GST Evaders Can Be Arrested: SC Upholds Telangana HC Judgment

Supreme Court has dismissed a plea challenging Telangana High Court judgment that held that a person can be arrested by the competent authority in cases of Goods and Service Tax (GST) evasion. 

The vacation bench of Chief Justice of India Ranjan Gogoi and Justice Aniruddha Bose, dismissing the Special Leave Petition, said that it is not inclined to interfere. 

The Division bench of the Telangana High Court, in April, comprising of V. Ramasubramanian and Justice P. Keshava Rao had dismissed a batch of writ petitions seeking protection from arrest for alleged tax evasion. The challenge was against the summons issued by Superintendent (Anti-Evasion) of the Hyderabad GST Commissionerate under the Central Goods and Services Tax Act, 2017. The bench observed that sub Section (1) of Section 69 of the Act empowers the Commissioner to order the arrest of a person, when such a person is believed to have committed a cognizable and non bailable offence. 

It had said: "If reasons to believe are recorded in the files, we do not think it is necessary to record those reasons in the authorization for arrest under Section 69(1) of the CGST Act. Since Section 69(1) of the CGST Act, 2017 specifically uses the words “reasons to believe”, in contrast to the words “reasons to be recorded” appearing in Section 41A(3) of Cr.P.C., we think that it is enough if the reasons are found in the file, though not disclosed in the order authorizing the arrest." 

The state had submitted before the High Court that the petitioners before it were allegedly involved in incorporating several partnership firms and had claimed input tax credit on the basis of certain invoices, without there being any actual physical receipt of goods. It had alleged that the fraudulent input tax credit claimed by them was to the tune of Rs 224.05 crore. 

The High court had also rejected the contention that here cannot be an arrest even before adjudication or assessment. 

It had said: "To say that a prosecution can be launched only after the completion of the assessment, goes contrary to Section 132 of the CGST Act, 2017. The list of offences included in sub Section (1) of Section 132 of CGST Act, 2017 have no co relation to assessment. Issue of invoices or bills without supply of goods and the availing of ITC by using such invoices or bills, are made offences under clauses (b) and (c) of sub Section (1) of Section 132 of the CGST Act. The prosecutions for these offences do not depend upon the completion of assessment." 

The bench also did not favour the argument raised by the petitioners that since all the offences under the Act are compoundable under sub Section (1) of Section 138 of the CGST Act, 2017, subject to the restrictions contained in the proviso thereto and that therefore, there is no necessity to arrest a person for the alleged commission of an offence which is compoundable. The court also had observed that the furthering of enquiry/ investigation is not the only object of arrest.

https://www.livelaw.in/top-stories/gst-evaders-can-be-arrested-14530

Whether Section 143-A Of The Negotiable Instruments Act, 1881 Has Retrospective Application Or Not ?

Preface: 

The party who commits default in payment can be sued by a payee in the civil court by filing suit for recovery of money. However, the special provision of Section 138 under the Negotiable Instruments Act, 1881 (hereinafter referred to as the NIA) was inserted with effect from 01.04.1989 vide the Banking Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988. The object of the NIA is to enhance the acceptability of the cheques in settlement of liabilities by making the drawer liable for penalties in case of bouncing of cheques due to insufficiency of funds in the accounts.

That by virtue of the Amendment Act No. 20 of 2018 in the NIA, the legislature introduced Section 143-A and Section 148providing for "Power to direct interim compensation" and "Power of Appellate Court to order payment pending appeal against conviction" respectively.

