Whether, on the facts and in the circumstances of the case, and having regard to the amendment made to Section 2(15) of the Income Tax Act, vide Finance Act, 2008, with effect from 01.04.2009 and the provisions of the proviso inserted below that Section, clarifying the circumstances under which carrying on of activity falling under advancement of any other object of general public utility, would not be for charitable purpose, which is squarely applicable to the case of the assessee for assessment year 2011- 12, the Tribunal is correct in law in holding that the assessee would be eligible for exemption under Section 11 of the Income Tax Act, 1961, for the assessment year? = In view of the discussion above, the question of law is answered in favour of the assessee and against the revenue. 22. After taking note of the amendment to Section 11(6) in paragraph 33, the Madras High Court also took note of the Circular bearing No.1 of 2015, dated 21.01.2015 and came to the conclusion that the provisions of Section 11 (6) inserted w.e.f., 01.04.2015 would operate only prospectively w.e.f., the assessment year 2015-16. Insofar as the cases that arose prior to the amendment are concerned, almost all High Courts have taken the same view. The position may be different after the amendment. But in the case on hand, the same relates to a period prior to amendment. Therefore, we do not wish to admit the appeals on the third substantial question of law, merely for waiting for the outcome of the decision of the Supreme Court. We respectfully agree with the views expressed by the other High Courts and answer the third question of law in favour of the assessee.

HONBLE SRI JUSTICE V.RAMASUBRAMANIAN AND HONOURABLE SRI JUSTICE ABHINAND KUMAR SHAVILI                      

I.T.T.A.Nos.71 of  2017

09-10-2017

The Principal Commissioner of Income Tax (Exemptions), Hyderabad... Appellant(in both the appeals)


Institute for Development and Research in Banking Technology, Castle Hills, Road No.1, Masab Tank, Hyderabad.. Respondent(i

Counsel for the appellant: Mr. J.V. Prasad Sr. S.C for I.T

Counsel for Respondent  : Mr. K. Vasanth Kumar


<GIST:

>HEAD NOTE:  

?Cases referred


HONBLE SRI JUSTICE V. RAMASUBRAMANIAN          
AND
HONBLE SRI JUSTICE ABHINAND KUMAR SHAVILI        

I.T.T.A.Nos.71 & 391 of  2017


COMMON JUDGMENT: (Per VRS,J)      

      Both these appeals are by the Revenue under Section 260A of the
Income Tax Act, 1961. In I.T.T.A.No.391 of 2017, the following questions
of law arise for consideration:
1.      Whether, on the facts and in the circumstances of the
case, and having regard to the amendment made to
Section 2(15) of the Income Tax Act, vide Finance
Act, 2008, with effect from 01.04.2009 and the
provisions of the proviso inserted below that Section,
clarifying the circumstances under which carrying on
of activity falling under advancement of any other
object of general public utility, would not be for
charitable purpose, which is squarely applicable to
the case of the assessee for assessment year 2011-
12, the Tribunal is correct in law in holding that the
assessee would be eligible for exemption under
Section 11 of the Income Tax Act, 1961, for the
assessment year?

2.       Whether, on the facts and in the circumstances of
the case, and having regard to the provisions of
newly inserted Section 13(8) of the Income Tax Act,
1961, inserted vide Finance Act, 2012, with
retrospective effect from 01.04.2009, which squarely
applies to the facts of the case of the assessee,
whether, the Tribunal is correct in law in holding that
the assessee is eligible for exemption under Section
11 of the Income Tax Act, 1961 for this assessment
year? and

3.      Whether, in the facts and the circumstances of the
case, when the income generating such assets was
already treated as application of income and given
exemption, thus leading to double deduction which is
impermissible in law?

      2. In I.T.T.A.No.71 of 2017, only the first two questions of law as
arising in I.T.T.A.No.391 of 2017 arise. Since the assessee is the same in
both cases and the appeals arise in respect of the assessment years
2010-11 and 2011-12, both the appeals were taken up together for
disposal.
      3. Heard Mr. J.V. Prasad, learned Senior Standing Counsel
appearing for the Revenue and Mr. K. Vasanth Kumar, learned counsel
appearing for the respondent.
      4. Admittedly the assessee is an autonomous institution established
by the Reserve Bank of India, way back in the year 1996. The assessee
was granted registration under Section 12AA with effect from
01.04.2004. But the registration was cancelled subsequently by the
Director of Income Tax (Exemptions), by an order dated 30.11.2011. The
Tribunal set aside the said order by a judgment dated 20.06.2012 passed
in I.T.A.No.147/HYD/2012. The said order of the Tribunal became the
subject matter of an appeal before this Court in I.T.T.A.No.168 of 2015.
By a judgment dated 04.11.2015 this Court answered the question of law
in favour of the assessee and dismissed the appeal I.T.T.A.No.168 of 2015
filed by the Revenue questioning the order of the Tribunal setting aside
the cancellation of registration.
      5. For the purpose of completion of narration, it should also be
brought on record that for the assessment years 2003-04 up to the year
2009-10, the assessing officer denied exemption, but the assessee
succeeded before this Court.
      6. But insofar as assessment years 2010-11 and 2011-12 are
concerned, the assessing officer took umbrage under the proviso to
Section 2(15) inserted under the Finance Act 2/2009, dated 01.04.2009,
to distinguish the decisions in favaour of the assessee with regard to the
assessment years 2003-04 to 2009-10. This is how the questions of law
that we have framed above have arisen for our consideration. As a
consequence the whole dispute now revolves around the interpretation to
the proviso to Section 2(15). Incidentally, one more issue with regard to
depreciation with reference to Section 11 has also been raised.
      7. As we have pointed out earlier, the assessee is a society
registered at the instance of the Reserve Bank of India for the purpose of
assisting the banks and financial institutions, for the improvement of their
performance. The assessee is also offering an M.Tech course and Ph.D
degrees in banking.
      8. Though the assessee claimed that the object for which it was
established would come within the purview of education, the Tribunal
did not accept it. However, the Tribunal held that the assessee would
come within the purview of the definition of the expression charitable
purpose, as an institution established for the advancement of an object
of general public utility. Though Mr. K. Vasanth Kumar, learned counsel for
the assessee attempted to argue on the basis of the finding recorded by
this Curt in I.T.T.A.No.168 of 2015 that the assessee should be
considered as an institution established for the purpose of education, we
do not think that we can now go into the question in view of the fact that
the Revenue alone is on appeal against the finding recorded by the
Tribunal.
      9. Before proceeding further, we should point out one fundamental
difference between the institutions, which would automatically fall within
the purview of the expression charitable purpose under Section 2(15)
and institutions which are established for the advancement of any other
object of general public utility. Section 2(15) as it stands today after the
last amendment under Finance Act, 2015, w.e.f., 01.04.2016 reads as
follows:
Section 2 (15): charitable purpose includes relief of the
poor, education, yoga medical relief, preservation of
environment including water-sheds, forests and wildlife and
preservation of monuments or places or objects of artistic
or historic interest, and the advancement of any other
object of general public utility:
Provided that the advancement of any other object of
general public utility shall not be a charitable purpose, if it
involves the carrying on of any activity in the nature of
trade, commerce or business, or any activity of rendering
any service in relation to any trade, commerce or business,
for a cess or fee or any other consideration, irrespective of
the nature of use or application, or retention, of the income
from such activity, unless
(i)     such activity is undertaken in the course of actual
carrying out of such advancement of any other  object
of general public utility; and
(ii)    the aggregate receipts from such activity or activities
during the previous year, do not exceed twenty per cent
of the total receipts, of the trust or institution
undertaking such activity or activities, of that previous
year;

      10. While institutions that are engaged in the relief to the poor,
education, yoga, medical relief, preservation of environment and
preservation of monuments or places or objects of artistic or historic
interest are categorized under one type under Section 2(15); the
institutions established for the advancement of any other object of
general public utility, are treated under Section 2 (15) as a separate
category. This is very clear from the proviso to Section 2(15). There were
two provisos inserted under Finance Act, 2010, w.e.f., 01.04.2009. The
said provisos read as follows:
Provided that the advancement of any other object of
general public utility shall not be a charitable purpose, if it
involves the carrying on of any activity in the nature of
trade, commerce or business, or any activity of rendering
any service in relation to any trade, commerce or business,
for a cess or fee or any other consideration, irrespective of
the nature of use or application, or retention, of the income
from such activity:
Provided further that the  first proviso shall not apply if
the aggregate value of the receipts from the activities
referred to therein is twenty-five lakh rupees or less in the
previous year;

      11. Without going into the intricacies, it can be pointed out in
general that the inclusion of an institution for the advancement of any
other object of general public utility within the definition of the
expression charitable purpose was actually conditional. The condition
was that such an institution should not be involved in the carrying on of
any activity in the nature of trade, commerce or business. In other words,
if an institution, established for the advancement of any other object of
general public utility, which would otherwise come within the purview of
Section 2(15), is involved in the carrying on of any activity in the nature
of trade, commerce or business, such an institution will come within
Section 2(15) only if two conditions laid down in the clauses are satisfied.
      12. Now that the Tribunal has categorized the assessee not as an
institution advancing the cause of education, but as an institution
established for the advancement of any other object of general public
utility, the first question that was required to be addressed by the
Tribunal was as to whether the assessee was involved in the carrying on
of any activity in the nature of trade, commerce or business. Now let us
see how this question was addressed to by the Tribunal.
      13. In paragraph 11 of its order, the Tribunal analyzed the two
provisos that were originally incorporated under Section 2(15) under the
Finance Act, 2008. After doing so, the Tribunal referred to (1) a Circular
of the CBDT bearing No.11/2008, dated 19.12.2008; and (2) the speech
of the Minister of Finance on 29.02.2008, made during the debate in the
Lok Sabha on the Finance Bill, 2008.
      14. Thus after referring to the plain language of the statutory
provisions and after referring to the manner in which the provision was
sought to be incorporated by the executive, the Tribunal came to the
conclusion in paragraph 15 of its order that the assessee was not engaged
in carrying on any activity in the nature of trade, commerce or business.
As a matter of fact, the Tribunal referred to the decision of the Delhi High
Court in Institute of Chartered Accountants of India v. Director
General of Income Tax (Exemptions) , before coming to the
conclusion that the assessee was not carrying on an activity in the nature
of any trade, commerce or business. The Tribunal also pointed out that
the charging of a fee by the assessee was not with profit motive and that
therefore, merely because the assessee derived income they cannot be
held to be carrying on an activity in the nature of trade, commerce or
business.
      15. The relevant findings of the Income Tax Appellate Tribunal in
this regard can be usefully extracted as follows:
The circumstances under which the services rendered by the
appellant society to the Banks make clear that there is no
profit motive in such activities because these activities were
entrusted to the appellant society by the Reserve Bank of
India as a part of its supervisory role over the Banks in
India. In our considered opinion, viewed from any angle, the
objects, either main or ancillary, are not in the nature of
business or trade or commerce. The banks merely used the
expertise of appellant society in the banking operations. The
question of the profit motive in undertaking such activities
can not be imagined keeping in view the circumstances
under which the appellant society is operated. The objects
of the appellant society are totally charitable in nature and
do not carry on any activity in the nature of trade,
commerce or business. Therefore, the proviso to Section
2(15) of the Act cannot be applied to the Appellant society
as clarified by the Circular No.11 of 2008 issued by the
CBDT. It is worthwhile to mention here that the Honble
Finance Minister had also clarified, during the course of the
debate in the Parliament, that the proviso to Section 2(15)
of the Act is not intended to apply to genuine charitable
organizations. It was further clarified by the Honble Finance
Minister that the Chambers of Commerce and similar
organizations rendering services to their members would not
be affected by introduction of this proviso. It is fairly settled
law now that reference can be made to the speech made by
the Honble Finance Minister at the time fo piloting the bill in
the Parliament in order to ascertain the true meaning of the
words and the language employed in the Statute.

