The Chartered Accountant

that the penalty proceedings under Section 273(2)(a)
and 271(1)(c) should be initiated against the assessee.
The Supreme Court held that the letter dated 15.6.1978
was complied with by X in providing adequate security
of the payable amounts, hence, there is nothing to
dispute or suspect the genuineness of the transaction.
The whole transaction would have to be viewed on
that backdrop. In the commercial world, the parties
are always free to vary the terms of contract. Merely
because by Resolution dated 30.6.1978, the assessee
agreed to defer the payment of interest, would not
mean that it tried to evade the tax. What is material in
the tax jurisprudence is the evasion of the tax, not the
beneficial lawful adjustment therefor. Considering the
genuine nature of the transaction based on the letter
dated 15.6.1978 and the Resolution dated 30.6.1978,
it could not be said that the whole transaction was in
order to evade the tax.
Further the Supreme Court held that the High Court
DECEMBER 2008 1000 THE CHARTERED ACCOUNTANT
LEGAL UPDATE
took the view that the levy of interest under Section
215 and the levy of penalty under Section 273(2)(a)
stand on different footings. Indeed, while the levy
of interest under Section 215 is automatic, that is
not the case with the penalty under Section 273(2)
(a), where the mens rea on the part of the assessee
would have to be shown to the extent, it has been indicated
in the language of the Section, where, therefore,
there was some scope for the assessee to justify
the estimate given by it and that the penalty could
not be inflicted. Indeed, if the assessee proceeded
on the basis of Resolution dated 30.6.1978, it has
to be held that the assessee had reasonably believed
that the income of interest which was written off by
the Resolution, could not be added to its income. If
it genuinely proceeded under that bonafide impression,
then, the High Court was right in writing off
the penalty and upsetting the view of the Tribunal.
The appeals were dismissed.
Indirect Taxes
Excise & Customs
Section 28 of the Customs Act, 1962 — Notice for payment of duties, interest etc.
Rule 2(a) of the Interpretative Rules would not be applicable since there is no question of the goods having the
essential character of CTVs
Commissioner of Customs, New Delhi v. Sony India Limited (Supreme Court), 23 September, 2008
The issue before the Supreme Court was that whether
Rule 2(a) of the Interpretative Rules can be applied,
as to whether the benefit of Notification exempting
components only will be available, if the product is
considered as complete or finished article by virtue of
deemed provision of Rule 2(a), and whether the change
effected in Explanatory Notes of HSN will give only
prospective application or it will be applicable.
The Supreme Court observed that the goods brought in
different consignments separately on the basis of valid import
licences would not attract the import duty as if they
were the finished goods. Rule 2(a) would not be applicable
since there is no question of the goods having the essential
character of CTVs.
The appeal was dismissed.
Section 108 of the Customs Act, 1962 — Search, Seizure and Arrest - Power to summon persons to give evidence
and produce documents
Power to arrest is circumscribed by objective considerations and cannot be exercised on whims, caprice or fancy of
the officer
Union of India v. Padam Narain Aggarwal etc. (Supreme Court), 3 October, 2008
In view of non-co-operation by the respondents,
complaints were filed by the Custom Authorities for
commission of offences punishable under Sections
174 and 175 of the IPC. On knowing this the accused
made applications for anticipatory bail before the District
and Sessions Court which were dismissed. On
appeal, the High Court disposed of the applications
by directing the Customs Authorities not to arrest the
respondents of any non-bailable offence without ten
days prior notice to them.
The Supreme Court observed that the respondents
were only summoned under Section 108 for recording
of their statements. The High Court was conscious
and mindful of that fact. It, therefore, held that applications
for anticipatory bail, in the circumstances,
were pre-mature. They were, accordingly, disposed
of by directing the respondents to appear before the
Custom Authorities. The Court, however, did not
stop there. It stated that even if the Custom Authorities
find any non- bailable offence against the respondents,
they shall not be arrested “without ten days
prior notice to them. Neither of the above directions