TIOL-DDT 2442 · the untouched capture
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<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><s><strong><font size="2"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=20079"><img src="http://www.taxindiaonline.com/RC2/image/stories/limca_book2014_1.jpg" alt="DDT in Limca Book of Records - Third Time in a row" width="250" height="123" hspace="5" border="0" align="right"></a></font></strong></font></strong></font></strong></font></strong></font></strong></s><strong><font color="#663399" size="3">TIOL-DDT 2442</font><br>
22.09.2014 <br>
Monday </strong></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">General Principles concerning retrospective effect of Laws <br>
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<td bgcolor="#BDDCFD"><div align="center"><strong><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">There is a technique required to draft legislation and to understand legislation. </font></strong></div></td>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>A</strong> legislation, be it a statutory Act or a statutory Rule or a statutory Notification, may physically consists of words printed on papers. However, conceptually it is a great deal more than an ordinary prose. There is a special peculiarity in the mode of verbal communication by a legislation. A legislation is not just a series of statements, such as one finds in a work of fiction/non fiction or even in a judgment of a court of law. </font></p>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">There is a technique required to draft legislation as well as to understand legislation. </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Former technique is known as legislative drafting and latter one is to be found in the various principles of ‘Interpretation of Statutes'. <em>Vis-à-vis</em> ordinary prose, a legislation differs in its provenance, lay-out and features as also in the implication as to its meaning that arise by presumptions as to the intent of the maker thereof. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Prospective effect presumed: Of the various rules guiding how a legislation has to be interpreted, one established rule is that unless a contrary intention appears, a legislation is presumed not to be intended to have a retrospective operation. The idea behind the rule is that a current law should govern current activities. Law passed today cannot apply to the events of the past. If we do something today, we do it keeping in view the law of today and in force and not tomorrow's backward adjustment of it. Our belief in the nature of the law is founded on the bed rock that every human being is entitled to arrange his affairs by relying on the existing law and should not find that his plans have been retrospectively upset. This principle of law is known as <em>lexprospicitnon respicit</em>: law looks forward not backward. A retrospective legislation is contrary to the general principle that legislation by which the conduct of mankind is to be regulated when introduced for the first time to deal with future acts ought not to change the character of past transactions carried on upon the faith of the then existing law. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The obvious basis of the principle against retrospectivity is the principle of 'fairness', which must be the basis of every legal rule. Thus, legislations which modified accrued rights or which impose obligations or impose new duties or attach a new disability have to be treated as prospective unless the legislative intent is clearly to give the enactment a retrospective effect; unless the legislation is for purpose of supplying an obvious omission in a former legislation or to explain a former legislation. We need not note the cornucopia of case law available on the subject because aforesaid legal position clearly emerges from the various decisions. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Where a benefit is conferred by a legislation, the rule against a retrospective construction is different.</strong> If a legislation confers a benefit on some persons but without inflicting a corresponding detriment on some other person or on the public generally, and where to confer such benefit appears to have been the legislators object, then the presumption would be that such a legislation, giving it a purposive construction, would warrant it to be given a retrospective effect. This exactly is the justification to treat procedural provisions as retrospective. In <em> Government of India & Ors. v. Indian Tobacco Association - <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=26&filename=legal/sc/2005/2005-TIOL-109-SC-CUS.htm" target="_blank"><strong><font size="1">2005-TIOL-109-SC-CUS</font></strong></a></em>, the doctrine of fairness was held to be relevant factor to construe a statute conferring a benefit, in the context of it to be given a retrospective operation. Where a law is enacted for the benefit of community as a whole, even in the absence of a provision the statute may be held to be retrospective in nature. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In such cases, retrospectively is attached to benefit the persons in contradistinction to the provision imposing some burden or liability where the presumption attaches towards prospectivity. Thus, the rule against retrospective operation is a fundamental rule of law that no statute shall be construed to have a retrospective operation unless such a construction appears very clearly in the terms of the Act, or arises by necessary and distinct implication. Dogmatically framed, the rule is no more than a presumption, and thus could be displaced by out weighing factors. