2018 (7) TMI 1280 – DELHI HIGH COURT – 2018 (17) G. S. T. L. 582 (Del.) – Validity of Remand of matter to Commissioner – appellant’s grievance is that the final order of CESTAT remanding the matter for fresh adjudication by the Commissioner is erroneous, inasmuch as, the Tribunal failed to discharge its obligations to consider the record – Held that:- It is evident from the consideration of the record that the Commissioner rendered elaborate findings on both the genuineness of the document (agreement dated 30.06.2006) as well as on its interpretation. Given these facts, if the Tribunal was in doubt as to whether the document was genuine, the least that it could have done was to limit the findings on remand while retaining Revenue’s appeal on the file. This Court notices that CESTAT has been repeatedly passing remand orders virtually abdicating its responsibility as an Appellate Court. This trend is unhealthy given that it is the final Court of fact and is required to adjudicate both o
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
Sr. Standing Counsel for the respondent accepts notice. 4. The appellant s grievance in the present proceedings under Section 35G of the Central Excise Act, 1944 is that the final order of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) remanding the matter for fresh adjudication by the Commissioner is erroneous, inasmuch as, the Tribunal failed to discharge its obligations to consider the record. 5. The appellant was issued with a show cause notice which alleged that it was receiving services from M/s Jefferies International Limited (JIL) and that for the period 2006-07 it was liable to pay service tax to the tune of 1,37,64,000/- and other amounts and penalties under the Finance Act, 1994. The show cause notice (dated 14.10.2011) was replied to and the allegations made by the Revenue were refuted. Apart from various submissions, the appellant contended that it had entered into an agreement dated 30.06.2006 with JIL and that the allegation with respect to its liability
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
to the balance sheet for the year 2006-07 the noticee had raised foreign currency convertible bonds of US dollars 50 millions and had incurred a foreign currency expenditure of ₹ 11.47 crorres for raising such bonds. Further the noticee had also entered into a memorandum of understanding on 20-04-2006 with M/s Jefferies London which is not a formal agreement but simply a letter of engagement singyfying intention of both the parties. As per said MOU letter dt : 20-04-2006, Jefferies were to be engaged to act as legal manager and sole placement agent for the noticee in connection with the proposed structuring, issuance and sale of equity linked securities of the noticee company. However the said MOU Letter states in the opening para itself that the final terms and conditions governing the transactions shall be mutually agreed by the company and M/s Jefferies. 34. The letter signed by and exchanged between the noticee and Jefferies, inter alia contains the following clauses – The co
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
(b) Issue of the bonds (Clause 3) The issuer undertakes to the manager (subject to the terms and in accordance with provisions of this agreement) to issue the firm bonds to the manager or as a manager may direct on the closing date. (c) The option (Clause 4) The issuer hereby grants to the manager an option to subscribe or procure subscription for all or any of the optional bank. This option shall be exercise during the option period in whole or in part, on one or more occasions, solely at the discretion of the manager by service on the issuer of option notice s on or before the expiry of the option period, such option notice s shall be irrevocable and shall set forth the aggregate principal amount of optional bonds as to which the option is being exercised. 46 to 47 xxx xxx xxx 48. Further M/s Jefferies have not issued any invoice for the underwriting services and the noticee has also not made the remittance from India. The payments has been made to M/s Jefferies by way of their appro
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
eement shall give rise to any obligation on the part of the company to issue or sell the securities or to enter into any agreement in relation thereto. 50. Further, clause 21 of the agreement dt : 30-062006 states that this agreement and the offering circular, constitute the entire agreement and understanding of the parties and supersedes any previous agreement between the parties relating to the subject matter of this agreement. 51. Accordingly reading of both the letter dt : 20-042006 and agreement dt : 30-06-2006 indicates that the agreement dt : 30-06-2006 is the only legal document following the letter dt : 20-04-2006. Both are genuine documents but the later one is legally binding and the one which has superseded the earlier one, i.e. dt : 20-04-2006. 7. After considering these materials and on the basis of other reasons, the show cause notice was discharged. The appeal, which the Revenue preferred to the CESTAT, disputed the findings. The Revenue s arguments in its grounds of ap
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
e adjudicating authority further failed to consider the essence and substance of the said further agreement dated 30.06.2006 that the essential purpose remained the same, i.e. to issue US $ 40 Millions 3.5% convertible bonds due 2011. Also, it is pertinent to take note of the fact that even in terms of the agreement dated 30.06.2006, the foreign service provider remained the manager to the issue of FCCB for raising FCCB of US$ 50 Millions. The notice granted only as option to the manager, i.e. the foreign service provider, to subscribe to the bonds and, moreover, this option was at the discretion of the said service provider. Thus, the Adjudicating Authority failed to appreciate that even in terms of the later agreement dated 30.06.2006 the relationship between the notice and the foreign service provider remained as that of an issuer of the FCCB and manager to the issue of the FCCB , respectively. Thus, the underwriting was only optional and only an optional accessory or auxiliary serv
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
et aside the impugned order and remand the matter to the original authority to verify the genuineness of the agreement and decided the issue denovo but by providing an opportunity of hearing to the respondent. Fresh evidence, if need be, may be admitted as per law. 9. Before this Court, the appellant contended that given the nature of findings by the Commissioner and the limited nature of the appeal by the Revenue – which did not appear to indicate any dispute vis-à-vis the genuineness of the agreement of 30.06.2006, the open remand on all aspects, was not justified. 10. Learned counsel for the Revenue on the other hand submitted that the appellant had disclosed the existence of the agreement for the first time in the reply to the show cause notice and appears to have thereafter produced it and as a result it could not be verified. It was submitted that in view of these peculiar features, the remand order of the Tribunal was in order. It is evident from the consideration of the
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =