  • Financial year
  • Government / Central Government / State Government
  • immovable property
  • Imprisonment
  • Month
  • movable property
  • Person
  • Section
  • year

HSN Codes of all Commodities – CLICK HERE 

Possible GST, IGST, CGST & IGST Rates of all Commodities – CLICK HERE 

GST Calculator – CLICK HERE

 

Effective example of the application of General Clause Act:

The definition of the term “Person” since has not been defined in Finance Act, 1994 can be borrowed from General Clause Act.

Section 5 : Where any Central Act is not expressed to come into operation on particular day, then it shall come into operation on the day on which it receives the assent. Unless the contrary is expressed, a central act or regulation shall be construed as coming into operation immediately on the expiration of the day preceding its commencement.

Section 6: Where any of the provision enacted after the commencement of this act is cancelled, then unless a different intention appears, the repeal shall not –

  • Revive anything not in force or existing at the time at which the repeal takes effect
  • Affect the previous operation of any enactment so repealed or anything duly done or suffered thereunder
  • Affect any right, privilege, obligation or liability acquired, accrued or incurred under any enactment so repealed or
  • Affect any penalty, forfeiture or punishment incurred in respect of any offence committed against any enactment so repealed or
  • Affect any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment.

Some important Cases on Section 6:

  • Limitation being matter of procedure, law at time of filing appeal is applicable (matter related to condonation of delay by Tribunal) – Thirumalai Chemicals Ltd. v Union of India 2011 (268) E.L.T. 296 (S.C.)
  • Section 6 of General Clauses Act applies only in respect of a Central Act or Regulation and not to repeal of a Rule – Kolhapur Canesugar Works Ltd. v Union of India 2000 (119) E.L.T. 257 (S.C.)

Section 10: Computation of time: When the court or office is closed on a certain day or is the last day of the prescribed period, then the proceedings shall be considered as done or taken in due time if it is done or taken on the next day afterwards on which the court or office is open. This provision is applicable provided the act or proceeding is not covered under the Indian Limitation Act.

Construction:

  • Section 13: Words importing the masculine gender shall be taken to include females, and words in the singular shall include the plural, and vice versa.
  • Section 20: Where any notification, order, scheme, rule, form or bye-law is issued, then the expression used in the notification, order, scheme, rule, form or bye-law should be construed to have the respective meanings as in the act or regulation conferring the power.

Section 26: Provision as to offences –

Where an act or omission constitutes an offence under two or more enactments, then the offender shall be liable to be prosecuted and punished under either of enactments, but shall not be liable to be punished twice for the same offence

Section 27: Meaning of service by post –

The service shall be deemed to be effected by properly addressing pre-paying and posting by registered post, and unless the contrary is proved, to have been effected at the time at which the letter would be delivered in the ordinary course of post.

It is material to rebute the presumption relating to service of notice as provided under the above section in order to provide that no notice has been received (when notice not received by authorised person) – BPCL v CCE [2011 (273) E.L.T. 316 (Tri. – Del.)]

Companies Act, 1956 | Notes

  • An Act to consolidate and amend the law relating to companies and certain allied associations.
  • Relevant provisions of all Indirect Taxes apply to a company in the same manner as to other persons. However, certain specific provisions apply to a Company which can be understood from the decided cases.

Can Company be prosecuted?

Company, though it is not a natural person but ‘legal’ or ‘juristic’ person, and thus, cannot be ordered to suffer imprisonment, however, other consequences would ensue, e.g. payment of fine etc. In other words, it was held that ‘Corporate criminal liability’ is not unknown to law. –  Madhumilan Syntex Ltd. v Union of India 2007 (210) E.L.T. 484 (S.C.)

Recovery of government dues

Recovery of taxes, liability of which had arisen within twelve months, from a Company in liquidation, shall have priority over other dues. Ref : Section 530(1) (a) – Rajratha Naranbhai Mills [1991 (52) E.L.T. 335 (S.C.)]

Amalgamation – implications

For all purposes of indirect taxes including clubbing of clearances in case of an Amalgamation, shall be effective from the date of amalgamation whereon the Transferee takes over of all assets and liabilities. – Kwality Zipper Ltd. v  Commissioner of Central Excise, Kanpur [2002 (145) E.L.T. 296 (Tri. – Del.)]

Relevance of Financial Statements of a Company

Demand on the basis of balance sheet and profit and loss account prepared and adopted by a Company has been upheld by Hon’ble Tribunal. Appellant’s plea that mention of fabrication of plant and machinery was made in the balance sheet to present a rosy picture of the company to the share holders or the equipment did not reach the finished stage is not acceptable – Usha Rectifier Corpn. (I) LTD. V CCE, New Delhi [2001 (130) E.L.T. 485 (Tri. – Del.)].