Key Aspects- Section 143-A of the NIA:

i.                 Section 143-A of the NIA deals with order of payment of interim compensation; the upper limit is maximum 20% of the cheque amount.

ii.                The order as regards payment of interim compensation is made directly in favour of the complainant.

iii.               If the order of payment is made, the accused is to pay interim compensation within a period of 60 days from the date of the order and for special reason, further 30 days can be given, hence, within a total of 90 days from the date of the order.

iv.               Stage at which application under Section 143-A of the NIA can be filed: (a) In summary trials or summons case, where the accused pleads not guilty to the accusation made in the complaint, and, (b)In any other case,upon framing of charge.

v.                Sub-section (3) of Section 143-A of the NIA states that the interim compensation shall be paid within 60 days from the date of the order passed under Sub-section (1) of Section 143-A of the NIA. However, Sub-section (1) of Section 143-A of the NIA states that the court may order the drawer to pay interim compensation. So, it leaves discretion with the trial court to pass such order of interim compensation and if such interim compensation is directed to be paid, then the ceiling limit under Sub-section (2) of Section 143-A of the NIA is 20% of the cheque amount.

vi.               Sub-section (4) of Section 143-A of the NIA states about recovery of money with interest from the complainant in case of acquittal of the accused within a period of 60 days or maximum 90 days from the date of order of acquittal of the accused.

vii.             Sub-section (5) of Section 143-A of the NIA states that interim compensation payable by the accused can be recovered by the complainant as if it were a fine under Section 421 of the Criminal Procedure Code, 1973.

Key Aspects- Section 148 of the NIA:

i.                 Section 148 of the NIA states that in an appeal by the drawer/accused against conviction under Section 138 of the NIA, the Appellate Court may order the appellant/drawer to deposit such sum which shall be a minimum of 20% of the fine or compensation awarded by the trial court.

ii.                 The Appellate Court may direct the release of the amount which is deposited by the appellant/drawerin the Appellate Court to the complainant/respondent, at any time during the pendency of the appeal.

iii.               If the order of payment is made, the appellant/drawer is to deposit such sum (minimum of 20% of the fine or compensation awarded by the trial court) within a period of 60 days from the date of the order and for special reason, further 30 days can be given, hence, within 90 days from the date of the order.

iv.               The order directing the deposit of money in the Appellate Court can be passed at any time during the pendency of the appeal.

v.                As per the proviso to Section 148 of the NIA, if the appellant/drawer is acquitted, the Appellate Court shall direct the complainant/respondent to repay to the appellant/drawer the amount so released, with interest (at the bank rate as published by the Reserve Bank of India, prevalent at the beginning of the relevant financial year) within 60 days from the date of the order, or within such further period not exceeding 30 days as may be directed by the Appellate Court on sufficient cause being shown by the complainant/respondent.

Comparing Section 143-A and Section 148 of the NIA:

In the matter of: Ajay Vinodchandra Shah V/s State of Maharashtra, Criminal Writ Petition No. 258 of 2019, High Court of Bombay, Date of Decision: 14.03.2019, Coram: MridulaBhatkar, J., in Para 13 and Para 14 it was held as follows:

"13. On comparison of the language used in sections 143A and 148, one finds a difference. U/s 143A, the accused is yet to face a trial. Under sub-section (2) thereof, the interim compensation under sub-section (1) shall not exceed twenty percent of the amount of cheque. However, under section 148, it is stated that the Court may order the appellant to deposit such sum which shall be a minimum of twenty percent of the fine. These clauses in these two sections reflect the intention of the Legislature that a person at the stage of trial is always considered innocent till he is found guilty and, therefore, the ceiling of 20% compensation is mentioned. However, in the appeal, when the first Court holds the accused guilty and thus, once he is convicted, then, the appellate Court is given the power to pass order directing the accused to deposit the amount which shall be a minimum of 20% of the fine or compensation awarded by the trial Court. It is further stated in section 148 that the amount payable under this sub-section (sic) shall be in addition to any interim compensation paid by the appellant under section 143A. 14. The Legislature has also taken care of the accused if at all he is not held guilty and acquitted either at the trial or in the appeal. The sub-section (4) of section 143A and the proviso to section 148 state about the repayment of the amount by the complainant to the accused. In the event of acquittal, the said amount also to be paid within 60 days from the date of the order…"

Section 143-A of the NIA operates retrospectively?

