List of Current Affairs

Source: Delhi High Court

Why in News?

The Delhi High Court recently quashed a Show Cause Notice (SCN) and the subsequent cancellation of a taxpayer's GST registration due to the SCN lacking specific details. The court ruled that the SCN was too vague and did not provide intelligible reasons for the cancellation, thus violating procedural fairness requirements. This decision emphasizes the need for clear and specific reasons in legal notices for GST registration issues.

What was the Background of M/S Chauhan Construction Co. versus Commissioner of DGST and Anr.?

• The petitioner's Goods and Services Tax (GST) registration was cancelled by an order dated 05^th April 2021.
• This cancellation order was issued pursuant to a Show Cause Notice (SCN) dated 26^th March 2021.
• The SCN alleged that the petitioner had issued invoices without supplying goods or services, violating GST provisions and leading to wrongful input tax credit availment or tax refund.
• The SCN required the petitioner to respond within seven working days and mentioned the possibility of an ex parte decision if the petitioner failed to appear for a personal hearing.
• However, the SCN did not specify any date, time, or venue for the personal hearing.
• The petitioner's GST registration was suspended effective 26^th March 2021 as per the SCN.
• Following the cancellation, the petitioner filed an application dated 19^th Arpil 2021 seeking revocation of the cancellation order.
• This revocation application was met with another Show Cause Notice dated 29^th December 2021, proposing to reject the application.
• The petitioner's revocation application was subsequently rejected by an order dated 10^th January 2022.
• The petitioner then appealed against the cancellation order under Section 107 of the Central GST Act and Delhi GST Act.
• This appeal was rejected on the grounds that the petitioner did not appear in response to a notice served through the GST portal.
• The petitioner contends that they did not access the portal as their GST registration was already suspended.
• A second revocation application filed by the petitioner was also met with a Show Cause Notice dated 19^th July 2023 and subsequently rejected.
• Having exhausted these remedies, the petitioner approached the High Court challenging the cancellation of their GST registration.

What were the Court’s Observations?

• The Court held that the impugned cancellation order was void ab initio, having been passed in violation of the principles of natural justice, as the petitioner was neither provided intelligible reasons for the proposed cancellation nor afforded an opportunity for personal hearing.
• The Bench noted that the Show Cause Notice (SCN) was deficient in that it failed to specify a venue, date, or time for the petitioner's personal hearing, thereby contravening procedural fairness.
• The Court observed that the cancellation order improperly effected a retrospective cancellation of the petitioner's GST registration from its initial grant date, despite the absence of any such proposal in the SCN, thus exceeding the scope of the notice.
• The High Court found that the subsequent rejections of the petitioner's revocation applications were similarly tainted by violations of natural justice principles, compounding the procedural impropriety.
• While quashing the cancellation order and directing the restoration of the petitioner's GST registration, the Court explicitly preserved the respondents' right to initiate fresh action against the petitioner for any statutory violations or recovery of dues, in accordance with law.

What is Section 29 and Section 107 of Central Goods and Services Tax Act, 2017?