Audit by CAG

In absence of any enabling provision empowering CAG to audit accounts of non-government company, plea that Sections 14(2) and 16 ibid enables it to do so was rejected by the Hon’ble Court.  The decision was based on the understanding that Companies Act, 1956, Income Tax Act, 1961, Central Excise Act, 1944 or Finance Act, 1994, do not have any provision for audit by CAG of company incorporated or existing under Companies Act, 1956, except a government company within meaning of Section 619 of Companies Act, 1956 –

matter referred to Division Bench-SKP Securities P. Ltd. [2013(29) STR 337(Cal)]

Rule 5A of Service Tax Rules, 2004:

Every assessee shall, on demand, make available to the officer authorised under sub-rule (1) or the audit party deputed by the Commissioner or the Comptroller and Auditor General of India, within a reasonable time not exceeding fifteen working days from the day when such demand is made, or such further period as may be allowed by such officer or the audit party, as the case may be

HSN Codes of all Commodities – CLICK HERE 

Possible GST, IGST, CGST & IGST Rates of all Commodities – CLICK HERE 

GST Calculator – CLICK HERE

Factories Act, 1948 | Notes

  • Central legislation meant to provide protection to the workers.
  • Extends to the whole of India.
  • Applicable to the premises, which comes under the definition “Factory”.
  • Factories: Premises where manufacturing process takes place and employs:
    • 10 and more workers – With Power
    • 20 and more workers – without power
  • Manufacturing process: It means any process for:
    • Making, altering, repairing, ornamenting, finishing, packing, oiling, washing, cleaning, breaking up, demolishing or otherwise treating or adapting any article or substance with a view to its use, sale, transport, delivery or disposal.
    • Pumping oil, water, sewage or any other substance.
    • Generating, transforming or transmitting power.
    • Composing types for printing, printing by letter press, lithography, photogravure or other similar process of book binding or.
    • Constructing, reconstructing, repairing, refitting, finishing or breaking up ships or vessels.
    • Preserving or storing any article in cold storage.
  • Power: It means electrical energy or any other form of energy which is mechanically transmitted and is not generated by human or animal agency.
  • Occupier And Manager are the responsible persons for implementation of the provisions envisaged in the Act.
  • Occupier means the person who has got the ultimate control over the affairs of the factory.
    • Proprietorship : Proprietor
    • Partnership : One of the partner
    • Company : One of the director
    • State or Central Government owned: Person so nominated by the respective government.
  • Manager means a person responsible to the occupier for the working of the factory. He has to be nominated by the occupier.

HSN Codes of all Commodities – CLICK HERE 

Possible GST, IGST, CGST & IGST Rates of all Commodities – CLICK HERE 

GST Calculator – CLICK HERE

Focus Area of the Act: 

  • Occupiers responsibility
  • Health and Safety of workers
  • Worker Welfare
  • Working hours and Leave provisions for adult workers
  • Special provisions for women and child labour
  • Special provisions for Dangerous / Hazardous operations
  • Worker participation
  • Compliance and records maintained under Factories Act can help an assessee to substantiate his position for the purpose of indirect taxes as well.
  • Concepts like production capacity, commencement of production etc are relevant for Indirect taxes especially in case of availment of exemption before a certain date.

Certain relevant case laws:

  • Registration under Factories Act, 1948 has nothing to do with assessee’s claim for exemption under Central Excise Act, 1944 – South Eastern Coalfields Ltd. v Commissioner, Cus. & C. Ex. [2006 (200) E.L.T. 357 (S.C.)]
  • Definition of ‘manufacturing process’ in Factories Act cannot be applied for the purpose of Central Excise Act, 1944, when specific definition available in the Central Excise Act, 1944 – Qazi Noorul H.H.H. Petrol pump v Dy. Director, E.S.I. Corporation [2009 (240) E.L.T. 481 (S.C.)]
  • Any expense undertaken by Company to comply with Statutory requirement of under Factories Act is eligible as input service – Commissioner v. GTC Industries – 2008 (12) S.T.R. 468 (Tri.-LB), Commissioner v. Ultratech Cement Ltd. – 2010 (20) S.T.R. 577 (Bom.).

Provisional Collection of Taxes Act, 1931 | Notes

Section 3 of the said act authorizes the Central Government to either impose or increase the duty structure with immediate effect provided the same is in public interest.

The provision shall be in force immediately on the expiry of the day on which the bill containing it is introduced.

Where a provision which has come into operation in an amended form before the expiry of 75th after the day on which the bill containing it was introduced, refunds is required to be made of all duties collected.