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Under certain circumstances, a particular amendment can be treated as clarificatory or declaratory in nature. Such statutory provisions are labelled as "declaratory statutes". The circumstances under which a provision can be termed as "declaratory statutes" is explained by Justice G.P. Singh Principles of Statutory Interpretation, 13th Edition 2012 published by Lexis Nexis Butterworths Wadhwa, Nagpur in the following manner: </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Declaratory statutes </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The presumption against retrospective operation is not applicable to declaratory statutes. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>"For modern purposes a declaratory Act may be defined as an Act to remove doubts existing as to the common law, or the meaning or effect of any statute. Such Acts are usually held to be retrospective. The usual reason for passing a declaratory Act is to set aside what Parliament deems to have been a judicial error, whether in the statement of the common law or in the interpretation of statutes. Usually, if not invariably, such an Act contains a preamble, and also the word 'declared' as well as the word 'enacted'. But the use of the words 'it is declared' is not conclusive that the Act is declaratory for these words may, at times, be used to introduced new rules of law and the Act in the latter case will only be amending the law and will not necessarily be retrospective. In determining, therefore, the nature of the Act, regard must be had to the substance rather than to the form. If a new Act is 'to explain' an earlier Act, it would be without object unless construed retrospective. An explanatory Act is generally passed to supply an obvious omission or to clear up doubts as to the meaning of the previous Act. It is well settled that if a statute is curative or merely declaratory of the previous law retrospective operation is generally intended. The language 'shall be deemed always to have meant' is declaratory, and is in plain terms retrospective. In the absence of clear words indicating that the amending Act is declaratory, it would not be so construed when the pre-amended provision was clear and unambiguous. An amending Act may be purely clarificatory to clear a meaning of a provision of the principal Act which was already implicit. A clarificatory amendment of this nature will have retrospective effect and, therefore, if the principal Act was existing law which the Constitution came into force, the amending Act also will be part of the existing law." </em></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Assessment creates a vested right and an assessee cannot be subjected to reassessment unless a provision to that effect inserted by amendment is either expressly or by necessary implication retrospective. </font></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now it is a well settled rule of interpretation<strong> hallowed by time and sanctified by judicial decisions</strong> that, unless the terms of a statute expressly so provide or necessarily require it, retrospective operation should not be given to a statute so as to take away or impair an existing right or create a new obligation or impose a new liability otherwise than as regards matters of procedure. </font></em></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The general rule as stated by Halsbury in Vol. 36 of the Laws of England (3rd Edn.) and reiterated in several decisions of the Supreme Court as well as English courts is that all statutes other than those which are merely declaratory or which relate only to matters of procedure or of evidence are prima facie prospectively and retrospective operation should not be given to a statute so as to affect, alter or destroy an existing right or create a new liability or obligation unless that effect cannot be avoided without doing violence to the language of the enactment. <strong>If the enactment is expressed in language which is fairly capable of either interpretation, it ought to be construed as prospective only. </strong></font></em></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">From a recent judgement of the Supreme Court of India reported in <a href="http://www.taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=OTYyMjQ=" target="_blank"><strong><font size="1">2014-TIOL-78-SC-IT-CB</font></strong> </a></font></p>
<p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">The Babus engaged in drafting laws can help in avoiding useless litigation, if they understand these concepts. </font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Anti Dumping Duty on Sulphur Black - re-imposed - No resurrection </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>PROVISIONAL</strong> Anti Dumping Duty was imposed on Sulphur Black, falling under heading 3204 of the First Schedule to the Customs Tariff Act, originating in, or exported from, the People's Republic of China by Notification No. 48/2008-Cus., dated 11-4-2008. This Notification was to be effective up to and inclusive of the 10th October, 2008. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">They forgot to extend this notification by 10th October 2008 and by Notification No. 128/2008-Cus imposed the final anti dumping duty with effect from the date of Provisional imposition that is 11.04.2008. This extension was to expire on 10.04.2013. Just in Time - on 10.04.2013, they extended it by another year till 10.04.2014 by Notification No. 5/2013-Cus (ADD), dated 10.04.2013. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">On 10.04.2014, they were sleeping and the Notification had a cool death. However by a Notification dated 03.07.2014, the designated Authority came to a conclusion that: </font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> - the dumped imports continue to cause injury to the domestic industry; </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">- dumping of the subject goods is likely to intensify from the subject country if no anti-dumping duty is imposed. </font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So, the Government has now again imposed anti dumping duty on the product with effect from 18th September 2014 for a period of five years. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">For the period from 11.04.2014 to 17.09.2014, there was no notification to levy anti dumping duty on this product, even though the dumping was there and it was causing injury to the domestic industry. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Who will compensate the domestic industry for its injury and the Government of India for the loss of Revenue?</font></p>
<p><a href="http://www.taxindiaonline.com/RC2/notDesc.php?MpoQSrPnM=MTcxNjI=" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Notification No. 41/2014-Cus.,(ADD), Dated: September 18, 2014 </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">RBI Circular on Willful Defaulter partly quashed - Not to apply to Directors - HC </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>RECENTLY</strong> Vijay Mallya had been struck with a ‘willful defaulter' notice from some banks. As per an RBI Master Circular wilfull defaulters are barred from any new funding from banks and financial Institutions for existing businesses and also for floating new ventures for a period of five years. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In a similar case, recently the Gujarat High Court held that the master circular as far as it relates to Directors of the Companies was illegal and so was struck down. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The challenge in the writ applications is to the legality and validity of the Master Circular dated 2nd July 2012 issued by the Reserve Bank of India in respect of 'willful defaulter' and the notices issued by the banks, calling upon the petitioners to show-cause as to why they should not be declared as willful defaulters in terms of the Reserve Bank of India's Master Circular. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The petitioners availed of a loan facility from the respondent Punjab National Bank. The respondent Bank noticed that the loan account of the petitioners was a Non-Performing Asset (NPA) since 30th June 2012 with the outstanding of Rs.1027 lac (as on the date of the NPA) including the interest at the applicable rate. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Despite regular reminders from the bank for payment of the dues, no steps were taken by the petitioners in that regard. Therefore, the respondent Bank issued a show-cause notice dated 19th February 2013 followed by a second show cause notice dated 14th May 2013 and a final notice dated 8th January 2014 on the premise that the petitioners had defaulted in repayment of the loan amount and the funds borrowed from the Bank were siphoned off and not used for the purpose for which the amount of the loan was disbursed, for which the petitioners were called upon to show-cause as to why they should not be declared as 'willful defaulters' in terms of the RBI Master Circular. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The High Court held that the <strong>Master Circular, so far as it is sought to be made applicable to all the directors of the company, is arbitrary and unreasonable. To this limited extent, that part of the Master Circular is held as ultra vires the powers of the Reserve Bank of India and is violative of Article 19(1)(g) of the Constitution of India.</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In a judgement running into more than 160 pages, the High Court dwelt on several issues of jurisprudence and concluded that:</font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(1) The Reserve Bank of India was within its powers to issue the Master Circular relating to the willful default and willful defaulters. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(2) The Master Circular has been issued by the Reserve Bank of India in public interest. Although it has not been stated in so many words to have been issued in public interest and also the source of power, yet if the source of power is traceable, exercise of such power cannot be setaside merely because the same has not been disclosed. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(3) The Master Circular does not suffer from the vice of impermissible delegation of a legislative power. It confirms exactly to the power granted. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(4) The Master Circular has the force of law and could be termed as a statutory circular. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(5) On mere apprehension of misuse of a provision, an otherwise valid statute, should not be struck down or condemned. A mere possibility or likelihood of abuse of power does not make the provision ultra vires or bad in law. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(6) The Master Circular does not impose an unreasonable restriction upon the promoters/entrepreneurs, being violative of the Article 19(1)(g) of the Constitution of India as it has the effect of debarring them from availing of any additional facilities for floating a new venture for a period of five years from the date the name of the willful defaulter is published in the list of “willful defaulters” by the Reserve Bank of India. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(7) The Master Circular, so far as it is sought to be made applicable to all the directors of the company, is arbitrary and unreasonable. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(8) The Master Circular seeks to paint all the directors with the same brush. The provisions in the circular shatter the <strong>concept of identity of a company being different and distinct from its directors</strong> without providing any safeguards. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(9) The show-cause notice issued to the petitioners of Special Civil Application No.645 of 2014 is held to be bad as it is bereft of the basic details and material particulars. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(10) The Standard Chartered Bank although has been included as one of the Scheduled Banks in the Second Schedule to the Reserve Bank of India Act, 1934, yet, <strong>being a private bank, is not amenable to the writ jurisdiction of this Court. </strong>Merely because a company is carrying on the banking business, it cannot per se become a public authority nor can be considered as discharging public functions. </font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">You can read the full text of this classic judgement in <strong><a href="http://www.taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=OTYzMzQ=" target="_blank"><font size="1">2014-TIOL-1631-HC-AHM-MISC</font></a> </strong></font></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">Jurispruden</font><font color="#FF6633" size="5">tiol</font><font color="#006600"> – Tuesday's cases</font></strong></font></strong></font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><img src="http://www.taxindiaonline.com/RC2/image/stories/ddt_hammer.jpg" alt="Legal Corner Icon" width="100" height="84" hspace="5" border="0" align="left"><font color="#663399"><strong>Central Excise</strong></font> </font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">CENVAT Credit is admissible on fuel used for manufacture of steam /power supplied to neighbouring EOU situated in same premises - factory means more than one premises - No error in the order of Tribunal: HC </font></strong></p>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Question of law: </font></strong></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">When the assessee who manufacture the steam, use the same in the factory of manufacturing and also utilized the steam in its another unit which is situated in the same compound, is he entitled to CENVAT Credit proportionately to the extent which was used in the other unit? </font></em></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In view of clear language in the statutory provisions coupled with the fact that the factory includes more than one premises, to be eligible for CENVAT Credit, an assessee has to use the input in the manufacture of dutiable goods in his factory. If the factory includes more than one unit and if the assessee uses this input in the manufacturing of excisable goods in both the units, he would be entitled to CENVAT Credit. </font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Income Tax </font></strong></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Whether Clause (d) of Sec 80IB(10), condition linked to date of approval of housing project, will not apply to any project sanctioned prior to Mar 31, 2005 - YES: HC </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> assessee is engaged in the business as builders and developers and was following the project completion method of accounting. It had declared its income at NIL after claiming a deduction of Rs.56,27,583/- under section 80-IB(10). During assessment, the AO noticed that the assessee had claimed a deduction under section 80-IB(10) on the profit after sale of shops . The same was disallowed on the ground that the assessee had not complied with the basic requirement that the profit derived on the sale of commercial area of the project was not entitled for deduction. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The issue before the Bench is - Whether Clause (d) of Sec 80IB(10), a condition linked to the date of approval of the housing project, will not apply to any project sanctioned prior to Mar 31, 2005. And the answer goes against the Revenue. </font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Service Tax </font></strong></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>Prima facie</em> no Service Tax liability arises on construction of low cost housing & Vipassana Kendra for Nagpur Improvement Trust & Ramtek Municipal Council: CESTAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><em>PRIMA</em></strong><em> facie</em> there is merit in the contention of the appellant that when Nagpur Improvement Trust gets flats constructed for renting out to low income group or slum dwellers, it would be construction of complex by a person directly engaging the service of another person and such complex is intended for personal use. Such complexes are specially excluded from the scope of the levy. Therefore, as far as the demand of service tax in respect of residential complex built for Nagpur Improvement Trust and Ramtek Municipal Council is concerned, the appellant has made out a prima facie case for grant of stay.</font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">See our Columns Tomorrow for the judgements </font></strong></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Tomorrow with more <strong>DDT</strong></font></p>
<p align="justify"><strong><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a nice day. </font></strong></p>
<p><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Mail your comments to</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> <a href="mailto:vijaywrite@tiol.in"><strong>vijaywrite@tiol.in </strong></a></font></p>
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