Section 29

• Grounds for Cancellation:
  • The proper officer may cancel registration on their own motion or on application by the registered person or their legal heirs.
  • Cancellation can be done if the business is discontinued, transferred, amalgamated, demerged, or disposed of.
  • It can also be done if there's a change in the business constitution or if the taxable person is no longer liable for registration or opts out voluntarily.
• Suspension of Registration:
  • During the pendency of cancellation proceedings, the registration may be suspended for a prescribed period and manner.
  • This suspension provision applies to both voluntary cancellation requests and cases where the proper officer initiates cancellation.
• Retrospective Cancellation:
  • The proper officer has the authority to cancel registration from any date, including retrospectively, under specific circumstances.
  • These circumstances include contravention of prescribed provisions, failure to file returns, non-commencement of business after voluntary registration, or obtaining registration through fraud or misrepresentation.
• Procedural Safeguards:
  • The proper officer must give the person an opportunity of being heard before cancelling the registration.
  • This provision ensures adherence to the principles of natural justice.
• Effect of Cancellation:
  • Cancellation does not affect the person's liability to pay tax and other dues for any period prior to the cancellation date.
  • This liability persists whether the dues are determined before or after the cancellation date.
• Cross-Applicability:
  • Cancellation under State GST or Union Territory GST Acts is deemed to be a cancellation under the Central GST Act as well.
• Financial Implications:
  • Upon cancellation, the registered person must pay an amount equivalent to the input tax credit on stock or the output tax payable on such goods, whichever is higher.
  • For capital goods, the person must pay an amount equal to the input tax credit taken, reduced by prescribed percentage points, or the tax on the transaction value, whichever is higher.
• Calculation Method:
  • The amount payable upon cancellation shall be calculated in the manner prescribed by the rules.

Section 107

• Section 107 of the Central Goods and Services Tax (CGST) Act, 2017 deals with Appeals to the Appellate Authority
• Right to Appeal:
  • Any person aggrieved by a decision or order passed under the CGST Act, State GST Act, or Union Territory GST Act by an adjudicating authority may appeal to the prescribed Appellate Authority.
• Time Limit:
  • The appeal must be filed within three months from the date of communication of the decision or order.
• Commissioner's Power:
  • The Commissioner may, on his own motion or upon request from State/UT tax Commissioners, examine any proceedings and direct a subordinate officer to appeal to the Appellate Authority within six months.
• Extension of Time:
  • The Appellate Authority may allow an appeal to be presented within a further period of one month if satisfied that the appellant was prevented by sufficient cause from filing within the original time limit.
• Powers of Appellate Authority:
  • The Authority may confirm, modify, or annul the decision or order appealed against, but cannot refer the case back to the adjudicating authority.
• Time Limit for Decision:
  • The Appellate Authority shall, where possible, hear and decide every appeal within one year from the date of filing.

What are the Principles of Natural Justice?

• Natural justice is a fundamental concept in common law systems, encompassing principles of fairness, reasonableness, equity, and equality in administrative and judicial proceedings.
• The two primary principles of natural justice are
  • "Nemo judex in causa sua" (no one should be a judge in their own cause)
  • "Audi alteram partem" (hear the other side), which together ensure impartiality and the right to a fair hearing.
• In India, the principles of natural justice are constitutionally protected under Articles 14 and 21 of Indian Constitution 1950, which guarantee equality before the law and the right to life and personal liberty, respectively.
• A third principle, often included in modern interpretations of natural justice, is the requirement for speaking orders or reasoned decisions, which helps prevent arbitrariness and ensures transparency in decision-making processes.
• The application of natural justice principles is essential in administrative law, serving as a safeguard against arbitrary state action and ensuring fair treatment of individuals in their interactions with government agencies and tribunals

Source: Allahabad High Court

Why in News?

Recently, the Allahabad High Court in the matter of Sanjit Singh Salwan and 4 Others v. Sardar Inderjit Singh Salwan and 2 Others has held that the disputes related to trust as mentioned under Section 92 of the Code of Civil Procedure, 1908 (CPC) are not arbitrable in nature. The Court further added that Section 89 of CPC which states the provisions regarding outside the court settlement shall not have overriding effect over Section 92 of CPC.

What was the Background of Sanjit Singh Salwan and 4 Others v. Sardar Inderjit Singh Salwan and 2 Others Case?