      16. In the light of the categorical finding recorded by the Tribunal,
we are of the considered view that though the assessee has been found
by the Tribunal to be an institution established for the advancement of
any other object of general public utility, the assessee does not fall under
the category of such an institution, which is carrying on an activity in the
nature of trade, commerce or business so as to attract the proviso to
Section 2 (15) at all. Hence, the first question of law arising in both cases
has to be answered against the appellant/Revenue.
      17. Strong reliance is placed by the learned Senior Standing
Counsel upon the decision of this Court in Andhra Pradesh State Seed
Certification Agency v. Chief Commissioner of Income Tax . In
the said case, the certification of seeds by the assessee was held to be in
the nature of trade, Commerce or business as the assessee facilitated
trade, commerce or business in the certified seeds.
      18. But the distinction between the assessee in the said case and
the assessee in the present case is that in the former the certification was
done for the benefit of the private individuals and the private institutions.
But in this case, the assessee was created by the Reserve Bank of India for
the improvement of the performance of the banks and financial sector of
the country, ultimately to have a bearing upon the economy of the
country. Therefore, the said decision does not go to the rescue of the
revenue.
      19. Once the first question of law is answered against the
appellant/Revenue, the second question of law revolving around Section
13(8) may not arise at all. Section 13(8) revolves around the quantum as
stipulated in clause (i) and (ii) of the Proviso to Section 2 (15). If the
proviso has no application, the invocation of those two clauses would not
apply. Hence, the second question of law does not arise for consideration
in the light of our answer to the first question of law.
      20. Insofar as the third question of law is concerned, it is admitted
by Mr. J.V. Prasad, learned Senior Standing Counsel for Revenue that
several High Courts have taken the view favouring the assessee and that
all Special Leave Petitions arising out of the judgments of those Courts
are now pending before the Supreme Court, after the grant of leave. The
learned Standing Counsel also submitted that even this Court is seized of
several appeals, where the third question of law is under consideration.
      21. There are two issues. The first is that Section 11(6) was
amended w.e.f., 01.04.2015 under Finance (No.2) Act, 2014. The
amendment was taken note of by a Bench of the Madras High Court in a
decision recently rendered in Director of Income Tax (Exemption) v.
Medical Trust of the Seventh Day Adventists . Paragraphs 24 to 27
of the said judgment reads as follows:
24. Truth to tell, this Court in the matter of Calavala Cunnan
Charities, has decided the question now under consideration
in favour of the assessee and we could well have decided
this Batch of appeals simply on the strength of the aforesaid
decision. We are however persuaded to proceed further with
the discussion since a conflicting view has been expressed
by the Kerala High Court in the case of Lissie Medical
Institutions (supra). Though the attention of the Division
Bench of the Kerala High court was drawn to the decision in
Rao Bahadur Calavala Cunnan Chetty Charities (supra) and
several decisions along similar lines, the court was
persuaded to take a contrary view preferring to follow the
rationale of the judgment of the Supreme Court in the case
of Escorts (supra).
25. As noted by us earlier, the judgment of the Supreme
Court in escorts turns on an entirely different position of law
and would not impact the issue being discussed in the
present case.
26. We are supported in our view by a plethora of decisions
of various High Courts - the Bombay High Court in the case
of CIT v. Munisuvrat Jain (1994 Tax Law Reporter 1084) and
DIT (Exem) Vs. Framjee Cawasjee Institute (109 CTR 463);
Karnataka High Court in CIT Vs. Society of the Sisters of
St.Anne (146 ITR 28); Madhyapradesh High Court in CIT Vs.
Raipur Pallottine Society (180 ITR 579); Gujarath High Court
in CIT Vs. Sheth Manilal rachhnoddas Vishram Bhavan Trust
198 ITR 598; Punjab and Haryana High court in CIT Vs.
Market Committee Pipli (330 ITR 16) and CIT Vs. Tiny Tots
Education Society (330 ITR 21); Madhyapradesh High Court
in CIT Vs. Devi Sakuntala Tharal Charitable Foundation (358
ITR 452) and the Calcutta High Court in CIT Vs. Silluguri
Regulated Market Committee (366 ITR 51). In addition, the
Delhi High Court in DIT Vs. Vishwa Jagriti Mission 262 CTR
558 and the Karnnataka High Court in DIT (Exem) Vs Al-
Ameen Charitable Fund Trust (2016) 67 taxmann.com 160  
have accepted the claim of the assessee distinguishing both
the judgment of the Supreme Court in Escorts as well as that
of the Kerala High Court.
27. In view of the discussion above, the question of law is
answered in favour of the assessee and against the
revenue.

      22. After taking note of the amendment to Section 11(6) in
paragraph 33, the Madras High Court also took note of the Circular
bearing No.1 of 2015, dated 21.01.2015 and came to the conclusion that
the provisions of Section 11 (6) inserted w.e.f., 01.04.2015 would
operate only prospectively w.e.f., the assessment year 2015-16. Insofar
as the cases that arose prior to the amendment are concerned, almost all
High Courts have taken the same view. The position may be different
after the amendment. But in the case on hand, the same relates to a
period prior to amendment. Therefore, we do not wish to admit the
appeals on the third substantial question of law, merely for waiting for
the outcome of the decision of the Supreme Court. We respectfully agree
with the views expressed by the other High Courts and answer the third
question of law in favour of the assessee.
      23. Accordingly the appeals are dismissed. As a sequel,
miscellaneous petitions pending in these appeals, if any, shall stand
closed. There shall be no order as to costs.
______________________  
V. RAMASUBRAMANIAN , J.    
_________________________  
ABHINAND KUMAR SHAVILI, J.    
9th October, 2017

challenging the action of the 2nd respondent viz., the Assistant Director of Income Tax in effecting the seizure of a sum of Rs.20 Crores lying in the current account of the petitioner in Canara Bank and also seeking a direction to the 1st respondent to release an amount of Rs.5 Crores from out of the seized amount and to confer all the benefits of the scheme known as Pradhan Mantri Garib Kalyan Yojana Scheme, 2016.= Let us take a hypothetical case where the declaration under PMGKY Scheme is rejected. Even in such a case, the petitioner may lose, may be about 70% of the total amount seized. Still the petitioner will get back 30%.=There is also one more aspect. If the declaration under PMGKY Scheme is accepted by the department, the petitioner will not only get immediate release of Rs.5 Crores, but will get RBI bonds encashable after four years to the total value of Rs.5 Crores together with interest. The amount lying in RBI bonds, if allowed to be retained as security for any eventuality, till the conclusion of all the proceedings, the departments interest will be more safeguarded, even if they release the amount of Rs.5 Crores. Therefore, in fine, the writ petition is disposed of directing the respondents to release an amount of Rs.5 Crores to the petitioner within two weeks. The amount of Rs.5 Crores lying in RBI bonds, shall be kept by the department as security for the release of the amount hereby ordered, until the conclusion of any proceedings pending or to be initiated by the department. If the declaration under PMGKY Scheme is finally accepted, the RBI bonds may also be released to the petitioner, provided no other dues are found payable by the petitioner.

HONBLE SRI JUSTICE V.RAMASUBRAMANIAN AND HONBLE SMT. JUSTICE T.RAJANI                

WRIT PETITION No.25470 of 2017  

11-10-2017

 M/s. Jaya Balajee Real Media Pvt. Ltd.,  Corporate Office: H.No.8-3-224/D/I/G-113, Madhura Nagar, Hyderabad-38, Rep. by its

1.The Prl. Commissioner of Income Tax (Central), 7th Floor, Aayakar Bhavan, Basheer Bagh, Hyderabad-042. The Asst. Director
 Unit-II(1), Aayakar Bhavan, Basheer Bagh,  Hyderabad-04   Respondents

Counsel for Petitioner:Dr. C.P. Ramaswami

Counsel for Respondents 1&2:    Mr. J.V. Prasad, Senior Standing Counsel

<Gist:

>Head Note:

? Cases referred:

1(2008) 298 ITR 1 (SC)