The refund under sec 5 shall not exceed the difference between the rate of such duty proposed and the rate of such duty in force when the bill was introduced. It is pertinent to take note of following cases:

  • Shifting of goods from one tariff item to another is not covered by Section 5. Exemption notification are not within its purview. – Pieco Electronics & Electricals Ltd v CCE, Pune [1996 (87) ELT 577(SC)]
  • However, in case of splitting of entry in same tariff leading to enhanced rate of duty was upheld from the date of introduction of bill – Mikroflo Filters Pvt. Ltd. v CCE [2004 (172) E.L.T. 259 (Tri. – Bang.)]

 

HSN Codes of all Commodities – CLICK HERE 

Possible GST, IGST, CGST & IGST Rates of all Commodities – CLICK HERE 

GST Calculator – CLICK HERE

The Special Economic Zones Act, 2005 | Notes

The SEZ Act 2005 and the rules of the SEZ Act came into force from February 10, 2006.

With an intention to give boost to economic growth, the government has enacted the special economic zone (SEZ) Act, 2005, whereby various fiscal incentives have been introduced for entrepreneurs and developers.

Rule 3 of the said Act states that any person may make a proposal to the concerned State Government for the purpose of setting up the Special Economic Zone.

Considering the need to enhance foreign investment and promote exports from the country, the Government of India has introduced following types of special incentives to SEZ units:

Company’s Act

  • Enhanced limit of 2.4 crores p.a. allowed for managerial remuneration.
  • Agreement to opening of Regional office of ROC in SEZ.
  • Exemption from requirement of domicile in India for 12 months prior to appointment as Director.

Customs and Excise

  • SEZ Units are free to import from the domestic sources without paying any duty for implementation of their project in the zone.
  • Sales to DTA by SEZ units regarded as import and is subject to normal import duties.
  • SEZ Units free from the periodic examination by Customs of export and import cargo.

Service tax applicability

  • Taxable services received by SEZ units (including unit under construction) and SEZ developers for consumption within SEZ are exempt from service tax vide notification No 40/2012 ST dated 20th June, 2012.
  • Exemption by way of refund of service tax paid on the specified services received by a unit located in a SEZ or the developer of SEZ.
  • When the specified received services are wholly consumed within SEZ, the person liable to pay service tax has the option of not paying the service tax ab initio.
  • In other cases, refund shall be calculated as follows:refund amount calculate formula
  • Claim for refund shall be filed in Form A-2.

 

HSN Codes of all Commodities – CLICK HERE 

Possible GST, IGST, CGST & IGST Rates of all Commodities – CLICK HERE 

GST Calculator – CLICK HERE

Allied Laws in India | Notes

Allied Laws

  • The Special Economic Zones Act, 2005;
  • Provisional Collection of Taxes Act 1931;
  • Factories Act 1948;
  • Companies Act 1956;
  • General Clauses Act 1897;
  • Limitation Act 1963;
  • Information Technology Act, 2000
  • Indian Evidence Act 1872;
  • Sale of Goods Act 1930;
  • Indian Penal Code;
  • Legal Metrology Act 2009

The Special Economic Zones Act, 2005

The SEZ Act 2005 and the rules of the SEZ Act came into force from February 10, 2006.

With an intention to give boost to economic growth, the government has enacted the special economic zone (SEZ) Act, 2005, whereby various fiscal incentives have been introduced for entrepreneurs and developers.

Rule 3 of the said Act states that any person may make a proposal to the concerned State Government for the purpose of setting up the Special Economic Zone.

Considering the need to enhance foreign investment and promote exports from the country, the Government of India has introduced following types of special incentives to SEZ units:

Company’s Act

  • Enhanced limit of 2.4 crores p.a. allowed for managerial remuneration.
  • Agreement to opening of Regional office of ROC in SEZ.
  • Exemption from requirement of domicile in India for 12 months prior to appointment as Director.

Customs and Excise

  • SEZ Units are free to import from the domestic sources without paying any duty for implementation of their project in the zone.
  • Sales to DTA by SEZ units regarded as import and is subject to normal import duties.
  • SEZ Units free from the periodic examination by Customs of export and import cargo.

Service tax applicability

  • Taxable services received by SEZ units (including unit under construction) and SEZ developers for consumption within SEZ are exempt from service tax vide notification No 40/2012 ST dated 20th June, 2012.
  • Exemption by way of refund of service tax paid on the specified services received by a unit located in a SEZ or the developer of SEZ.
  • When the specified received services are wholly consumed within SEZ, the person liable to pay service tax has the option of not paying the service tax ab initio.
  • In other cases, refund shall be calculated as follows:refund amount calculate formula
  • Claim for refund shall be filed in Form A-2.

