Allied Laws

11.  Evidence – Doubt that the exported goods were overpriced cannot be sustained – No business interests between the parties hence held to be at arm’s length price – Monies received through banking channel – Cannot be held as hawala. [Customs Act, 1962 – Sections 114, 114A, 127A, 127B, 14, 17, 156, 28]

UOI vs. Padmini Polymers Ltd. and Ors. 2017 (353) E.L.T. 25 (Del.)

The ground on which the impugned order was challenged is that the settlement commission had erred in overlooking the fact that during settlement proceedings, it is not for the petitioner to establish respondent’s guilt beyond reasonable doubt; instead it was for the license holder to establish its innocence apropos the issues raised in the show cause notice.

It was held that in the absence of sufficient proof being led, Revenue’s doubt about the FOB value of the goods cannot be sustained. It has not substantiated its contention that the exported goods were overpriced. Furthermore, there was nothing on record to conclude that there were business interests between Respondent and its importers in Singapore, United States and USA so as to doubt that the transactions between them were not in the normal course of trade or that it was not a transaction at arms’ length. Hence, the declared FOB would have to be accepted.

Since Revenue has not led any evidence to indicate either a ‘Hawala’ transaction or a back flow of money to Respondent through illegal means regarding the value of the exported goods, the export transaction cannot be viewed with suspicion. In any case, all monies were received by Respondent through the banking channels as have been so certified by its bankers through remittance certificates. In view of the same, the petition was dismissed.

12. Interest – No provision in Act to pay – Govt. to pay interest on currency seized at the time of refund of such amount. [Central Excise Act]

R.H.L. Profiles Ltd. vs. Commr. of Cus., Ex. and Service Tax, Kanpur 2017 (352) E.L.T. 349 (All.)

The only issue was whether the Tribunal was justified in rejecting the claim of interest on the amount refunded on the ground that there was no provision for paying interest on such amount?

 It was observed that nowhere the Government can enrich itself at the cost of the others. The Government cannot deny payment of interest merely for the reason that there is no express statutory provision for payment of interest on the refund of excess amount/tax collected by the Revenue.

It was held that the amount which was illegally confiscated by the Revenue and was ultimately refunded, the assessee-appellant was entitled to interest and that the department is under obligation to pay the same.

13. Money Laundering – Attachment of money alleged to be proceeds of illegal transactions – No link between sum of money attached and the alleged proceeds of crime – Fixed deposit receipt to be returned together with the accretions. [Section 5, PMLA, 2002]

 Satish Estate Pvt. Ltd. vs. Union of India 2017 (353) E.L.T. 21 (P & H)

The Petitioner owns a piece of land which it sought to sell to TI Ltd. TI Ltd. advanced a sum of Rs. 25 lakh towards earnest money by two cheques. Disputes and differences arose between the petitioner and TI Ltd. TI Ltd. filed an FIR against the petitioner for offences inter alia u/s. 420 of the Indian Penal Code. However, the suit and the FIR filed by TI Ltd. came to an end and the petitioner forfeited the earnest money of Rs. 25 lakh.

TI Ltd. had entered into another agreement with a third party for the sale of an entirely different property for a total consideration of Rs. 3.61 crore and advance/earnest money was paid by third party of a sum of Rs.11 lakh and Rs. 3.50 crore, respectively, where also, differences and disputes arose due to which the third party filed an FIR against TI Ltd. and for the sale of an entirely different property and charges were framed pursuant to that FIR against the respondent under Sections 420, 467, 468 and 471 of the Indian Penal Code.

The petitioners had forfeited an amount of Rs.25 lakh, in respect of which the Enforcement Directorate had passed a provisional attachement order against the director of the petitioner and not against the petitioner directly.

It was stated that the amount of Rs. 25 lakh paid to the petitioners by TI Ltd. was from the proceeds of crime i.e. from the sale of the land to the third party consequent to which the an FIR had been filed by the third party against TI Ltd., and hence, such amount of Rs. 25 lakh was to be attached.

The petitioner sought an order for the return of the sum of Rs. 25 lakh which stood attached by the Directorate of Enforcement in exercise of powers under the Prevention of Money Laundering Act, 2002.