HONBLE SRI JUSTICE V.RAMASUBRAMANIAN          
AND
HONBLE SMT. JUSTICE T.RAJANI    
WRIT PETITION No.25470 of 2017  
ORDER: (per V.Ramasubramanian, J.)  
      The petitioner has come up with the above writ petition
challenging the action of the 2nd respondent viz., the Assistant
Director of Income Tax in effecting the seizure of a sum of
Rs.20 Crores lying in the current account of the petitioner in
Canara Bank and also seeking a direction to the
1st respondent to release an amount of Rs.5 Crores from out of
the seized amount and to confer all the benefits of the scheme
known as Pradhan Mantri Garib Kalyan Yojana Scheme,  
2016.
      2. We have heard Dr. C.P. Ramaswami, learned counsel
appearing for the petitioner and Mr. J.V. Prasad, learned
Senior Standing Counsel appearing for the respondents.
      3. The petitioner is a producer of feature films in Telugu
and Tamil languages. According to the petitioner,
he deposited a sum aggregating to Rs.40 Crores during the
period from 23-12-2016 to 27-12-2016 into their current
account with Canara Bank, after the Government of India
notified the demonetisation of certain currencies. Thereafter,
Warrants of Authorisation were issued on 30-12-2016,
followed by a Prohibitory Order dated 31-12-2016 under
Section 132(3) of the Income Tax Act, 1961. Searches were
conducted at various places in Chennai and Hyderabad and
a sworn statement was recorded from the Director of
petitioner-company on 02-01-2017 and 03-01-2017.
Thereafter, a sum of Rs.22.99 Crores was ordered to be seized
on 04-01-2017 followed by an order for seizure of another
amount of Rs.13.98 Crores, both of which were lying in the
current account of the petitioner.
      4. After more than 50 days of the seizure of the aforesaid
amounts, the petitioner gave a sworn statement expressing
willingness to disclose an amount of Rs.20 Crores under the
scheme known as Pradhan Mantri Garib Kalyan Yojana  
Scheme, 2016, hereinafter referred to as PMGKY Scheme.
Actually the said scheme viz., PMGKY Scheme, introduced  
under the Taxation Laws (Second Amendment) Act, 2016  
mandated two conditions to be satisfied before
a declaration in Form-I could be accepted from a person
willing to come under the scheme. These conditions are
(i) payment of 30% of the income disclosed under the Act
towards tax, payment of 10% of the undisclosed income as
penalty and payment of 33% of the tax towards surcharge and
(ii) the deposit of 25% of the declared income in RBI Bonds.
      5. Section 199M of the Income Tax Act, introduced by the
said amendment, made it clear that a declaration filed under
the scheme without payment of tax and surcharge under
Section 199D or without payment of penalty under Section
199E or without depositing 25% in RBI Bonds as per Section
199F, shall be void.
      6. Since the entire amount available to the credit of the
petitioner in their current account, totalling to Rs.36.97 Crores
had been seized by the Department and also taken away by
them, the petitioner was left with no funds to make payment
under Sections 199D, 199E and 199F. Finding themselves in a
fix, the petitioner came up with a writ petition in W.P.No.9262
of 2017, challenging one portion of a Circular bearing
No.2/2017, dated 18-01-2017, in and by which the Board
disabled a person from seeking adjustment of the cash seized
by the Department and deposited into the public deposit
account, towards payment of tax, surcharge and penalty under
the PMGKY Scheme.  
      7. Pending the writ petition W.P.No.9262 of 2017, the
petitioner sought an interim prayer to direct the
2nd respondent to release a sum of Rs.20 Crores  (i) for
payment of tax, surcharge and penalty and (ii) for depositing
25% of the declared income in RBI Bonds, so as to enable the
petitioner to file a valid declaration under the scheme.
      8. The said writ petition W.P.No.9262 of 2017 came up
for the first time for orders as to admission, on 16-3-2017.
Since the deadline for filing a declaration under the scheme
was closing on 31-3-2017, we ordered on 16-3-2017, notice
returnable by one week. To the credit of the Department, the
Department filed a counter affidavit on 23-3-2017 itself.
      9. In the counter affidavit, the Department itself conceded
that the Department has no objection to appropriate, out of the
seized amount, an amount sufficient for payment of tax,
surcharge and penalty under the PMGKY Scheme, which  
worked out to Rs.9.98 Crores. But the Department objected to
the interim prayer for keeping
Rs.5 Crores out of the seized amount, in RBI Bonds, in terms
of Section 199F, on the ground that the same may tantamount
to releasing the amount from out of the clutches of the
Department.
      10. After hearing the arguments on both sides, this Court
passed an interim order on 23-3-2017 to the following effect:
8. Therefore, we are of the considered view that by an
act of balancing the rights of both sides, this application
could be disposed of with the following directions:
       1) the 2nd respondent, without prejudice to the
contentions to be raised, shall keep out of the seized
cash, a sum of Rs.5.00 crores in RBI Bonds, but to keep
the bonds with the 2nd respondent himself in safe
custody, without releasing the same to the petitioner;
       2) the 2nd respondent shall issue a letter to the
effect that the amount has been kept in RBI bonds to
enable the petitioner to file a declaration;
       3) the petitioner shall file a declaration under
Section 199-C, in the form prescribed, on or before 31-3-
2017;
       4) the declaration so submitted shall be treated as
validly made, at least insofar as the twin conditions are
concerned. If there are non-compliance with any other
conditions, which are not the subject matter of the writ
petition, the same may have to be addressed to the
petitioner.

      11. Pursuant to the said order, the Department kept in
RBI Bonds, a sum of Rs.5 Crores, from out of the seized
amount (representing 25% of the declared income) in terms of
Section 199F of the Act. Thereafter, the petitioner filed Form-I
Declaration on 28-3-2017, declaring an undisclosed income of
Rs.20 Crores under the PMGKY Scheme.  
      12. Thereafter, the petitioner gave a letter to the
respondents on 06-4-2017 to release the balance amount of
Rs.5 Crores (out of the declared income of Rs.20 Crores), on
the ground that there can be no claim by the Department on
the said amount, as whatever had to be done with the declared
income of Rs.20 Crores, had already been done. Since the
claim of the petitioner for the release of
an amount of Rs.5 Crores, could be understood much better in
terms of numbers than in terms of prose, we shall present their
contention as follows:
      (i) Amount seized from the current
          account of the petitioner             = Rs.36.97 Crores

      (ii) Amount that the petitioner
           wanted to declare under
           PMGKY Scheme, 2016           = Rs.20 Crores

      (iii) The amount of tax, penalty
            and surcharge payable under
            Sections 199D and 199E,
            appropriated by the Department
            itself towards the scheme, from
            out of the seized cash              = Rs.9.98 Crores

      (iv) The amount kept in RBI Bonds
            in terms of Section 199F by the
            Department pursuant to the
            interim order of this Court         = Rs.5 Crores

      (v) The amount, which the petitioner
           is seeking release of                        = Rs.5 Crores
           (Rs.20 Crores - Rs.9.98 Crores - Rs.5 Crores)