In the matter of: Punjab Tin Supply Co. V/s Central Government, (1984) 1 SCC 206, it was observed that, all laws which affect substantive rights generally operate prospectively and there is a presumption against their retrospectivity if they affect vested rights and obligations unless the legislative intent is clear and compulsive; such retrospective effect may be given where there are express words giving retrospective effect or where the language used necessarily implies that such retrospective operation is intended. Hence, the question whether a statutory provision has retrospective effect or not depends primarily on the language in which it is couched. If the language is clear and unambiguous, effect will have to be given to the provision in question in accordance with its tenor; however, if the language is not clear then the court has to decide whether in the light of the surrounding circumstances retrospective effect should be given to the statutory provision or not.

According to Section 5 of the General Clauses Act, 1897, any Act of Parliament comes into operation on the day on which it receives the assent of the President. Unless it is expressed to become operational on any other date and unless a contrary intention is expressed, the Act of Parliament comes into effect qua all cases on the day of its commencement.

View Taken by the Hon'ble High Court of Bombay: In the matter of Ajay Vinodchandra Shah (Supra), the Hon'ble High Court of Bombay observed that (Para 12 of the report):

"… It is incorrect to accept that it is to be made not (sic)applicable to the cases which are filed only after 01.09.2018 and not applicable to the cases pending earlier in the trial as well as appellate Court. Huge number of cases under section 138 of the Act are pending in the Courts. In these cases, if the plea is recorded or charge is not framed, then the trial Court can invoke its powers under Section 143-A after 1.9.2018 and can impose interim compensation which shall not exceed 20% of the amount of cheque. Same is the case in appeals. If the appeals are pending, the Court can pass interim orders under section 148…"

Thus, according to the view taken by the Hon'ble High Court of Bombay, Section 143-A and Section 148 of the NIA do not operate prospectively.

View Taken by the Hon'ble High Court of Punjab & Haryana:

In the matter of: Ginni Garments & Anr V/s Sethi Garments, CRR No. 9872-2018 (O&M), High Court of Punjab & Haryana, Date of Decision: 04.04.2019, Coram: Rajbir Sehrawat, J., it was held that:

i.                 Whether Section 143-A and Section 148 of the NIA have prospective or retrospective operation depends upon the determination whether these provisions are substantive in nature or are merely procedural. If these provisions are substantive in nature then these provisions cannot be applied retrospectively to the pending cases, however, if these provisions are procedural in nature then they have to be applied to all the cases, including the ones pending before the court on the date, the amendment was enforced.

ii.                A bare perusal of Section 143-A of the NIA shows that Section 143-A of the NIA has given power to the trial court to order the drawer of the cheque to pay interim compensation (maximum of 20% of the cheque amount) to the complainant, where the accused has not pleaded guilty of the accusation made against him. Moreover, as per Section 143-A of the NIA if interim compensation is not paid within 60 days (or maximum of 90 days) from the order of the court granting interim compensation, then the interim compensation can be recovered by the complainant from the drawer/accused under Section 421 of the Criminal Procedure Code, 1973, as if it were a 'fine' imposed upon the drawer/accused.Section 143-A of the NIA casts a substantive obligation upon the drawer/accused.

iii.               Section 143-A of the NIA is not a procedural provision as it intends to create a 'stand-alone liability' for the drawer/accused towards the complainant which has to be discharged by the drawer/accused when the matter is still pending for adjudication before the trial court.

iv.               Although the provision of Section 143-A of the NIA cannot be applied to the pending trials, however, the situation regarding Section 148 of the NIA is drastically different. Section 148 of the NIA does not, in any way, affects the substantive right of the accused, to defend himself or to prosecute his appeal. Section 148 of the NIA categorically provides that in case the appellant/drawer is acquitted by the Appellate Court, then, the amount awarded by the Appellate Court as interim compensation shall be returned to him, by the complainant along with interest.