 

HSN Codes of all Commodities – CLICK HERE 

Possible GST, IGST, CGST & IGST Rates of all Commodities – CLICK HERE 

GST Calculator – CLICK HERE

 

Provisional Collection of Taxes Act, 1931

  • Section 3 of the said act authorizes the Central Government to either impose or increase the duty structure with immediate effect provided the same is in public interest.
  • The provision shall be in force immediately on the expiry of the day on which the bill containing it is introduced.
  • Where a provision which has come into operation in an amended form before the expiry of 75th after the day on which the bill containing it was introduced, refunds is required to be made of all duties collected.
  • The refund under sec 5 shall not exceed the difference between the rate of such duty proposed and the rate of such duty in force when the bill was introduced. It is pertinent to take note of following cases:
    • Shifting of goods from one tariff item to another is not covered by Section 5. Exemption notification are not within its purview. – Pieco Electronics & Electricals Ltd v CCE, Pune [1996 (87) ELT 577(SC)]
    • However, in case of splitting of entry in same tariff leading to enhanced rate of duty was upheld from the date of introduction of bill – Mikroflo Filters Pvt. Ltd. v CCE [2004 (172) E.L.T. 259 (Tri. – Bang.)]

Factories Act, 1948

  • Central legislation meant to provide protection to the workers.
  • Extends to the whole of India.
  • Applicable to the premises, which comes under the definition “Factory”.
  • Factories: Premises where manufacturing process takes place and employs:
    • 10 and more workers – With Power
    • 20 and more workers – without power
  • Manufacturing process: It means any process for:
    • Making, altering, repairing, ornamenting, finishing, packing, oiling, washing, cleaning, breaking up, demolishing or otherwise treating or adapting any article or substance with a view to its use, sale, transport, delivery or disposal.
    • Pumping oil, water, sewage or any other substance.
    • Generating, transforming or transmitting power.
    • Composing types for printing, printing by letter press, lithography, photogravure or other similar process of book binding or.
    • Constructing, reconstructing, repairing, refitting, finishing or breaking up ships or vessels.
    • Preserving or storing any article in cold storage.
  • Power: It means electrical energy or any other form of energy which is mechanically transmitted and is not generated by human or animal agency.
  • Occupier And Manager are the responsible persons for implementation of the provisions envisaged in the Act.
  • Occupier means the person who has got the ultimate control over the affairs of the factory.
    • Proprietorship : Proprietor
    • Partnership : One of the partner
    • Company : One of the director
    • State or Central Government owned: Person so nominated by the respective government.
  • Manager means a person responsible to the occupier for the working of the factory. He has to be nominated by the occupier.

Focus Area of the Act: 

  • Occupiers responsibility
  • Health and Safety of workers
  • Worker Welfare
  • Working hours and Leave provisions for adult workers
  • Special provisions for women and child labour
  • Special provisions for Dangerous / Hazardous operations
  • Worker participation
  • Compliance and records maintained under Factories Act can help an assessee to substantiate his position for the purpose of indirect taxes as well.
  • Concepts like production capacity, commencement of production etc are relevant for Indirect taxes especially in case of availment of exemption before a certain date.

Certain relevant case laws:

  • Registration under Factories Act, 1948 has nothing to do with assessee’s claim for exemption under Central Excise Act, 1944 – South Eastern Coalfields Ltd. v Commissioner, Cus. & C. Ex. [2006 (200) E.L.T. 357 (S.C.)]
  • Definition of ‘manufacturing process’ in Factories Act cannot be applied for the purpose of Central Excise Act, 1944, when specific definition available in the Central Excise Act, 1944 – Qazi Noorul H.H.H. Petrol pump v Dy. Director, E.S.I. Corporation [2009 (240) E.L.T. 481 (S.C.)]
  • Any expense undertaken by Company to comply with Statutory requirement of under Factories Act is eligible as input service – Commissioner v. GTC Industries – 2008 (12) S.T.R. 468 (Tri.-LB), Commissioner v. Ultratech Cement Ltd. – 2010 (20) S.T.R. 577 (Bom.).

Companies Act, 1956

  • An Act to consolidate and amend the law relating to companies and certain allied associations.
  • Relevant provisions of all Indirect Taxes apply to a company in the same manner as to other persons. However, certain specific provisions apply to a Company which can be understood from the decided cases.

Can Company be prosecuted?

Company, though it is not a natural person but ‘legal’ or ‘juristic’ person, and thus, cannot be ordered to suffer imprisonment, however, other consequences would ensue, e.g. payment of fine etc. In other words, it was held that ‘Corporate criminal liability’ is not unknown to law. –  Madhumilan Syntex Ltd. v Union of India 2007 (210) E.L.T. 484 (S.C.)