      13. The request made by the petitioner in their letter
dated 06-4-2017 for the release of Rs.5 Crores from out of the
seized amount, was rejected by the Principal Commissioner of
Income Tax, who is the 1st respondent herein, by an order
dated 27-7-2017. Aggrieved by the said order of the
1st respondent dated 27-7-2017, the petitioner has come up
with the above writ petition.
        14. The main prayer of the petitioner in the Writ Petition
comprises of three parts, viz., (a) to declare as illegal the
seizure effected by the 2nd Respondent on 04.01.2017 and
05.01.2017, of the amount lying in Canara bank to the extent
of Rs.20 Crores; (b) to quash the letter dated 27.07.2017
issued by the 1st respondent refusing to release an amount of
Rs.5 Crores from out of the seized amount; and (c) to direct the
1st respondent to  confer all consequential benefits under the
PMGKY Scheme including the release of Rs.5 Crores.
      15. A careful look at all the three components of the
prayer made in the writ petition would show that the main
object of the petitioner is to have a direction to the respondents
to accept his declaration of undisclosed income of Rs.20
Crores under the PMGKY Scheme. Once this relief is granted, a
sum of Rs.5 Crores representing 25% of the disclosed income
would come back to the petitioner automatically as a
consequence.
      16. Though the first component of the prayer made in the
main writ petition is to declare the seizure of cash to the tune of
Rs.20 Crores as illegal, the said prayer may become redundant
once the seized amount of Rs.20 Crores is treated as an
income declared under the PMGKY Scheme. In fact the total
amount seized from the bank accounts of the petitioner was
Rs.36.97 Crores. The petitioner is not seeking a declaration
that the seizure of the entire amount of Rs.36.97 Crores is
illegal. The petitioner has limited his prayer only in respect of a
part of the seized amount namely Rs.20 Crores, which he had
declared under the PMGKY Scheme.  
      17. As we have pointed out earlier, all the pre-conditions
to be satisfied by a person to come under the PMGKY Scheme  
have been satisfied by the petitioner in the following manner:
1.      By the department themselves appropriating Rs.9.98
Crores out of the seized amounts towards tax, surcharge
and penalty in terms of Sections 199D and 199E.
2.      The department converting a sum of Rs.5 Crores into RBI
bonds as required by Section 199F, pursuant to the
interim orders passed in W.P.No.9262 of 2017.
3.      The petitioner filing a declaration in Form-I on
28.03.2017 as stipulated by Section 199C.
      18. But it must be pointed out that only the first out of
the aforesaid three pre-conditions, was fulfilled by the
petitioner with the consent of the department as the
department had no objection to appropriate out of the seized
amount, a sum of Rs.9.98 Crores towards tax, surcharge and
penalty. The other two pre-conditions for accepting the
petitioner under the PMGKY Scheme were satisfied by the
petitioner pursuant to the interim orders passed by this court
in W.P.No.9262 of 2017. Therefore the entitlement of the
petitioner to come under the PMGKY Scheme in respect of the
disclosed income of Rs.20 Crores, is subject to the outcome of
W.P.No.9262 of 2017. When the question of entitlement of the
petitioner to come under the PMGKY Scheme in respect of
Rs.20 Crores has not reached finality, but is subject to the
outcome of W.P.No.9262 of 2017, the petitioner is not entitled
to come up with the 2nd Writ Petition.
      19. As we have pointed out earlier, the second and third
pre-conditions for the acceptance of the declaration of the
petitioner under the PMGKY Scheme were fulfilled pursuant to
the interim orders passed in W.P.No.9262 of 2017. In case the
said W.P.No.9262 of 2017 is allowed eventually, the petitioner
will be entitled automatically to the balance amount of Rs.5
Crores, which represents the 25% of income declared under
the PMGKY Scheme.  
      20. Therefore the petitioner ought not to have come up
with the above writ petition as rightly contended by Mr. J.V.
Prasad, learned Senior Standing Counsel for the department.
But at the same time, the petitioner could have come up with a
miscellaneous petition in the previous writ petition itself, for a
direction to release an amount of Rs.5 Crores. After all the
petitioner came up with a miscellaneous petition in the
previous writ petition for the release of Rs.5 Crores for being
deposited into RBI bonds, for compliance with Section 199F.
Therefore, the petitioner could have come up with another
miscellaneous petition in the very same writ petition.
      21. However, we do not wish to dismiss this writ petition
on the sole ground that the petitioner could not have converted
into a fresh writ petition, what could have been filed as a
miscellaneous petition in a previous writ petition. If we dismiss
this writ petition on this sole ground, the petitioner can come
up with a miscellaneous petition in the previous writ petition
and the same will only be a multiplication. Therefore, we shall
decide here and now, whether the petitioner is entitled to the
reliefs prayed for.
      22. As we have indicated earlier, the prayer of the
petitioner in this writ petition comprises of three parts, the first
part challenging the seizure of the amount to the extent of
Rs.20 Crores, the second part challenging the rejection of the
request for release of Rs.5 Crores, and the third part seeking a
direction to release the amount of Rs.5 Crores. The first part of
the prayer will lose its meaning and significance, if we grant the
substantial relief of release of Rs.5 Crores to the petitioner,
since out of the sum of Rs.20, Crores declared by the petitioner
under the PMGKY Scheme, a portion equivalent to 75% has  
already appropriated by the Government towards tax,
surcharge, penalty and investment in RBI Bonds. Therefore,
the only significant question that we have to address ourselves
in this writ petition is, as to whether the petitioner will be
entitled to release of Rs.5 Crores.
      23. Before we find an answer to the above question, we
should settle a small area of dispute between the petitioner and
the respondents. As we have pointed out earlier, the total
amount seized from the current account of the petitioner was
Rs.36.97 Crores, out of which a sum of Rs.20 Crores is sought
to be brought under the PMGKY Scheme. Therefore, the claim
of the petitioner is that a sum of Rs.16.97 Crores is available
with the department, over and above the amount of Rs.5
Crores liable to be refunded to them under the PMGKY
Scheme. In other words, the claim of the petitioner is that if the
amount of Rs.5 Crores forming part of the amount of Rs.20
Crores declared under the Scheme is released to them, the
department will still be left with Rs.16.97 crores, to take care of
any contingency that may arise in future.
      24. But the department filed a counter affidavit to the
rejoinder filed by the petitioner, claiming that a sum of Rs.8.61
Crores has been adjusted towards the demand in relation to
the assessment year 2012-2013, leaving only a balance of
Rs.13.39 Crores, and a sum of Rs.2.95 Crores may become  
payable by the petitioner as per the returns filed under Section
153A, as self assessment tax. This will leave only a sum of
Rs.10.44 Crores available with the department, as per the
counter to the rejoinder filed by the department.
      25. In other words, the claim of the petitioner is that even
after releasing a sum of Rs.5 Crores forming part of the
disclosed income of Rs.20 Crores, the department will be left
with Rs.16.97 Crores. But according to the department, they
will be left only with a sum of Rs.10.44 Crores, inclusive of the
amount of Rs.5 Crores now sought to be released.
      26. We do not think that we need to go into the dispute
with regard to the above issues. Even if we go by the counter
filed by the department to the rejoinder filed by the petitioner,
the department has a surplus amount of Rs.10.44 Crores,
which is twice the amount now sought by the petitioner to be
released. Therefore, the department will still have a sum of
Rs.5.44 Crores, which is not adjustable (1) either towards any
disputes under the PMGKY Scheme; (2) or towards any other
dues payable by the petitioner. Keeping this fundamental fact
in mind, let us now go to the contentions raised. The refusal of
the department to release the amount of Rs.5 Crores sought for
by the petitioner, is on account of the fact that the seizure was
effected under Section 132B of the Income Tax Act. It is stated
by the respondents in their counter affidavits that after the
Government of India notified demonetisation of certain
currencies, the petitioner started depositing cash into the
current account and also started effecting withdrawals and
diversions. A huge amount of Rs.40 Crores came to be
deposited by the petitioner on two dates, viz., 23.12.2016 and
27.12.2016, forcing the department to issue a prohibitory
order under Section 132(3). It is further claimed by the
department that the Director of the petitioner gave a sworn
statement under Section 132(4) on 02.01.2017 to disclose an
income of Rs.40 Crores. But after receiving advice from
seasoned (?) professionals, the petitioner sought to declare only
a sum of Rs.20 Crores under the Scheme. Therefore, the
contention of Mr. J.V. Prasad, learned Senior Standing Counsel
for the petitioner is that in view of Section 132B, the petitioner
is not entitled to the release of the amount of Rs.5 Crores,
especially when the declaration under the PMGKY Scheme was  
made after the seizure was effected. The learned Senior
Standing Counsel also drew our attention to
Section 199-I, under which the amount of undisclosed income
declared in accordance with Section 199C shall not be
included in the total income of the declarant for any
assessment year. According to the respondents, the petitioner
did not file returns of income for the assessment years 2014-
2015, 2015-2016 and 2016-2017. Therefore, it is contended
by Mr. J.V. Prasad, learned Senior Standing Counsel that the
petitioner is not entitled to the release of the aforesaid amount.
      27. In response to the above contentions, it was argued
by Mr. C.P. Ramaswamy learned counsel for the petitioner that
as per the decision of the Supreme Court in K.C.C Software
Ltd., v. Director of Income Tax , cash in bank is
conceptually different from cash in hand and that it is not
permissible to convert assets to cash and thereafter impound
the same. More over, PMGKY Scheme does not allow all  
provisions of the Income Tax Act to come into play. Under
Section 199N, the provisions of Chapter-XV of the Income Tax
Act relating to liability in special cases and of Sections 119,
138 and 189 of the Act, so far as may be, shall apply in relation
to proceedings under the Scheme as they apply in relation to
proceedings under the Income Tax Act. Therefore, it is
contended by Mr. C.P. Ramaswamy learned counsel for the  
petitioner that Section 132B would have no application.
      28. But the contentions of Mr. C.P. Ramaswamy, learned
counsel for the petitioner do not merit acceptance. As rightly
pointed out by Mr. J.V. Prasad, learned Senior Standing
Counsel for the department, demonetisation was notified on
08.11.2016. The petitioner started depositing huge amounts of
cash into their current account. Within a couple of days from
23.12.2016 to 27.12.2016, the petitioner deposited an amount
of nearly Rs.40 Crores. The Taxation Laws (Second
Amendment) Act, 2016 was notified in Government Gazette on
15.12.2016. But the petitioner did not make use of the same.
Therefore, the department issued warrant of authorisation on
30.12.2016, followed by a prohibitory order under Section
132(3) on 31.12.2016. A sworn statement was recorded under
Section 132(4) on 02.01.2017, in and by which the petitioner
agreed to disclose Rs.40 Crores under the PMGKY Scheme. A  
search was conducted on 04.01.2017 and the amounts lying in
bank were seized on 04.01.2017 and 05.01.2017. The first writ
petition was filed in March, 2017.
      29. Therefore, in the timeline of events, the seizure was
effected first and the petitioners offer to come under the
Scheme came later. Hence, the petitioner cannot fall back upon
Section 199N to contend that the provisions of Section 132B
will not apply to a case covered by Chapter IX-A.
      30. Section 132B (1) deals with assets seized under
Section 132 or requisitioned under Section 132A. We do not
know how the amount lying in the current account of a person,
on a particular day, would not constitute an asset. Let us take
a hypothetical case where a person is in enjoyment of overdraft
facility. The amounts withdrawn by the person under the
overdraft facility will surely be shown as a liability by that
person. As a corollary the amount standing to his credit in the
books of accounts will also be shown as an asset.
      31. The reliance placed upon the decision of the Supreme
Court in KCC Software does not appeal to us. In that case the
contention of the assessee was that the bank accounts, which
were disclosed in the regular books of account, were seized by
the department and the money lying therein to the credit of the
assessee were withdrawn. In other words, the Supreme Court
was dealing in KCC Software, an amount which was accounted  
for in the books of accounts. In this case what was seized by
the department from the petitioners current account was
unaccounted money. Therefore, the decision in KCC Software
would have no application to the case on hand.
      32. Apart from the legal arguments, the learned counsel
for the petitioner also appealed for mercy on the ground that
since the entire account has been dried up, the petitioner is not
even in a position to pay salaries to their employees and the
release of feature films was also stuck. Therefore, the learned
counsel for the petitioner pleaded that even if everything goes
against the petitioner, the department will be left with a surplus
amount far greater than Rs.5 Crores and that therefore, the
release of the same to the petitioner, while saving the petitioner
from bankruptcy, would not prejudice the case of the
department in any manner.
      33. As we have pointed out earlier, the amount taken
away from the current account of the petitioner was Rs.36.98
Crores. Out of the said amount, a sum of Rs.20 Crores has
been disclosed under the PMGKY Scheme. If the declaration
filed by the petitioner under Section 199C is accepted by the
department, the department will have to do two things, viz., (a)
to release the amount of Rs.5 Crores; and (b) to allow the
petitioner to encash the amount of Rs.5 Crores invested in RBI
bonds under Section 199F. In other words if the declaration
under PMGKY Scheme is accepted by the department, the  
petitioner will get release of Rs.5 Crores.
      34. Let us take a hypothetical case where the declaration
under PMGKY Scheme is rejected. Even in such a case, the  
petitioner may lose, may be about 70% of the total amount
seized. Still the petitioner will get back 30%.
      35. Though according to the petitioner the department
will be left with a surplus of Rs.16.97 Crores, even after the
release of Rs.5 Crores, the case of the department is that they
left only with a sum of Rs.5 Crores after releasing a sum of Rs.5
Crores, after adjusting the amount payable under all heads for
all these years. Therefore, we are of the considered view that
the release of Rs.5 Crores will not hamper either any
investigation or further proceedings on the part of the
department.
      36. There is also one more aspect. If the declaration
under PMGKY Scheme is accepted by the department, the  
petitioner will not only get immediate release of Rs.5 Crores,
but will get RBI bonds encashable after four years to the total
value of Rs.5 Crores together with interest. The amount lying in
RBI bonds, if allowed to be retained as security for any
eventuality, till the conclusion of all the proceedings, the
departments interest will be more safeguarded, even if they
release the amount of Rs.5 Crores.
      37. Therefore, in fine, the writ petition is disposed of
directing the respondents to release an amount of Rs.5 Crores
to the petitioner within two weeks. The amount of Rs.5 Crores
lying in RBI bonds, shall be kept by the department as security
for the release of the amount hereby ordered, until the
conclusion of any proceedings pending or to be initiated by the
department. If the declaration under PMGKY Scheme is finally
accepted, the RBI bonds may also be released to the petitioner,
provided no other dues are found payable by the petitioner.
      38. As a sequel, miscellaneous petitions, if any, pending
in this writ petition shall stand closed. There shall be no order
as to costs.
___________________________    
V.RAMASUBRAMANIAN, J.    
_____________
T.RAJANI, J.
11th October, 2017.

If the owner of the fishing trawler/fishing vessel/boat fails to pay the charges and other amounts payable to the Port Trust under its Regulations and if the owner of the fishing trawler/fishing vessel/boat failed to comply with the orders of the Deputy Conservator/Traffic Manager, the concerned fishing controller/fishing vessel/boat shall be seized by the Deputy Conservator/Traffic Manager and will be released only after payment of all the dues. A bare reading of the above provision makes it clear that the owner of the vessel is liable to pay the dues if any. In the present case, there being no dues to be collected from the owner of the vessel i.e., the petitioner, and admittedly, the dues claimed are in relation to the Company, the action of the respondents in detaining the Boat is unsustainable and without jurisdiction. In those circumstances, the writ petition is allowed. However, it is made clear that it would be open to the respondents to take all steps for collection of the amounts alleged to be due from M/s. Kaanha Shipping Private Limited, by following the procedure prescribed under law.

THE HONBLE SRI JUSTICE CHALLA KODANDA RAM          

Writ Petition No.2791 of 2017

09-10-2017

K.V.Kalyan Shanker Petitioner

Visakhapatnam Port Trust and others.Respondents  

Counsel for the petitioner: Mr.N.V.Sumanth

Counsel for respondents:Ms.V.Uma Devi

<GIST:

>HEAD NOTE:  

?Cases cited:
       
1.AIR 1965 Supreme Court 40

THE HONBLE SRI JUSTICE CHALLA KODANDA RAM          

      WRIT PETITION No. 2791 OF  2017
O R D E R:

       
        In this writ petition, proceedings, dated 28.07.2016, issued
by respondent No.1-Visakhapatnam Port Trust, are under
challenge.

        Petitioner states that he is the owner of
Boat bearing registration No. VPT 20120040, which is used for the
purpose of carrying men and material to offshore work site. He
incidentally happens to be one of the Directors of M/s. Kaanha
Shipping Private Limited, which operates as stevedores in
respondent No.1-Port Trust handling all types of Cargos in the
Port.  He further states that the said Boat was seized on 27.07.2017
by CISF personnel on the instructions of Marine Department.
When enquiries were made, he was informed that the Boat was
seized on account of the alleged dues owed by M/s. Kaanha
Shipping Private Limited.   He also states that he is only one of the
Directors of the said Company and for the dues owed by it, he
cannot be made liable for the same and therefore, the respondents
to take action against the Company. The assertion of the petitioner
is that there is neither an agreement nor a provision which enable
the respondent authorities to attach/detain the Boat of the
petitioner, who is an individual, with regard to the dues of the
Company.