v.                 When the case reaches before the Appellate Court, the appellant/drawer has already acquired a status of 'convict', who has already been found guilty of his conduct and sentenced by the trial court. In case the trial court imposes a fine then making the appellant/drawer pay that amount does not affect his substantive right, rather it is a matter of procedure only. Moreover, in case the trial court imposes a fine, which can be up to twice the amount of the cheque and which can be treated as compensation to be paid to the complainant, in that situation, liability of the appellant/drawer has already been determined by the trial court and the liability to pay the amount to the complainant already exists at the time when the appellant/drawer comes before the Appellate Court.

vi.               Section 148 of the NIA is to govern all the appeals pending on the date on which it was enforced and/or appeals filed thereafter.

View Taken by the Hon'ble High Court of Allahabad:

In the matter of: Vivek Kumar Negi V/s State of U.P. &Anr., Application under Section 482 of the Cr.P.C. No. 11055 of 2019, High Court of Allahabad, Date of Decision: 11.04.2019, Coram: Arvind Kumar Mishra, J., the question that came for adjudication before the Hon'ble Court was this:

"… whether the amendment brought and incorporated under Section 143 (A) (1) of the Negotiable Instruments Act, 1881 (hereinafter referred to as 'the Act') is applicable retrospectively nor (sic) not?"

Answering the question framed above, the Hon'ble Court observed as follows:

"… In so far as amendment is concerned, the amendment is of procedural nature and not of substantive nature. Moreover, in matters of applicability of the amendment [under Section 143 (A)] proceedings launched in the matters pending prior to the incorporation of the amendment there is no express bar in the Act. It being so, the amendment will be applicable even to the proceeding pending prior to the date of incorporation of the amendment as Section 143 (A) in the matters involving provisions of the Negotiable Instruments Act, 1881…"

Thus, according to the view taken by the Hon'ble High Court of Allahabad, Section 143-A of the NIA is to operate retrospectively.

View Taken by the Hon'ble High Court of Karnataka:

In the matter of: Sri V. Narasimha Murthy V/s Sri Santhosh,

 I.A. No. 3 of 2018 in Criminal Revision Petition No. 425 of 2018, High Court of Karnataka, Date of Decision: 18.02.2019,

Coram: B.A. Patil, J.,

it was held that:

i.                 According to Section 148 of the NIA, the Appellate Court may order the accused to deposit a minimum of 20% of the fine amount or the compensation awarded by the trial court and if the said amount is deposited within 60 days from the date of such order, the Appellate Court may direct the release of the amount so deposited by the accused in favour of the complainant during the pendency of the appeal. The proviso to Section 148 of the NIA states that while releasing the amount so deposited, the complainant has to be directed to repay the said amount in the event of acquittal of the accused with interest at bank rate which was prevailing during the said period.

ii.                It is a cardinal principle of construction that every statute is prima facie prospective in nature, unless it is expressly or by necessary implication made to have retrospective operation.

iii.               Section 148 of the NIA has been enacted to protect the interest of the complainant and to provide relief to the complainant. Further, Section 148 of the NIA has been enacted to discourage filing of frivolous appeals. Thus, Section 148 of the NIA has to be given wider interpretation and not a restricted/pedantic interpretation.

iv.               Section 148 of the NIA has to be given retrospective effect.Section 148 of the NIA is to govern all the appeals pending on the date on which it was enforced and/or appeals filed thereafter.

Afternote:

In the matter of: G.J. Raja V/s Tejraj Surana,

Petition for Special Leave to Appeal (Crl.) No. 3342/2019, the Hon'ble Supreme Court of India, formulated the following question of law for adjudication:

"… whether Section 143-A introduced by the Amendment Act No. 20 of 2018 in the Negotiable Instruments Act, 1881 has retrospective application or not?"

The aforenoted matter is still pending adjudication before the Hon'ble Supreme Court of India with the next date of hearing being: 01.07.2019.