It was held that the director was not a party to the transaction in his personal capacity but only as a Director of the petitioner. The maintainability of such proceedings itself is doubtful. Secondly, there was no connection between the land which was a subject matter of the agreement between the petitioner and the Respondent on the one hand, and the land that was a subject matter of the agreement between the Respondent and the third party entered on the other hand. Since there was no link between the said sum of Rs. 25 lakh and the alleged proceeds of crime namely the sum of Rs. 3.61 crore received by Respondent from third party. In the circumstances, the petition was allowed.

 The FDR was directed to be returned together with the accretions thereto, if any. It was clarified that in the event of any evidence being obtained by the respondents in respect of the said sum of Rs. 25 lakh, they are always at liberty to take necessary action in accordance with law.

14. Money Laundering – Person in possession of proceeds of crime – Not charged with offence of crime [PMLA, 2002; Sections 3,  24]

 Jafar Mohammed Hasanfatta and Ors. vs. Deputy Director and Ors. 2017 (353) E.L.T. 55 (Guj.)

The allegation against each of the petitioner is of commission of offence u/s. 3 of PMLA, which is punishable u/s. 4 of PMLA. Section 3 describes the offence of money-laundering where whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming it as untainted property shall be guilty of offence of money-laundering.

It was held that section 24 shows legislative intent of attachment and confiscation of proceeds of crime by presuming involvement of proceeds of crime in money laundering irrespective of whether the person concerned is or not charged with the offence of money laundering. Thus, there shall be a legal presumption in any proceeding relating to proceeds of crime under PMLA that such proceeds of crime are involved in money-laundering. Burden would be on the person concerned to show to the contrary.

However, section 24 clearly indicates that even a person in possession or connected with any proceeds of crime may or may not be charged with the offence of money laundering. Whether a person shall be charged with money laundering or not shall thus depend only upon satisfying the requirements of Section 3 of PMLA.

In the instant case, neither there was anything to raise a presumption of fact or law that any of the petitioners was aware that the monies received in their bank accounts through banking channels were ‘proceeds of crime’ derived from any ‘scheduled offence’, nor is there anything to further presume that the petitioners were intentionally projecting or claiming any proceeds of crime as untainted one. In absence of the same, offence of money laundering u/s. 3 of PMLA even on prima facie basis would not be attracted.

15. Tenancy – Devolution – Brother – Not family nor heir. [Hindu Succession Act, 1956, S.3(a), S.15(2)(b)].

Durga Prasad vs. Narayan Ramchandani (D) thr. AIR 2017 SUPREME COURT 915

In the present case, the suit property was taken on rent by the father-in-law of deceased tenant-Lalita that is Hem Ram Sharma and after his death, his son Baldev (husband of Lalita) became tenant of the suit property. Upon his death, Lalita became the tenant of the suit property. The Appellant is the brother of deceased Lalita, who was the tenant of the Respondent herein. Upon death of Lalita, in terms of section 15(2)(b) of the Hindu Succession Act, in the absence of any son or daughter of deceased Lalita, the tenancy would devolve upon the heirs of her husband. Since the Appellant is the brother of deceased Lalita and does not fall under the category of ‘heir’ of Lalita’s husband, the tenancy of the suit property will not devolve on him nor can he be called as an ‘heir’ u/s. 3(a) of the U.P. Act XIII of 1972.

Section 3(g) defines ‘family’, in relation to landlord which includes the spouse that is husband or wife of a person, male lineal descendants which means his or her son, son’s son, son’s son’s son and so on, parents, grandparents, unmarried, widowed, divorced daughter or granddaughter, etc.

The definition given in the Clause is an inclusive one and is supposed to be construed in its technical meaning which implies that,what is not given has to be excluded as not forming part of the family of landlord or tenant.

Therefore, sisters and brothers of landlord and tenant are excluded from his/her family. In the facts of the present case, the Appellant being brother of deceased tenant cannot be held to be the ‘family’ as the inclusive list given under the Act clearly omits “brother and sister” and the same cannot be read therein as the list has to be read and interpreted strictly. _