• In the present case, a trust named, Guru Teg Bahadur Trust used to manage the Guru Teg Bahadur school.
• Appellants and defendants claimed themselves trustees by amending the original trust deed in 2019.
• A dispute arose over management and membership of the school.
• The respondent filed a suit seeking injunction for restraining the appellant from interfering in the management and control of the school.
• The suit was dismissed by the trial court, against which an appeal was filed.
• During the pending appeal the parties entered arbitration.
• Two awards were passed by the sole arbitrator, one in the year 2022 and the other one was in the year 2023.
• The appellant pleaded that the award passed by the arbitrator in the year 2023 was an ex parte award.
• Appellant filed an execution case for 2022 award. However, the same was withdrawn due to insistence of Arbitrator
• Thereafter the appellant filed an application under Section 9 of the Arbitration & Conciliation act, 1996 (ArC) before the Commercial Court.
• The appellants were seeking injunction for restraining the respondent from interfering in the management and control of the school.
• It was argued by the appellant that the first time they came to know about the award passed in the year 2023 was by way of the objections filed by the respondents in Section 9 of ArC proceedings.
• The respondent again approached the arbitrator to restrain the appellant from interfering in the management of the school for which an award was passed in the year 2024.
• The appellant challenged the awards passed in the year 2023 and in the year 2024 under Section 37 and section 34 of Arc respectively.
• The commercial court held that the matters related to trust are not arbitrable and therefore the awards passed by the arbitrator are null and void.
• The commercial court also rejected the application of the appellant under Section 9 of ArC.
• Aggrieved by the decision to reject the application, the appellant filed the appeal before the Allahabad High Court.

What were the Court’s Observations?

• The Allahabad High court observed that provisions of Section 92 of CPC which states the provisions regarding trust.
• The Allahabad High Court further added that the clause (2) of Section 92 of CPC specifically states that any dispute or reliefs mentioned under Clause (1) of the said provision can only be sought as per the procedure given under its Clause (2).
• The High Court held that Guru Teg was a public trust and therefore the arbitration proceedings commenced, and awards passed hold no value as the same to be sough under Section 92 of CPC.
• The Allahabad High Court therefore confirmed the order of the Commercial Court.

What is Section 92 of CPC?

• Filing a Lawsuit for Public Trusts
  • This section explains who can file a lawsuit related to public charitable or religious trusts.
  • The Advocate-General or at least two people interested in the trust can file a suit in a civil court.
  • They need the court's permission first. The lawsuit can be about various issues related to managing the trust.
• Possible Court Orders
  • The court can make different types of orders, including:

a) Removing a trustee

b) Appointing a new trustee

c) Transferring property to a trustee

d) Ordering a removed trustee to hand over trust property

e) Asking for financial reports and investigations

f) Deciding how to use trust property or income

g) Allowing trust property to be rented, sold, mortgaged, or exchanged

h) Creating a plan for the trust

i) Granting any other necessary relief

• Restrictions on Filing Lawsuits
  • This part says that lawsuits about these trusts must follow the rules mentioned earlier.
  • There are some exceptions based on specific laws for religious endowments.
• Changing Trust Purposes
  • The court can change the original purposes of a public charitable or religious trust in certain situations.
  • This is called applying the trust property or income "cy pres" (as near as possible to the original purpose).
  • The situations include:

a) When the original purposes have been fulfilled or can't be carried out

b) When only part of the trust property is being used

c) When the trust property can be used more effectively with other similar property

d) When the original purpose was tied to an area that's no longer relevant

e) When the original purposes have become unnecessary, harmful, illegal, or ineffective

Source: Supreme Court

Why in News?

A bench of Justice Pankaj Mithal and Justice R Mahadevan held that the title to the property can be transferred only by way of a registered instrument.

• The Supreme Court held this in the case of Beena and Ors v. Charan Das (D) Thr. Lrs. & Ors.

What was the Background of Beena and Ors v. Charan Das (D) Thr. Lrs. Ors. Case?