Recovery of government dues

Recovery of taxes, liability of which had arisen within twelve months, from a Company in liquidation, shall have priority over other dues. Ref : Section 530(1) (a) – Rajratha Naranbhai Mills [1991 (52) E.L.T. 335 (S.C.)]

Amalgamation – implications

For all purposes of indirect taxes including clubbing of clearances in case of an Amalgamation, shall be effective from the date of amalgamation whereon the Transferee takes over of all assets and liabilities. – Kwality Zipper Ltd. v  Commissioner of Central Excise, Kanpur [2002 (145) E.L.T. 296 (Tri. – Del.)]

Relevance of Financial Statements of a Company

Demand on the basis of balance sheet and profit and loss account prepared and adopted by a Company has been upheld by Hon’ble Tribunal. Appellant’s plea that mention of fabrication of plant and machinery was made in the balance sheet to present a rosy picture of the company to the share holders or the equipment did not reach the finished stage is not acceptable – Usha Rectifier Corpn. (I) LTD. V CCE, New Delhi [2001 (130) E.L.T. 485 (Tri. – Del.)].

Audit by CAG

In absence of any enabling provision empowering CAG to audit accounts of non-government company, plea that Sections 14(2) and 16 ibid enables it to do so was rejected by the Hon’ble Court.  The decision was based on the understanding that Companies Act, 1956, Income Tax Act, 1961, Central Excise Act, 1944 or Finance Act, 1994, do not have any provision for audit by CAG of company incorporated or existing under Companies Act, 1956, except a government company within meaning of Section 619 of Companies Act, 1956 –

matter referred to Division Bench-SKP Securities P. Ltd. [2013(29) STR 337(Cal)]

Rule 5A of Service Tax Rules, 2004:

Every assessee shall, on demand, make available to the officer authorised under sub-rule (1) or the audit party deputed by the Commissioner or the Comptroller and Auditor General of India, within a reasonable time not exceeding fifteen working days from the day when such demand is made, or such further period as may be allowed by such officer or the audit party, as the case may be

General Clauses Act, 1897

The purpose of the General Clauses Act is to place in one single statute different provisions as regards interpretations of words and legal principles which would otherwise have to be specified separately in many different acts and regulations.

Section 3 : Provides for definitions of words which are applicable in all Central Acts and Regulations, unless there is anything repugnant in the subject or context. Some of important definitions include:

  • Affidavit
  • Document
  • Financial year
  • Government / Central Government / State Government
  • immovable property
  • Imprisonment
  • Month
  • movable property
  • Person
  • Section
  • year

Effective example of the application of General Clause Act:

The definition of the term “Person” since has not been defined in Finance Act, 1994 can be borrowed from General Clause Act.

Section 5 : Where any Central Act is not expressed to come into operation on particular day, then it shall come into operation on the day on which it receives the assent. Unless the contrary is expressed, a central act or regulation shall be construed as coming into operation immediately on the expiration of the day preceding its commencement.

Section 6: Where any of the provision enacted after the commencement of this act is cancelled, then unless a different intention appears, the repeal shall not –

  • Revive anything not in force or existing at the time at which the repeal takes effect
  • Affect the previous operation of any enactment so repealed or anything duly done or suffered thereunder
  • Affect any right, privilege, obligation or liability acquired, accrued or incurred under any enactment so repealed or
  • Affect any penalty, forfeiture or punishment incurred in respect of any offence committed against any enactment so repealed or
  • Affect any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment.

Some important Cases on Section 6:

  • Limitation being matter of procedure, law at time of filing appeal is applicable (matter related to condonation of delay by Tribunal) – Thirumalai Chemicals Ltd. v Union of India 2011 (268) E.L.T. 296 (S.C.)
  • Section 6 of General Clauses Act applies only in respect of a Central Act or Regulation and not to repeal of a Rule – Kolhapur Canesugar Works Ltd. v Union of India 2000 (119) E.L.T. 257 (S.C.)

Section 10: Computation of time: When the court or office is closed on a certain day or is the last day of the prescribed period, then the proceedings shall be considered as done or taken in due time if it is done or taken on the next day afterwards on which the court or office is open. This provision is applicable provided the act or proceeding is not covered under the Indian Limitation Act.

Construction:

  • Section 13: Words importing the masculine gender shall be taken to include females, and words in the singular shall include the plural, and vice versa.
  • Section 20: Where any notification, order, scheme, rule, form or bye-law is issued, then the expression used in the notification, order, scheme, rule, form or bye-law should be construed to have the respective meanings as in the act or regulation conferring the power.