        The respondents filed a counter-affidavit stating that they are
entitled to detain the Boat for the dues owed by the Company under
Regulation 7(2) of the Visakhapatnam Port Trust Fishing Harbour
Regulations, 1986 framed in exercise of statutory powers under the
Major Port Trust Act, 1963.

        Sri N.V. Sumanth, learned counsel appearing for the
petitioner, by placing reliance on the judgment of the Honble
Supreme Court in Tata Engineering and Locomotive Company  
Limited Vs. The State of Bihar and others , would submit that it is
well-settled that the Company is a separate corporate entity which
has its own legal existence and the same is different from the
shareholders of the Company.  It is the specific contention of the
learned counsel for the petitioner that the petitioner cannot be made
liable to pay the dues of the Company.

        Ms.V.Uma Devi, learned Standing Counsel appearing on
behalf of the respondents, reiterates the contentions made in the
counter-affidavit and would submit that the Company owes huge
amounts to the extent of Rs.4,47,78,833/- and further, the petitioner
had also executed a power of attorney in favour of his father to
represent the Company and to sign all the documents in relation to
it and therefore, the petitioner would be vicariously liable for the
dues owed by the Company and the action taken by the
respondents is not in violation of law.

        Having considered the respective submissions, it may be
noted that the Honble Supreme Court in the judgment referred to
supra, while dealing with the legal status of the individual
shareholders vis--vis the legal entity, held as under:

        The true legal position in regard to the character of a corporation or
a company which owes its incorporation to a statutory authority, is not in
doubt or dispute.  The Corporation in law is equal to a natural person and
has a legal entity of its own.  The entity of the Corporation is entirely
separate from that of its shareholders; it bears its own name and has a
seal of its own; its assets are separate and distinct from those of its
members; it can sue and be sued exclusively for its own purpose; its
creditors cannot obtain satisfaction from the assets of its members; the
liability of the members or shareholders is limited to the capital invested
by them, similarly the creditors of the members have no right to the
assets of the Corporation.  This position has been well-established ever
since the decision in the case of Salomn v. Salomon and Company,
1897 AC 22 was pronounced in 1897; and indeed, it has always been
the well recognised principle of common law.  However, in the course of
time the doctrine that the Corporation or a Company has a legal and
separate entity of its own has been subjected to certain exceptions by
the application of the fiction that the veil of the Corporation can be lifted
and its face examined in substance.  The doctrine of the lifting of the veil
thus marks a change in the attitude that law had originally adopted
towards the concept of the separate entity or personality of the
Corporation.  As a result of the impact of the complexity of economic
factors, judicial decisions have sometimes recognised exceptions to the
rule about the juristic personality of the Corporation.  It may be that in the
course of time these exceptions may glow in number and to meet the
requirements of different economic problems.

        It is not in dispute that the petitioner is the owner of the Boat
in question.  It is also not in dispute that there is no claim against
the petitioner with respect to the Boat in his individual capacity.  In
this connection, it is apt to quote Regulation 7(2) of the
Visakhapatnam Port Trust Fishing Harbour Regulations, 1986,
which reads thus:

       If the owner of the fishing trawler/fishing vessel/boat fails to pay
the charges and other amounts payable to the Port Trust under its
Regulations and if the owner of the fishing trawler/fishing vessel/boat
failed to comply with the orders of the Deputy Conservator/Traffic
Manager, the concerned fishing controller/fishing vessel/boat shall be
seized by the Deputy Conservator/Traffic Manager and will be released
only after payment of all the dues.

        A bare reading of the above provision makes it clear that the
owner of the vessel is liable to pay the dues if any. In the present
case, there being no dues to be collected from the owner of the
vessel i.e., the petitioner, and admittedly, the dues claimed are in
relation to the Company, the action of the respondents in detaining
the Boat is unsustainable and without jurisdiction.

        In those circumstances, the writ petition is allowed.
However, it is made clear that it would be open to the respondents
to take all steps for collection of the amounts alleged to be due
from M/s. Kaanha Shipping Private Limited, by following the
procedure prescribed under law.

      Consequently, the miscellaneous petitions, if any shall stand
disposed of. No costs.
________________________  
CHALLA KODANDA RAM, J      
Dt:09.10.2017

Admittedly, the petitioner has an effective alternative remedy of appeal as against the impugned order. But the petitioner seeks to bypass the alternative remedy on two grounds viz., (a) that there was a violation of the principles of natural justice, inasmuch as the request of the petitioner to cross-examine the witnesses whose statements were relied upon, was turned down arbitrarily and (b) that the rejection of the request for cross-examination was also contrary to the order of remand passed by the CESTAT, on 08-9-2014.

HONBLE SRI JUSTICE V.RAMASUBRAMANIAN AND HONBLE SRI JUSTICE ABHINAND KUMAR SHAVILI                    

Writ Petition No.5917 of 2017

31-10-2017

1. M/s Manidhari Stainless Wire Pvt. Ltd., Through its Director, Shri Pavan Raj Kanugo, Secunderabad-500 003
2. Pavan Raj Kanugo S/o Sumermal Kanugo, Aged 52 years, Occ: Business, 203, Asha Devi Apts., P.G. Road, Sindhi Colony, Secund    

1.Union of India, Through its Secretary, Govt. of India, Ministry of Finance, New Delhi
 2. The Addl. Director General, O/o. Director General, Central Excise Intelligence, Hyderabad Zonal Unit, Hyderabad, H.No.1-1
Begumpet, Hyderabad-500 0013. Commissioner of Central Excise and Service Tax,   Hyderabad-IV, Posnett Bhavan, Tilak Road,  Ra  

Counsel for Petitioners:Mr. Madhava Sham Murthy, representing Mr. Srikanth Kaveti

Counsel for Respondents 1 to 3: Mr. B.Narayana Reddy,Senior Standing Counsel

<Gist:

>Head Note:

? Cases referred:
1.2013 (289) ELT 3 (SC)
2.2017 (350) ELT 486 (Bom.)
3.1983 (13) ELT 1486 (SC)
4.1997 (89) ELT 646 (SC)