Source: https://www.livelaw.in/columns/whether-section-143-a-in-the-negotiable-instruments-act-14507

Bar Council of Delhi directs Deloitte, EY, KPMG and PwC not to offer legal services

In a double-whammy of sorts for the Big Four audit-cum-consultancy firms – Deloitte, EY, KPMG and PwC – the Bar Council of Delhi on Friday directed the four firms to refrain from providing legal services to clients till further notice.

The move comes after a complaint was filed by the Society of Indian Law Firms (SILF), representing around 100 Indian law firms. SILF said in its complaint that the Big Four were actually accounting firms, but are engaged in "doing law practice". SILF had filed a similar complaint to the Bar Council in 2015 alleging that the Big Four were resorting to "unauthorised practice of law" in violation of the Advocates Act.

The Bar Council order asked the four firms to provide a list of advocates on their rolls. The order copy said that while Deloitte and KPMG had filed their response to the complaint, PwC and EY had asked for more time to submit their response. The Council has deferred the matter for further hearing to July 12. It has asked the four firms to refrain from the practice until further orders.

The development comes at a time when the Big Four firms are under the scanner for audit-related practices. The recent meltdown at ILFS group has put the spotlight on statutory auditors.

Many in the chartered accountant fraternity were of the view that there were grey areas over jurisdiction of non-litigation related legal services. In their earlier response in 2015, one of the Big Four firms had said that they were not "engaged in the practice of law". A source in one of the Big Four firms reiterated the same stand that they do not represent any legal firm. "We do not practice in any area that only advocates are supposed to practice," he added.

There has been growing angst in the legal fraternity that multinational audit-cum-consultancy firms have over the years hired lawyers in large numbers to offer legal advice to clients. “It is a turf battle between lawyers and chartered accountants,” noted a senior advocate and chartered accountant. There are many lawyers – registered with the Bar Council – who offer tax advice to clients.

Meanwhile, the Institute of Chartered Accountants refused to get drawn into this fight and did not offer any official comment to Bar Council’s order.



Source: https://www.business-standard.com/article/companies/bar-council-of-delhi-directs-big-four-not-to-offer-legal-services-119050301212_1.htm

Amrapali Group Committed First Degree Crime by Cheating Home Buyers: Supreme Court

Amrapali Group has committed a "first-degree crime" by cheating thousands of home buyers and no matter how powerful the people behind this mess they will be booked and prosecuted, the Supreme Court said Tuesday.

"Fate is written on the wall" for the group and its directors, the top court said while declining to hear their claims of no wrongdoing.

The embattled real estate firm "cheated everybody including home buyers, banks and authorities and indulged in cartelization to prevent the Debt Recovery Tribunal from auctioning its unencumbered properties", it said. "The limit of your fraud touched the sky."

A bench of Justices Arun Mishra and U U Lalit said it cannot believe the justification given by Amrapali for alleged diversion of funds of over Rs 3,500 crore, looking at its dubious conduct.

"You have committed a first-degree crime by cheating thousands of home buyers. We should have cancelled the licences of statutory auditors of Amrapali for indulging in fraudulent practise long back and sent them to jail.

"We are saying in open court that there are powerful people behind this mess but no matter how powerful they are, we will book them and prosecute them. We are not going to spare anybody," the bench said.

The hard-hitting remarks of the bench came after advocates appearing for the group, said there was no wrongdoing done on their part and there was no diversion of Rs 3,500 crore as claimed by the court-appointed forensic auditors.

Luthra said forensic auditors have erred on various aspects in their report like they had claimed that not a single penny was invested by directors of Amrapali but in reality, Rs 60 to Rs 70 crore was put in by them.

"We have to believe the forensic auditors and their report looking at your dubious conduct. We believe them. You (Amrapali) have yourself admitted in your earlier affidavit that Rs 2,990 crore of home buyers money was diverted and now you are claiming that there was no diversion. You have made a peon as your director and he purchases shares worth crores of rupees for Amrapali. Is this not correct," the bench said.