Section 26: Provision as to offences –

Where an act or omission constitutes an offence under two or more enactments, then the offender shall be liable to be prosecuted and punished under either of enactments, but shall not be liable to be punished twice for the same offence

Section 27: Meaning of service by post –

The service shall be deemed to be effected by properly addressing pre-paying and posting by registered post, and unless the contrary is proved, to have been effected at the time at which the letter would be delivered in the ordinary course of post.

It is material to rebute the presumption relating to service of notice as provided under the above section in order to provide that no notice has been received (when notice not received by authorised person) – BPCL v CCE [2011 (273) E.L.T. 316 (Tri. – Del.)]

Limitation Act, 1963

Limitation is required for good of masses and is required from the perspective of both, the assessor and the assessed. – Equity aids the vigilant and not the indolent.

Subject to provisions of sections 4 to 24 of the Limitation Act, every suit instituted, appeal preferred and application made after the ‘prescribed period’ shall be dismissed, although limitation has not been set up as a defence.

‘Period of limitation’ means the period of limitation prescribed for any suit, appeal or application by the schedule to the Act and ‘prescribed period’ means the period of limitation computed as per provisions of the Act.

Where the prescribed period for any suit, appeal or application expires on a day when the court in closed (including for part of a day), then the same may be preferred on the day when court re-opens.

Time periods / events to be excluded for the computation of Period of limitation:

  • Period when a person is disabled (as he was minor or insane)
  • First day or day of judgment
  • Time for getting copy of judgment or decree or order or award (against which appeal or application has to be filed
  • Time spent (by mistake or misunderstanding) in proceeding bona fide in the Court without jurisdiction
  • Period of stay or injunction

Fraud nullifies everything : Period of limitation starts only after fraud or mistake is discovered by affected party. limitation starts from the date of knowledge of mistake of law [Vidarbha Veneer Industries Ltd. v. UOI – 1992 (58) ELT 435 (Bom HC)]

Period of limitation restarts from the date of acknowledgment of any right or liability obtained from the party against whom such property, right or liability is claimed

  • Provisions of Section 17 of Limitation Act, 1963 are applicable if wrongful reversal on insistence of Department and limitation period to apply from date of discovery of mistake – Raymond Ltd v CCE, Bhopal [2013 (289) E.L.T. 353 (Tri. – Del.)]

Limitation is a question of law and can be raised at any stage i.e. even at the time of appeal.

Law of Limitation is applicable only to courts and not to tribunals, unless empowered by the statute – Om Prakash v Ashwini Kumar [2010 (258) E.L.T. 5 (S.C.)], Nityanand M Joshi v. LIC [AIR 1970 SC 209], Sakura v. Tanaji [AIR 1985 SC 1279], Birla Cement Works v. G M Western Railway [(1995) 2 JT 59 (SC)].

Section 5: concept of ‘condonation of delay’ and ‘sufficient cause”

  • The words ‘sufficient cause’ in Section 5 of Limitation Act should receive a liberal construction so as to advance substantial justice, when the delay is not on account of any dilatory tactics, want of bona fides, deliberate inaction or negligence on the part of the appellant. – Perumon Bhagvathy Devaswom v. Bhargavi Amma [(2008) 8 SCC 321]
  • However, in absence of no satisfactory or reasonable explanation rendered for condonation of delay, condonation should not be granted – Collector of Central Excise, Madras v. A.MD. Bilal & Co., 1999 [(108) ELT 331 (SC)], Balwant singh v Jagjit Singh 2010 (262) E.L.T. 50 (S.C.)

Important to note that in case of CCE v Hongo India [2009 (236) E.L.T. 417 (S.C.)], the Apex Court held that the time limit prescribed in Section 35H of Central Excise Act, 1944 absolute and not extendable by court under Section 5 of Limitation Act, 1963. Similar decision in the case of Gopinath and Sharma v CST, Chennai [2012 (28) S.T.R. 132 (Tri. – Chennai)]

Important to note that in case of CCE v Hongo India [2009 (236) E.L.T. 417 (S.C.)], the Apex Court held that the time limit prescribed in Section 35H of Central Excise Act, 1944 absolute and not extendable by court under Section 5 of Limitation Act, 1963. Similar decision in the case of Gopinath and Sharma v CST, Chennai [2012 (28) S.T.R. 132 (Tri. – Chennai)]

Information Technology Act, 2000

Use of computers to create, transmit and store information is becoming an indispensible part of today’s business.

Legal provisions in most of the statutes in India require paper records and signature of the relevant person.