HONBLE SRI JUSTICE V.RAMASUBRAMANIAN          
AND
HONBLE SRI JUSTICE ABHINAND KUMAR SHAVILI        
Writ Petition No.5917 of 2017
Order: (per V.Ramasubramanian, J.)
      The petitioner has come up with the above writ petition
challenging an Order-in-Original passed by the Commissioner
of Central Excise and Service Tax (the 3rd respondent herein),
in terms of Rule 14 of the CENVAT Credit Rules, 2004 read
with Section 11A(4) of the Central Excise Act, 1944, confirming
a demand of Rs.4,52,24,794/- towards CENVAT/ CVD, of  
Rs.67,03,377/- towards Additional duty of import,
of Rs.9,04,283/- towards Education Cess, of Rs.4,21,568/-
towards Secondary and Higher Education Cess, in all totalling
to Rs.5,32,54,022/-, purportedly towards recovery of the
CENVAT Credit improperly availed.
      2. We have heard Mr. Madhava Sham Murthy, learned
counsel appearing for the petitioner and Mr. B.Narayana
Reddy, learned Senior Standing Counsel for the respondents.
      3. The petitioner is engaged in the manufacture of
various stainless steel items, such as S.S. Wire, S.S. Flat, S.S.
Wire Rod, S.S. Angle etc., classifiable under Ch.72 of the
Schedule to the Central Excise Tariff Act, 1985. Search
operations were conducted at the factory premises of the
petitioner, the residential premises of its Directors and other
related premises, on 24-6-2009, on the ground that the officers
of the Directorate of Central Excise Intelligence had specific
information that the petitioner was irregularly availing CENVAT
Credit of duty paid on certain goods claiming them as inputs
without actually using the same in or in relation to the
manufacture of their dutiable finished goods.
      4. After the search and after recording the statements of a
few persons including a consultant of the petitioner, a show
cause notice was issued on 01-3-2012, calling upon the
petitioner to show cause as to why CENVAT Credit amounting
to Rs.4,50,52,629/-, for the period from 01-02-2007 to
02-10-2011 should not be demanded and recovered under
Section 11A(1). This show cause notice resulted in an ex parte
Order-in-Original being passed on 20-5-2013.
      5. As against the Order-in-Original dated 20-5-2013, the
petitioner filed an appeal before the CESTAT. The CESTAT
allowed the appeal by an order dated 08-9-2014 and
remanded the matter back to the Adjudicating Authority.
      6. In the de novo proceedings, held on 20-10-2015, the
authorised representative of the petitioner seems to have
requested for cross-examination of some persons. The
petitioner also requested permission to inspect the documents.
      7. But the request was rejected and hence the petitioner
filed a reply to the show cause notice. Thereafter, a personal
hearing took place on 18-3-2016. It appears that the petitioner
reiterated their demand for cross-examination. However, by
the order impugned in the writ petition dated
31-3-2016, which was later modified by a corrigendum dated
24-8-2016, the 3rd respondent confirmed the demand.
Therefore, aggrieved by the same, the petitioner has come up
with the above writ petition.
      8. Admittedly, the petitioner has an effective alternative
remedy of appeal as against the impugned order. But the
petitioner seeks to bypass the alternative remedy on two
grounds viz., (a) that there was a violation of the principles of
natural justice, inasmuch as the request of the petitioner to
cross-examine the witnesses whose statements were relied
upon, was turned down arbitrarily and (b) that the rejection of
the request for cross-examination was also contrary to the
order of remand passed by the CESTAT, on 08-9-2014.
      9. For the purpose of convenience, let us take up the
second ground for consideration first. It is the contention of the
learned counsel for the petitioner that the refusal of the
Adjudicating Authority to permit the petitioner to cross-
examine those persons whose statements were relied upon,
was contrary to the order of remand passed by the CESTAT in
the first round. Therefore, it is necessary to look at the order
passed by the CESTAT in the first round of litigation.
      10. It is seen from the order of CESTAT dated
8-9-2014 that the same was passed in common on three
appeals, one filed by the petitioner/Company and the other two
filed by the Directors of the petitioner/Company. Paragraph-3
of the order of CESTAT shows that two grounds were urged
viz., (a) that the request for cross-examination was denied and
(b) that the request for furnishing the documents, properly
paginated and indexed was not considered.
In paragraph-4 of the order, the Tribunal recorded its
displeasure that though the petitioner was responsible for
protracting the proceedings by not filing a reply to the show
cause notice, there was substantial contribution from the
Commissioner, forcing the Tribunal to reluctantly interfere with
the order. In paragraph-5, the Tribunal, after recording the
contents of the letter of the counsel for the petitioner seeking
cross-examination of the persons cited therein, went on to
examine how the request for certain documents was not
properly considered. Paragraph-5 of the order of the Tribunal
reads as follows:
5. In this case on 29-3-2013, the advocate for the
appellant submitted a letter to the Commissioner
wherein he gave the name of the persons whom he would
like to cross-examine and also cited several decisions to
support his submissions relating to cross-examination.
Further in paragraph 5 of his letter, he submits that
documents from C1 to C8, C13, C15 to C18, C20, C22,
C24 to C28 and C1.4 are not available in the relied upon
documents. This submission has been simply brushed  
aside without proper discussion and without taking note
of the fact which was brought out by the learned AR
today during the hearing that till then correspondence
was being undertaken by the appellants and they had
been provided documents on two occasions and this
specific complaint about specific documents not being
received had not been made till that date.
      11. In paragraph-6 also, the discussion revolved only
around the non-furnishing of the documents. In paragraph-7
of its order (penultimate paragraph), the Tribunal recorded its
findings and in paragraph-8, the Tribunal recorded the result
of the appeals. Paragraphs-7 and 8 of the order of the Tribunal
read as follows:
       7. From the above it can be seen that it was the
Commissioners office who directed the assessee to go to
DGCEI office and also required the Additional Director to
conduct verification and send a confirmation. That being
the position, it was not proper for the Commissioner to
simply adjudicate the matter ignoring his own office
request to the Additional Director for a report and
ignoring the fact that learned counsel for the appellants
had stated that the DGCEI office had asked the
appellants to come after
15th April for the purpose of verification of documents/
supply of documents. Having written to the Additional
Director to verify and confirm and having written to the
assessee to go to the DGCEI office, passing an
adjudication order without getting the complete
reply/proper reply and without giving an opportunity to
the appellants to go through the process of verification
with DGCEI was not proper.
       8. In view of the above observations very
reluctantly we set aside the impugned order and remand
the matter for fresh adjudication to the learned
Commissioner with a hope that a proper well reasoned
order will be passed. Needless to say we hope that
appellants shall also extend cooperation. Then again we
find that the appellants have been asking for paginated
index and frankly we could not understand what exactly
was the paginated index they wanted. However while the
appellants want every page to be numbered, the Revenue
seems to think that if annexure numbers have been given
that would be enough. This is another confusion that has
arisen. We hope there will be no such confusions in
future.
      12. From a careful look at the order of CESTAT dated 08-
9-2014 in its entirety, it can be easily deduced that the
Tribunal set aside the order of adjudication and remanded the
matter back, solely on the ground that certain documents were
not made available. Even in the operative portion of the order,
the Tribunal directed the Adjudicating Authority only to pass a
well reasoned order, after furnishing to the petitioner, the
documents with a paginated index (whatever it meant). Two
things follow from the order of the Tribunal dated 08-9-2014.
They are: (a) that though the ground relating to denial of
opportunity to cross-examine witnesses was specifically raised,
the Tribunal did not record any finding in paragraphs-7 and 8
of its order on this issue and (b) that in any case there was no
positive direction by the Tribunal in its order dated 08-9-2014
to give an opportunity to the petitioner to cross-examine the
witnesses. Therefore, the first contention of the petitioner that
the Adjudicating Authority failed to comply with the directions
issued by the CESTAT in the order of remand, is wholly
misconceived. Unless the Tribunal has recorded a categorical
finding that the refusal of the Adjudicating Authority to permit
cross-examination was illegal or unless the Tribunal has
directed the Adjudicating Authority to allow cross-examination,
it is not open to the petitioner to contend that the order of the
Tribunal was not complied with.
      13. In any case if the petitioner thinks that the
Adjudicating Authority failed to comply with the order of the
CESTAT, they should have gone again before the CESTAT. After
all, the order impugned in the writ petition is liable to be
appealed against, to the very same CESTAT. Without going to
the Tribunal and complaining that its order of remand was
violated, the petitioner has chosen to come to this Court to
complain that the order of the CESTAT was violated. Therefore,
we have no hesitation in rejecting the second contention.
      14. The first contention revolves around the refusal of the
adjudicating authority to permit cross-examination. In order to
understand and appreciate the scope and reach of this
contention, it is necessary to look into the nature of the
allegations against the petitioner, which lead to the
adjudication. The allegations against the petitioner are
(a) that they availed CENVAT Credit of duty paid on the
consignments of S.S. Sheet/S.S. Coils as detailed in the
annexure, without actually using the same in or in relation to
the manufacture of dutiable finished goods, (b) that they
showed certain portions of S.S. Sheets/S.S. Coils to have been
sent to job workers, for the conversion of the same into S.S.
Billets, without actually sending them (c) that the petitioner
declared the description of goods on the job work challans as
Scrap/Steel Scrap/S.S. Scrap even in cases where S.S.
Sheet/Coil was shown as sent for job work in their Raw
Material Stock Register and (d) that the petitioner had
procured unaccounted S.S. Scrap from the market and
supplied the same to job workers.
      15. The persons whom the petitioner wanted to summon
for cross-examination and the reasons for making such a
request were given by the petitioner in a letter dated 03-11-
2015 sent by the counsel for the petitioner to the
Commissioner. For the purpose of easy appreciation,
we present in a tabular form, the names, their identities and
the reasons given by the petitioner for making a request for
cross-examining them:
Name
Status
Reasons
1. Pradeep Das
General Manager
(Production) of the
petitioner/Company
He stated before the Investigating
Officers that he was not aware of the
purpose of receipt of consignments of
S.S. Sheets, S.S. Strips and S.S.
Flats into the factory. He claimed
that there was no use for the same
and that he was also not aware as to
why those goods were sent outside
the factory. The petitioner wanted to
cross-examine him on the ground
that this person deliberately kept
quiet and failed in his duty to
portray the correct position in the
factory, despite being Production-in-
Charge and despite being fully aware
of the nature of the activities in the
factory
2. Virender
 Kumar Pandey
Proprietor of M/s.
Akshat Steel Traders
He claimed in his statement to have
supplied M.S. Scrap to the company.
The petitioner claimed that this
person should be called upon to
produce all records such as Sale
Registers, Sales Invoices, Delivery
Challans, Monthly VAT Returns and
Income Tax Returns, evidencing the
supply of goods to the petitioner.
3.N.M.
   Bhandari
AGM (Accounts) of
M/s. Stainless India
Ltd.
He claimed that his company did not
receive any S.S. Coils from the
petitioner and that S.S. Coils could
not be used in their induction
furnace for melting purposes. The
petitioner claims that being an
accounts person, this person was
not competent to speak about the
aspects of production.  At the same
time, the petitioner claim that Sri
Bhandari was correct in stating that
M.S. Patti was not received. But the
petitioner claims that Bhandari
failed to disclose that what was
received by the company was M.S.
Patti Scrap ignited in the factory and
not supplied by Akshat Traders.
Therefore, the petitioner wanted to
cross-examine him to cull out the
actual nature of material that was
sent for conversion.
4. Ashok
    Fulvalia
Director, M/s.
Harrison Steels Pvt.
Ltd.
This witness stated that
M.S. Patti was not received but M.S.
Scrap was received. The petitioner
wanted this witness to come with all
the factory records showing the
receipt of M.S. Patti from their
factory.

      16. The request for cross-examination of the above four
witnesses was rejected by the Adjudicating Authority in
paragraph-22 of the impugned order, for the reasons stated
therein. It will be useful to extract the reasons stated by the
Adjudicating Authority as follows:
       (i) the deposition of Shri Pradeep Das regarding
the usage or otherwise of SS sheets, SS strips and SS
flats in the factory has also been corroborated by the
statements of Shri Uma Shankar Gupta, Ex-employee,  
Shri Naveen Chandra Upadyaya, Logistics in-charge Shri
Mukesh Pathak, former Excise Manager (Para 5.3, 5.6
and 5.11.5 respectively of SCN);
       (ii) the statements of S/Shri N.M. Bhandari, Ashok
Fulvalia, were shown to Shri Babulal Doshi, Director
during the course of his statement on 01-02-2012 and
after perusing the said statements, Shri Doshi admitted
that he is in agreement with the contents of the same.
(Para 6.9 of SCN);
       (iii) the statements of job workers were shown to
Shri Pavan Raj Kanugo during the course of recording his
statement dated 12-12-2011 under Section 14 of Central
Excise Act, 1944 and after going through the said
statements, Shri Kanugo stated that he had nothing to
differ or add in that regard (Para 6.8.2 of SCN);
       (iv) the depositions of S/Shri Virender Kumar
Pandey, N.M. Bhandari, Ashok Fulvalia, are also
supported by the records maintained by their respective
firms/ companies and the Show cause notice relies on
such records (Annexure C-16, C-18 and C-21
respectively) and the relevant details in the said records
are extracted in Annexure E-3.1, E-3.3 and E-4 to the
show cause notice;

      17. Apart from the above factual grounds of rejection, the
Adjudicating Authority also took a legal ground for rejection of
the request for cross-examination. The legal ground was that
as per the decision of the Supreme Court in Telestar Travels
Pvt. Ltd. V. Special Director of Enforcement , the rejection
of the request for cross-examination need not always
tantamount to violation of the principles of natural justice. The
decision of the Supreme Court in Telestar Travels Pvt. Ltd.
followed two earlier decisions, one in M/s. Kanungo & Co. v.
Collector of Customs, Calcutta [1983 (13) E.L.T. 1486 (S.C.)]
and the other in Surjeet Singh Chhabra v. Union of India
[1997 (89) E.L.T. 646 (S.C.)].
      18. Assailing the factual as well as the legal grounds on
which the Adjudicating Authority denied permission for cross-
examination, it was contended by Mr. Madhava Sham Murthy,  
learned counsel for the petitioner, that in Telestar, the
Supreme Court was dealing with proceedings under the
Foreign Exchange Regulation Act, 1973. Since Rule 3 of the
Adjudication Rules made it clear that the rules of procedure do
not apply to adjudication proceedings, the Supreme Court
came to a particular conclusion in Telestar and hence,
according to the learned counsel for the petitioner, the said
decision cannot be relied upon in the proceedings under the
Central Excise Act. In support of this contention, the learned
counsel places heavy reliance upon the decision of a Division
Bench of the Bombay High Court in Nirmal Seeds Pvt. Ltd. v.
Union of India .
      19. We have carefully considered the reasons stated in
paragraph-22.1 of the impugned order and the contentions of
the learned counsel for the petitioner. We have already
tabulated the details of the persons whom the petitioner
wanted to cross-examine and the reasons for the petitioner
making such a request. The first witness whom the petitioner
wanted to cross-examine, was their own General Manager
(Production). Admittedly he was an employee of the petitioner.
The petitioner has made an allegation that though he was fully
aware of the nature of the activities in the factory and especially
the manufacturing process, he deliberately kept quiet and
failed in his duty to portray the correct position in the factory.
      20. We do not know how, if one of the employees of
a company facing adjudication failed to perform his duties,
it would be a ground to seek his cross-examination.
The petitioner never filed any statement or sworn affidavit of
Mr. Pradeep Das, either retracting his earlier statement or
attempting to explain the same. In fact all that Sri Pradeep Das
said was that he was not aware about the purpose of receipt as
well as despatch of certain consignments. We do not know how
a cross-examination can be permitted in respect of something
that a witness claimed to be unaware of.
      21. Insofar as the remaining three witnesses whom the
petitioner wanted to summon for cross-examination are
concerned, the Adjudicating Authority has recorded
categorically that their statements were supported by records
maintained by their firms/companies and that the details of
such records were also indicated in Annexures C-16, C-18 and
C-21 to the show cause notice. The relevant details from the
said records were also extracted in Annexures E-3.1,
E-3.3 and E-4 to the show cause notice.
      22. Therefore, we are of the considered view that the
factual grounds on which the Adjudicating Authority rejected
the request for cross-examination, are cogent and convincing.
The statements of third party witnesses were in fact shown to
one of the Directors of the petitioner/Company by name
Babulal Doshi and he is stated to have confirmed those
statements.
      23. It may be of interest to note that before the
Adjudicating Authority, the petitioner/Company as well as the
other Director of the Company viz., Sri Pavan Raj Kanugo alone
were represented by counsel. It is recorded in paragraph-18.1
of the impugned order that Sri Madhava Sham Murthy, learned
counsel, appeared only for
M/s. Manidhari Stainless Wire Pvt. Ltd. and its Director Pavan
Raj Kanugo and that the advocate was not appearing for Sri
Babulal Doshi, the other Director who was also a noticee. In
other words, Babulal Doshi, one of the Directors of the
petitioner/Company, who confirmed the statements of the third
party witnesses, failed even to appear before the Adjudicating
Authority despite the fact that the Company as well as the
other Director were represented before the Adjudicating
Authority. Therefore, the reasons stated by the Adjudicating
Authority cannot be found fault with.
      24. Coming to the legal grounds, it is seen that in
Kanugo & Co. v. Collector of Customs , the Supreme Court
held categorically that the principles of natural justice do not
require that in matters of this nature, persons who gave
information should be allowed to be cross-examined.
In Kanugo & Co., what was in challenge was an order of
confiscation of goods under Section 167(8) of the Sea Customs
Act, 1878 read with Section 3(2) of the Imports and Exports
(Control) Act, 1947. In paragraph-12 of its judgment, the
Supreme Court held in Kanugo & Co. as follows:
12.     The complaint of the appellant now is that
all the persons from whom enquiries were alleged to have
been made by the authorities should have been produced
to enable it to cross-examine them. In our opinion, the
principles of natural justice do not require that in
matters like this the persons who have given information
should be examined in the presence of the appellant or
should be allowed to be cross-examined by them on the
statements made before the Customs Authorities.
Accordingly we hold that there is no force in the third
contention of the appellant.