Luthra said the group acted in a bona fide manner and in the interest of home buyers but the problems started after the company ran into litigation.

Amrapali Group claimed that they had received Rs 11,057 crore from the home buyers and they have constructed five projects in Indirapuram of Delhi-NCR and gave their possession to home buyers.

"Your (Amrapali Group and its directors) fate is written on the wall. We are not inclined to hear your bona fide claims looking at your dubious conduct," the bench said.

At the outset, the bench also pulled up Bank of Baroda and other lenders, who have given hefty loans to Amrapali Group for failing to monitor and control the diversion and usage of funds by the realty firms.

The day-long hearing remained inconclusive and would continue tomorrow.

Two forensic auditors -- Pawan Agrawal and Ravi Bhatia -- in their fresh report said yesterday that Amrapali has diverted over Rs 3,500 crore of home buyers money to different projects.

The top court had allowed the I-T department and the EOW to access the report of forensic auditors in their probe but restrained them from summoning them.

Forensic auditors in their fresh supplementary report pointed out that promoters of Amrapali did not invest a single penny in real estate firm and home buyers money was used for the construction of high rise buildings.

Supreme Court sets aside Centre's decision to merge FTIL and NSEL

The Supreme Court on Tuesday set aside the Centre's decision to merge National Spot Exchange Ltd (NSEL) with Financial Technologies India Ltd (FTIL), which is now known as 63 Moon Technologies Ltd.

A bench comprising justices R F Nariman and Vineet Saran delivered the judgement on a batch of petitions filed by 63 Moon Technologies Ltd challenging the Bombay High Court's December 2017 verdict upholding the Centre's decision to merge NSEL with FTIL.

In February 2016, the Centre had passed a final amalgamation order in terms of the provision of the Companies Act merging FTIL and NSEL. As per the order, all the assets and liabilities of NSEL would become assets and liabilities of FTIL.

The government's order was challenged in the high court which dismissed the petition in December 2017.

In its judgement, the apex court held that the Centre's February 2016 order was "ultra vires" to section 396 of the Companies Act and was also violative of Article 14 (equality before law) of the Constitution.

"In conclusion, though other wide-ranging arguments were made with respect to the validity of the Central Government amalgamation order, we have not addressed the same as we have held that the order dated February 12, 2016, is ultra vires Section 396 of the Companies Act, and violative of Article 14 of the Constitution of India for the reasons stated by us hereinabove," the bench said.

"The appeals are accordingly allowed, and the impugned judgment of the Bombay High Court is set aside," the apex court said.

The bench held that the merger of NSEL and FTIL did not satisfy the criteria of "public interest".

"Thus, it is clear that no reasonable body of persons properly instructed in law could possibly hold, on the facts of this case, that compulsory amalgamation between FTIL and NSEL would be in public interest," the bench noted.

After the apex court's verdict, Jignesh Shah, chairman emeritus and mentor of 63 Moons Technologies Ltd, said in a press statement, "We have always had full faith in the Indian judiciary and our courts. Finally, truth has prevailed."

NSEL had shut down in 2013 after a major payment default and it was ordered not to enter into any fresh contracts by Forward Markets Commission (FMC), which has since been integrated into the Securities and Exchange Board of India (SEBI).

On July 31, 2013, NSEL, then 99.99 per cent subsidiary of FTIL, had defaulted in nearly Rs 5,600 crore payments to its around 13,000 investors.

After the crisis, the Ministry of Corporate Affairs (MCA) had decided to issue a final order for the merger of NSEL with FTIL under section 396 of the Companies Act, 1956.

In February 2016, the MCA had passed a final order directing the merger of scam-hit NSEL with FTIL.

https://www.businesstoday.in/top-story/supreme-court-sets-aside-centre-decision-to-merge-ftil-and-nsel/story/342130.htm