However, to overcome the hurdle of paper documentation and to match the fast pace of technology, the IT Act had been enacted.

The purpose of Act is

  • to provide legal recognition for transactions carried out by means of electronic data interchange
  • to facilitate electronic filing of documents with the Government agencies

The Act does not apply to

  • a negotiable instrument except cheque
  • a power-of-attorney
  • a trust deed
  • a will
  • any contract for the sale or conveyance of immovable property
  • any such class of documents or transactions as may be notified by the Central Government

The Act provides (relevant provisions):

  • Legal recognition to Electronic Transaction / Record
  • Legal recognition of digital signatures
  • Various types of computer crimes defined and stringent penalties provided under the Act
  • Electronic Governance

Unless there is a specific provision in a law to provide information in paper form, information provided in electronic form shall suffice the requirement

However, Section 8 further prescribes that no department or ministry can be compelled to accept application, return or any communication in electronic form.

If the Compact Disc (CD), Hard Disc, Pen-drive, Floppy etc., were not filled with any information, then, they could have been treated as goods. It would be necessary to know the meaning of electronic record and data etc., by importing the definitions of the same as stated in Information Technology Act. The word “electronic record” is defined under Section 2(1)(t) of the Information Technology Act, 2000, as “electronic record” means data, record or data generated, image or sound stored, received or sent in an electronic form or micro film or computer generated micro fiche.”

The aforementioned provisions make it clear that the information or data stored are part of the electronic record. Therefore, the material which is stored in such Hard Disc, Pen-drives etc., can be termed as electronic files or electronic documents. Such electronic document or records are admissible as per Section 65B(1) of the Evidence Act. The aforesaid provision makes it clear that information contained in the electronic record printed on a paper, stored, recorded or copied in optical or magnetic media produced by a computer shall be deemed to be also a document. Thus, the contention of the petitioner that the Floppies, Pen-drives, CDs etc., seized in this case should be treated as mere goods cannot be accepted. But, they are electronic records/documents. ‘Goods’ under Section 2(22)(e) of Customs Act, 1962 not include ‘documents’ or ‘files’ for purpose of Section 105 read with Section 110. – Stovekraft Pvt. Ltd. v Jt. Dir. [2007 (214) E.L.T. 179 (Kar.)]

Indian Evidence Act, 1872

The object of every judicial investigation is the enforcement of a right or liability that depends on certain facts. The law of evidence can be called the system of rules whereby the questions of fact in a particular case can be ascertained.

Evidence: it means and includes

  • All statements which the court permits or requires to be made before it by witnesses, in relation to matters of fact under inquiry. Such statements are called oral evidence
  • All documents including electronic records produced for the inspection of the court. Such statements are called documentary evidence

Types of Evidence : Direct, Circumstantial, Hearsay, Documentary, Oral, Scientific, Real, Digital

Provisions relating to Admissions

Sec 17 of the act defines the term admission as any statement, which can either oral, documentary or recorded in electronic media.

Further sec 18 provides that the statements made by a party to the proceeding or by an agent of such party are also considered as admissions provided the court regards them authorized (expressly or impliedly).

Confession made by the person in the custody of police officer would be relevant only when they are made in the presence of a magistrate.

Section 34 provides that the entries in the books of account including those maintained in electronic form are relevant. But these statements shall not alone be sufficient evidence to charge any person with liability.

In terms of sec 65B, any information contained in an electronic record which is printed on paper, stored, recorded or copied in optical or magnetic media produced by a computer shall be deemed to be also a document.

Opinion of third party: The court under sec 45 would consider the views of the expert when the court is expected to form an opinion upon a point on foreign law or of science or art or as to identity of handwriting. Further facts not otherwise relevant would be relevant if they support or are inconsistent with the opinion of experts, when such opinions are relevant.

Admissibility of document or contents thereof may not necessarily lead to any inference unless contents thereof have some probative value – H. Siddiqui v A. Ramalingam [2011 (268) ELT 436 (SC)]

Right of cross examination – Statements and report etcare inadmissible in evidence when the appellant’s request for an opportunity to cross examine the witness are unfairly declined, thereby violating the principles of natural justice. The test is whether failure to permit the party to cross examine has resulted in any prejudice so as to call for reversal of the orders and a de novo enquiry into the matter. –

  • Surjeet Singh Chhabra v. Union of India and Ors. (1997) 1 SCC 508 = 1997 (89) E.L.T. 646 (S.C.)
  • New India Assurance Company Ltd. v. Nusli Neville Wadia and Anr. – (2008) 3 SCC 279, S.C.
  • Girotra v. United – 1995 Supp. (3) SCC 212,

Sale of Goods Act, 1930

This law is enacted to define and amend the law relating to sale of goods.