      25. In Surjeet Singh Chhabra v. Union of India , the
Supreme Court was concerned with a case arising under the
Foreign Exchange Regulation Act and the Customs Act. Though  
the decision in Surjeet Singh Chhabra was a very brief order,
the Supreme Court rejected the contention that the denial of
cross-examination tantamounted to the violation of the
principles of natural justice.
      26. In Telestar Travels Pvt. Ltd., the Supreme Court
was concerned with a set of proceedings under the Foreign
Exchange Regulation Act, 1973. In paragraph-18 of its
decision, the Supreme Court dealt with this issue as follows:
       18. There is, in our opinion, to merit even in that
submission of the learned counsel. It is evident from Rule
3 of the Adjudication Rules framed under Section 79 of
the FERA that the rules of procedure do not apply to
adjudicating proceedings. That does not, however, mean
that in a given situation, cross-examination may not be
permitted to test the veracity of a deposition sought to be
issued against a party against whom action is proposed
to be taken. It is only when a deposition goes through the
fire of cross-examination that a Court or Statutory
Authority may be able to determine and assess its
probative value. Using a deposition that is not so tested,
may therefore amount to using evidence, which the party
concerned has had no opportunity to question. Such
refusal may in turn amount to violation of the rule of a
fair hearing and opportunity implicit in any adjudicatory
process, affecting the right of the citizen. The question,
however, 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. The answer to that
question would depend upon the facts and circumstances
of each case.    

      27. In paragraph-19, the Supreme Court extracted
paragraph-12 of the decision in Kanugo & Co. Eventually the
Court held in paragraph-20 as follows:
       20. Coming to the case at hand, the Adjudicating
Authority has mainly relied upon the statements of the
appellants and the documents seized in the course of the
search of their premises. But, there is no dispute that
apart from what was seized from the business premises
of the appellants the Adjudicating Authority also placed
reliance upon documents produced bys Miss Anita
Chotrani and Mr. Raut. These documents were, it is
admitted disclosed to the appellants who were permitted
to inspect the same.  The production of the documents
duly confronted to the appellants was in the nature of
production in terms of Section 139 of the Evidence Act,
where the witness producing the documents is not
subjected to cross-examination. Such being the case, the
refusal of the Adjudicating Authority to permit cross-
examination of the witnesses producing the documents
cannot even on the principles of Evidence Act be found
fault with. At any rate, the disclosure of the documents
to the appellants and the opportunity given to them to
rebut and explain the same was a substantial compliance
with the principles of natural justice. That being so,
there was and could be no prejudice to the appellants nor
was any demonstrated by the appellants before us or
before the Courts below. The third limb of the case of the
appellants also in that view fails and is rejected.

      28. Therefore, it is clear that the right to cross-examine is
not absolute at least insofar as the cases of this nature are
concerned. If there are factual grounds to show that the denial
of cross-examination was based upon the sound logic, then the
order of adjudication cannot be interfered with.
      29. It is true that in Nirmal Seeds Pvt. Ltd., a Division
Bench of the Bombay High Court distinguished the decision in
Telestar Travels. But the reasons for doing so in that
particular case are indicated in paragraph-12 of the decision,
which read as follows:
       12. In the present case, we do not think that we
are allowing the petitioners a liberty to prolong or delay
the adjudication proceedings. The petitioners in their
communication dated 23-11-2016, copy of which is at
Page 108 of the paper book, expressly brought to the
notice of the authorities that in the show cause notice
the statements of Dinesh J. Gunjal, Accountant of Nigal
Krushi Seva Kendra, Nashik, Dilip Sampat Dhikale and
Aditya Keshavsingh Pardeshi are referred and relied
upon.
The justification for cross-examination of each of these
persons is provided by the petitioners. They state that
Dinesh Gunjal is an Accountant but he has given the
statement as if he is a technical person and without
knowing the chemical composition and applications. He
has deposited that the products Bio Power and Bio Force
are growth stimulants/regulators and that is why his
technical capabilities have to be adjudged. His cross-
examination, therefore, is crucial. Dilip Sampat Dhikale
is
an undergraduate, yet, he deposes on identical lines and
claims that the above products are not ordinary
fertilizers.  Therefore, in order to ascertain whether he is
technically equipped to differentiate between plant
growth regulator and plant growth promoter and also to
know the difference between ordinary fertilizer and
stimulants/regulators that his cross-examination is
necessary. The third person also agrees with Mr. Gunjal.

      30. We do not find in this case, the presence of any of
those or similar reasons. Therefore, we are not convinced that
the impugned order could be set aside solely on the ground of
denial of permission to cross-examine the witnesses.
      31. In view of the above, the writ petition is dismissed.
However, it will be open to the petitioner to avail the alternative
remedy of appeal before the appropriate authority. The order
impugned in the writ petition was passed on
18-3-2016 and a corrigendum was issued on 24-8-2016.
The petitioner field the above writ petition on 24-11-2016.
Therefore, if the petitioner files an appeal as against the
impugned orders, the period from 24-11-2016 up to the date
of issue of the copy of this order shall be excluded for
computing either the period of limitation or the period of delay.
The Registry shall return the original impugned order to enable
the petitioner to file an appeal. The miscellaneous petitions, if
any, pending in this writ petition shall stand closed. No costs.
___________________________    
V.RAMASUBRAMANIAN, J.    
______________________________    
ABHINAND KUMAR SHAVILI, J.    
31st October, 2017.

It is settled principle of law that the proceedings under Article 226 are limited to the grounds available for judicial review, whereas the appeal under Section 54 of the Act enables the appellate Court to go through the evidence adduced before the civil Court or available with it in the light of the evidence already adduced and examine whether the enhancement of compensation is proper or not. The alternative remedy and the scope of enquiry in the appeal is much wider than the discretionary remedy of Article 226 of the Constitution. In the circumstances, both the Writ Petitions are dismissed giving liberty to the petitioners to avail the remedy of appeal under Section 54 of the Act and the time spent for these proceedings can be exempted for condoning the delay, if any.

THE HONBLE SRI JUSTICE A. RAMALINGESWARA RAO          

Writ Petition Nos. 20896 of 2017

20-10-2017

Union of India, rep. by the Secretary to the Government of India,Ministry of Defence, South Block, New Delhi and others . P

K. Ravinder Reddy and others . Respondents  

Counsel for the Petitioners:  Asst. Solicitor General

Counsel for the Respondents 1 to 6:  Sri Harender Pershad
Counsel for Respondent No.8        :  Ms. M. Siva Jyothi
Counsel for Respondent No.9        :  GP for Land Acquisition

<Gist :

>Head Note :

? Cases referred:

1. AIR 1980 SC 1118
2.  (1995) 2 SCC 326
3. (2015) 5 SCC 423
4. 2014(6) ALT 405
5. 1987 MLJ 189


HONBLE SRI JUSTICE A. RAMALINGESWARA RAO          
Writ Petition Nos.20896 and 23946 of 2017

Common Order:
      These two Writ Petitions are being disposed of by this common
order, as they involve a common point of law.
      W.P.No.20896 of 2017 was filed challenging the judgment and
decree in L.A.O.P.No.100 of 2011 dated 09.02.2016 passed by the
learned II Additional District Judge, Ranga Reddy District at L.B. Nagar,
Hyderabad,  whereas W.P.No.23946 of 2017 was filed by the same  
petitioners challenging the judgment and decree in L.A.O.P.No.1123 of
2010 dated 06.02.2017 passed by the learned Special Sessions Judge for
trial of Cases under Scheduled Caste and Scheduled Tribe (Prevention of
Atrocities) Act-cum-VII Additional District and Sessions Judge, Ranga
Reddy District at L.B. Nagar, Hyderabad.
      The facts in the two writ petitions are that the second petitioner
sent a requisition for acquisition of lands of an extent of 4000 to 4500
acres in various villages of Ranga Reddy District vide its letter dated
05.11.2004 to the District Collector, Ranga Reddy District for the benefit
of the petitioner Laboratories.  Accordingly, a notification was issued
under Section 4(1) of the Land Acquisition Act, 1894 (for short the Act)
on 06.07.2006 and a declaration was published on 06.07.2007.  The Land
Acquisition Officer, 9th respondent passed an Award on 10.04.2008
awarding a compensation of Rs.600/- per sq. yard for the lands under
acquisition, but having not satisfied with the said Award, the land owners
sought reference under Section 18 of the Act and the same was numbered
as L.A.O.P.No.100 of 2011.  The Civil Court enhanced the compensation
from Rs.600/- per sq. yard to Rs.1250/- per sq. yard by its order dated
09.02.2016.  Challenging the said order, W.P.No.20896 of 2017 was filed.
      The petitioners in W.P.No.23946 of 2017 are also covered by the
same notification, declaration and Award.  However, their reference was
numbered as L.A.O.P.No.1123 of 2010 and the compensation was  
enhanced from Rs.600/- to Rs.4000/- per sq. yard by the Civil Court by its
judgment and decree dated 06.02.2017.  Challenging the said judgement,
W.P.No.23946 of 2017 was filed.
      This Court, by order dated 30.06.2017, while issuing notice before
admission in W.P.No.20896 of 2017, granted interim suspension of the
operation of the judgment and decree dated 09.02.2016 in
L.A.O.P.No.100 of 2011 for a period of six weeks and later on it is coming
up for hearing.  No counter affidavit is filed by the Land Acquisition
Officer, but the other respondents filed an affidavit seeking vacation of
the said order and the averments made in the counter affidavit are not
being dealt with since this Court is disposing of these two Writ Petitions
on the issue of maintainability and availability of alternative remedy.
      Learned counsel for the petitioners submits that the Writ Petitions
are maintainable and in the absence of any notice to the Requisitioning
Authority, the Petitioners, the judgements of the reference courts are
liable to be set aside.
      Learned counsel for the land owners, on the other hand, submitted
that after numbering the reference by the Civil Court, though intimation
was given by the Land Acquisition Officer on 19.04.2014 to the third
petitioner to take necessary steps for impleading and protecting the
interest of the Government, no steps were taken by the third petitioner
and hence the judgements of the Civil Courts are valid.
      In the light of the above rival contentions, the points framed for
consideration in the present Writ Petitions are;
(1)     Whether it is obligatory on the part of the Civil Court to issue
a notice to the beneficiaries of the land acquisition in the case
of a reference to the Civil Court at the instance of the land
owners who were not satisfied with the award of the Land
Acquisition Officer?
(2)     Whether the Writ Petitions are maintainable challenging the
judgements of the reference courts?
(3)     To what relief.