• Late Bhawani Parshad was the landlord and Late Charan Das was the tenant of the premises consisting of a house of two rooms/godown.
• Eviction Proceedings and Consent Order:
  • The landlord applied under Section 14 of the Himachal Pradesh Urban Rent Control Act, 1971 (the Act) for eviction of tenant on the ground that the house in question was in a dilapidated condition and required demolition and reconstruction.
  • During the course of the suit the landlord appeared before the Court and stated that there has been a settlement between the parties and the tenant has accepted to deposit a sum of Rs. 12, 500 in the Court.
  • According to the settlement if the amount is deposited before the date decided the application of the landlord shall be deemed to have been dismissed otherwise the application of landlord would be allowed.
  • The tenant also appeared and accepted the above settlement.
  • The tenant deposited the above amount in the Chamba Treasury before the date mentioned.
  • Thus, the application of landlord under Section 14 of the Act was dismissed in terms of the consent order.
  • The landlord filed a revision petition before the High Court against such order which was dismissed. The Court while dismissing observed that the appropriate remedy for landlord here would be filing an appeal under Section 21 (1) (b) of the Act.
• Application for Execution of Consent Order by the Tenant:
  • Thereafter, the tenant moved an application for execution of consent order. This was allowed by the Rent Controller.
  • The Rent Controller directed that the name of the tenant should be entered as owner by correcting relevant records.
  • Aggrieved by the above the landlord filed a civil suit. However, during the meantime the building had collapsed and hence it was held that the order of Rent Controller was not sustainable in law.
• Present Suit by Tenant for Injunction and Recovery of Possession:
  • Consequently, the tenant filed a suit for permanent mandatory injunction for possession and recovery of Rs. 2,000 making the landlord as the defendant.
  • The civil suit was dismissed and in appeal also the tenant failed.
  • However, in second appeal the above judgment and order passed was reversed.
  • Thus, in second appeal the Court held that the tenant was the owner of the property and entitled to decree of possession.
  • Thus, the question before the Court was whether under the consent order dated 05.09.1979 passed on an application under Section 14 of the Act moved by the landlord, the tenant can claim himself to be the owner of the property as he has deposited the stipulated amount of Rs.12,500/-.

What were the Court’s Observations?

• The Court held that the answer to this issue would depend on the interpretation of the consent order vis-a-vis the statements of the landlord and tenant recorded by the Rent Controller in passing the consent order.
• The Court held that by reading the statements of the landlord and the tenant it can be concluded that:
  • It was nowhere provided in the statements that the amount agreed to be paid was a sale consideration of the property.
  • Although it may have been stated that the amount is equivalent to the value of the property.
  • Therefore, by any stretch of imagination it cannot be said that there was any settlement of transfer of the property on the above sale consideration.
  • Also, there is no document witnessing the transfer of property in pursuance of the above consent order.
• The Court further observed that it cannot be inferred from the statements that on deposit the tenant would become the owner of the property.
• The settlement recorded does not in any way provide or confer ownership rights upon the tenant.
• In the absence of the registered document, it cannot be said that any transfer of title takes place.
• Hence, the Court reversed the judgment and order of the High Court.

How is Title to the Property Transferred?

• Section 54 of the Transfer of Property Act, 1882 (TOPA) defines sale.
• It provides that sale is
  • Transfer of ownership
  • In exchange for price
    • Paid
    • Promised
    • Part paid
    • Part promised
• Para 2 of Section 54 provides how sale should be made.

• Further, it provides that delivery of tangible immoveable property takes place when the seller places the buyer, or such person as he directs, in possession of the property.

What Documents are Compulsorily Registrable?

• Section 17 of the Registration Act, 1908 provides for documents that are compulsorily registrable. These are:

What is the Case Laws on Transfer of Title?

• Suraj Lamps and Industries v. State of Haryana (2012):
  • The Court in this case held that immovable property can be transferred only by way of a registered deed of conveyance.
  • The Court also in this case deplored the practice of transferring the title to the property by way of ‘SA/GPA/WILL’ transfers.
  • The Court further held that as per Section 54 of TPA sale of an immovable property can only happen by way of a registered instrument and an agreement to sell does not create any right title or interest in the subject matter.