In terms of sec 4, a contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price. There must be a contract between one person to another and the contract may either be absolute or conditional.

When property is transferred from seller to buyer at the time of formation of contract, an absolute sale occurs.

When property in the goods is to be transferred at some future date and not at the time of contract, the contract of sale is termed as an agreement to sell.

Goods

  • Only “goods” attract Customs or Excise or Sales tax depending on the nature of event ie. ‘Imports’ or ‘Exports’, ‘Manufacture’, ‘Sale’ etc.
  • According to Sale of Goods Act, Sec. 2(7) –

    “Goods” means every kind of moveable property other than actionable claims & money; and includes stocks & shares, growing crops, grass & things attached to or forming part of the land which are agreed to be severed before sale or under the contract of Sale.

  • It may be noticed that while ‘currency and negotiable instruments’ are ‘goods’ for Customs duty purposes, they are not goods for the purposes of Excise levy or Sales tax.
  • Reliance on Sale of goods Act has been made by indirect tax statutes to understand when is a sale transaction effected, what all shall be included in the Sale price, warranties and conditions of sale, place of delivery etc.

Some relevant Case laws:

Increase in price because of increase in duty to be borne by purchaser when such enhancement is made prior to date of delivery of goods – Ravinder Raj v Competent Motors [2011 (266) ELT 157 (SC)]

The fact that Sales tax, Local and Central has been paid at the factory gate and crucial documents of transport, showing the buyers as consignee which in terms of Section 39 of Sale of Goods Act, 1930 would be sufficient to construe sale on delivery to the buyer, on handing over the goods on the transport vehicle. – Welspun Gujarat Stahl Rohren Ltd v CCE [2006 (194) E.L.T. 430 (Tri. – Mumbai)]

Identification of goods by buyer’s representative would construe possession – Commissioner v Ravi Cables [2003 (152) ELT A266 (SC)]

Indian Penal Code

The provisions of this act are applicable to the whole of India except the state of Jammu & Kashmir.

Every person shall be liable punishment under this Code and not otherwise for every act of omission contrary to the provisions thereof, of which, he shall be guilty within India.

Relevant provisions of IPC:

  • Sec 175 provides for a simple imprisonment for a term which may extend upto one month or with fine which may extend upto INR 500 when any person intentionally fails to produce or deliver any document to the public servant which he is legally bound to.
  • Sec 177 provides for simple imprisonment of around six months and/ or with a fine of INR 1000 when any person furnishes false or incorrect information.
  • Sec 178 provides for simple imprisonment of around six months and/or with a fine of INR 1000 when any person refuses to answer any question demanded by the public servant.
  • Sec 186 provides for simple imprisonment of around three months and/or with a fine of INR 500 when any person voluntarily obstructs any public servant in discharge of his public functions.
  • Sec 193 provides for an imprisonment extendable upto seven years with a fine when any person intentionally provides false evidence at any stage of judicial proceeding or fabricates evidence for the purpose of being used in proceedings.
  • Sec 204 provides for a imprisonment which may extend upto two years and/or fine when any person secrets or destroys any document or electronic record which he may lawfully be compelled to produce as evidence in a court of justice or in any proceedings.
  • Sec 228 provides for a imprisonment extendable upto six months and/or fine extendable upto INR 1000 when any person intentionally insults or causes any interruption to any public servant when such public servant is sitting in any stage of a judicial proceedings.
  • Section 192 of the India Penal Code for fabrication of false evidence, even when made in support of genuine case, is still attracted – Phiroze dinshaw lam v UOI [1996 (84) E.L.T. 10 (S.C.)]

Legal Metrology Act, 2009

This legislation was introduced to establish and enforce standards of weights and measures, regulation of trade and commerce in weights, measures and other goods which are sold or distributed by weight, measure or number.

In terms of sec 4, every unit of weight or measure shall be in accordance with the metric system based on the international system of units.

Under sec 10, any transaction, dealing or contract in respect of any goods, class of goods or undertakings shall be made by such weight, measure or number.

No person in relation to any goods or service –

  • Quote or make announcement of, whether by word of mouth or otherwise any price or charge or
  • Issue or exhibit any price list, invoice, cash memo or other document or
  • Prepare or publish any advertisement, poster or other document or
  • Indicate the net quantity of pre-packaged commodity or
  • Express in relation to any transaction or protection, any quantity or dimension, Otherwise than in accordance with the standard unit of weight, measure or numeration. The said provisions are not applicable for goods or things meant for export.

Provisions of declarations on pre-packaged commodities are contained in new Act also. Hence, the provisions of MRP valuation for excise purposes will continue under new Act also.