      The land of an extent of Ac.55.03 gts., situated in Survey Nos.1 to
8, 11 to 19, 21 to 25, 27, 30 and 31 of Roshanudowla village,
Saroornagar Mandal, Ranga Reddy District is involved in the two writ
petitions.  The land was acquired for establishing Research facilities and
security strip around the boundaries of DRDL (Defence Research and
Development Laboratory).  The lands of the unofficial respondent land
owners are covered by the award of the Land Acquisition Officer and
hence there is no dispute on facts.  In L.A.O.P.No.100 of 2011 the learned
II Additional District Judge, Ranga Reddy District at L.B. Nagar,
Hyderabad enhanced the compensation from Rs.600/- per sq. yard to
Rs.1250/- per sq. yard, whereas in L.A.O.P.No.1123 of 2010 the learned
VII Additional District and Sessions Judge, Ranga Reddy District at L.B.
Nagar, Hyderabad enhanced the compensation from Rs.600/- per sq. yard
to Rs.4000/- per sq. yard.  Thus, the judgements passed by the reference
courts are challenged in the present Writ Petitions by the petitioners.
      Admittedly, the petitioners were not put on notice and on that
ground the validity of the Awards are under challenge.


Sections 18 to 21 of the Act read as follows.
       18. Reference to Court :- (1) Any person interested
who has not accepted the award may, by written application to
the Collector, require that the matter be referred by the
Collector for the determination of the Court, whether his
objection be to the measurement of the land, the amount of
the compensation, the person to whom it is payable, or the
apportionment of the compensation among the persons
interested.

       (2) The application shall state the grounds on which
objection to the award is taken.

       Provided that every such application shall be made:-

       (a) if the person making it was present or represented
before the Collector at the time when he made his award within
six weeks from the date of the Collector's award;

       (b) in other cases, within six months of the receipt of the
notice from the Collector under Section 12, sub-section (2), or
within six months from the date of the Collector's award,
whichever period shall first expire.

       19. Collector's statement to the Court:- (1) In
making the reference, the Collector shall state for the
information of the Court, in writing under his hand,

       (a) the situation and extent of the land, with particulars
of  any trees, buildings or standing crops thereon;

       (b) the names of the persons whom he has reason to
think interested in such land;

       (c) the amount awarded for damages and paid or
tendered under sections 5 and 17, or either of them, and the
amount of compensation awarded under section 11

       (cc) the amount paid or deposited under sub-section
(3A) of section 17; and

       (d) if the objection be to the amount of the
compensation, the grounds on which the amount of
compensation was determined.

       (2) To the said statement shall be attached a Schedule
giving the particulars of the notices served upon, and of the
statements in writing made or delivered by, the parties
interested respectively.


       20. Service of notice :- The Court shall thereupon
cause a notice, specifying the day on which the Court will
proceed to determine the objection, and directing their
appearance before the Court on that day, to be served on the
following persons, namely: -

       (a) the applicant;

       (b) all persons interested in the objection, except such
(if any) of them as have consented without protest to receive
payment of the compensation awarded; and

       (c) If the objection is in regard to the area of the land or
to the amount of the compensation, the Collector.

       21. Restriction on scope of proceedings:- The scope
of the inquiry in every such proceeding shall be restricted to a
consideration of the interests of the persons affected by the
objection.


      A Division Bench of this Court in M/s. Orient Cement v. State
of A.P., (W.P.No.17532 of 1988 dated 07.10.1994), by relying on a
decision reported in Himalaya Tiles & Marble (P) Limited v. F.V.
Coutinho , and interpreting Section 20(b) of the Act held that it is
mandatory for the Court of reference to cause a notice served on the
beneficiary for whom the land was acquired before proceeding to
determine the compensation.
      In U.P. Awas Evam Vikas Parishad v. Gyan Devi (Dead) by
LRs , a Constitution Bench of the Honble Supreme Court by its majority
judgment held as follows.
To sum up, our conclusions are :
1. Section 50(2) of the L.A. Act confers on a local authority for
whom land is being acquired a right to appear in the acquisition
proceedings before the Collector and the reference court and
adduce evidence for the purpose of determining the amount of
compensation.
2. The said right carries with it the right to be given adequate
notice by the Collector as well as the reference court before
whom acquisition proceedings are pending of the date on which
the matter of determination of compensation will be taken up.
3. The proviso to Section 50(2) only precludes a local authority
from seeking a reference but it does not deprive the local
authority which feels aggrieved by the determination of the
amount of compensation by the Collector or by the reference
court to invoke the remedy under Article 226 of the Constitution
as well as the remedies available under the L.A. Act.
4. In the event of denial of the right conferred by Section
50(2) on account of failure of the Collector to serve notice of
the acquisition proceedings the local authority can invoke the
jurisdiction of the High Court under Article 226 of the
Constitution.
5. Even when notice has been served on the local authority the
remedy under Article 226 of the Constitution would be available
to the local authority on grounds on which judicial review is
permissible under Article 226.
6. The local authority is a proper party in the proceedings
before the reference court and is entitled to be impleaded as a
party in those proceedings wherein it can defend the
determination of the amount of compensation by the Collector
and oppose enhancement of the said amount and also adduce  
evidence in that regard.
7. In the event of enhancement of the amount of compensation
by the reference court if the Government does not file an
appeal the local authority can file an appeal against the award in
the High Court after obtaining leave of the court.
8. In an appeal by the person having an interest in land seeking
enhancement of the amount of compensation awarded by the  
reference court the local authority, the should be impleaded as
a party and is entitled to be served notice of the said appeal.
This would apply to an appeal in the High Court as well as in
this Court.
9. Since a company for whom land is being acquired has the
same right as a local authority under Section 50(2), whatever
has been said with regard to a local authority would apply to a
company too.
10. The matters which stand finally concluded will, however, not
be reopened.

      The said Constitution Bench decision is holding the field and the
decision of the Division Bench is binding on me.  A reading of the above
decisions would make it clear that the beneficiary has a right to appear in
the acquisition proceedings before the Collector and the reference Court
and adduce evidence for the purpose of determining the amount of
compensation.  The said right carries with it the right to be given
adequate notice by the Collector as well as the reference court, but the
beneficiary cannot seek a reference on its own. It can challenge the award
of the Collector or the judgement of the reference Court in proceedings
under Article 226 of the Constitution as well as the remedies available
under the Land Acquisition Act.  Even after issuing a notice to the
beneficiary, it is open to the beneficiary to challenge the Award in
proceedings under Article 226 of the Constitution on grounds on which
judicial review is permissible.  The beneficiary is a proper party.  In the
case of enhancement of compensation by reference Court, if the
government does not file an appeal, the beneficiary can file an appeal
against the judgement of the civil court in the High Court after obtaining
leave of the Court.
      Learned counsel for the respondents relied on a decision reported
in Radhey Shyam v. Chhabi Nath  and submitted that the judicial
orders of the Civil Court are not amenable to writ jurisdiction under
Article 226 of the Constitution and those orders can be challenged only by
way of statutory appeal or revision or under Article 227, but not by way
of Writ Petition under Articles 226 or 32.  The said decision did not arise
out of the provisions of the Land Acquisition Act and it is only a decision
of three Judge Bench. In fact the said decision was considered by me in
Pervaram Ramulu v. Government of Andhra Pradesh , and
followed the ratio since the said case related to the exercise of civil
jurisdiction by the court.  When there is a Constitution Bench decision
directly arising under the provisions of the Land Acquisition Act and
holding that the Writ Petition is maintainable under Article 226
challenging the award passed by the Land Acquisition Officer or of the
Civil Court, the said decision cannot be made applicable to the facts of the
present case.
      Thus, the point Nos.1 and 2 above have to be held in favour of the
petitioners.
      Coming to the relief to be granted in the present Writ Petitions,
when this Court pointed out that the scope of enquiry in a proceeding
under Article 226 of the Constitution are circumscribed by the grounds of
judicial review and a regular appeal under Section 54 of the Act would
better serve the purpose of the petitioners, learned counsel for the
petitioners submitted that the petitioners would be spectators in an
appeal preferred before this Court, by relying on a decision reported in
Indian Rare Earths Limited v. The Sub Collector, Land
Acquisition Officer, Padmanabhapuram, Thuckalay, Kanyakumari  
District .  The observations of the Division Bench in the said case are no
longer good law, in view of the Constitution Bench decision of the Honble
Supreme Court in U.P. Awas Evam Vikas Parishads case (supra).  The
said decision is correct only to the extent of entitlement of the beneficiary
for a notice and maintainability of a Writ Petition, but the observations
relating to the scope of enquiry under Article 226 in the place of an
alternative remedy available under the Act are not correct.
      It is settled principle of law that the proceedings under Article 226
are limited to the grounds available for judicial review, whereas the appeal
under Section 54 of the Act enables the appellate Court to go through the
evidence adduced before the civil Court or available with it in the light of
the evidence already adduced and examine whether the enhancement of
compensation is proper or not.  The alternative remedy and the scope of
enquiry in the appeal is much wider than the discretionary remedy of
Article 226 of the Constitution.
      In the circumstances, both the Writ Petitions are dismissed giving
liberty to the petitioners to avail the remedy of appeal under Section 54
of the Act and the time spent for these proceedings can be exempted for
condoning the delay, if any.  There shall be no order as to costs.
        As a sequel thereto, the miscellaneous petitions, if any pending in
these Writ Petitions, shall stand closed.


____________________________    
A.RAMALINGESWARA RAO, J      
Date:  20th October, 2017