An interest rate of 25 per cent per annum? Well, fixing interest rates is a matter between the lender and the borrower. As such, the National Company Law Appellate Tribunal, Kolkata bench, did frown at the high rate with a terse observation that “it seems to be on the higher side”, but said nothing further, since interest rate matters are not in its remit.

But when Kotak Mahindra Bank also took an issue to the High Court of Kolkata, the Debts Recovery Tribunal and the National Company Law Tribunal (NCLAT), in no uncertain terms, expressed displeasure over such ‘forum shopping’.

The underlying case, which is still being heard by NCLAT, is not the issue here. Basically, it pertains to a guarantee stood by a company called Multiple Hotels Pvt Ltd, the ‘corporate debtor’, whose director, Partha Paul, is the appellant before NCLAT. The borrowers were a company and a trust for promotion of education, to whom Kotak Mahindra Bank lent ₹20.8 crore.

When the bank proceeded under Section 13(2) of SARFAESI (Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act), the claim, on December 29, 2016, was ₹14.73 crore. Despite a payment of ₹5.5 crore, the dues had swelled to ₹21.6 crore on November 30, 2018, when the bank sued under Section 7 of the Insolvency and Bankruptcy Code (IBC). The appellant alleged that the bank did not even disclose the amount received by it to the tribunal.

Dr Ashok Kumar Mishra, Technical Member, NCLAT, clearly did not find the conduct of the bank acceptable. In his order, he observed: “All this suggests that the bank/R1 is involved in forum shopping to the multiple ‘courts/tribunals’ just to harass the ‘guarantor’ as it has moved the Hon’ble High Court of Calcutta at Calcutta to coerce the trust into paying off its debts and involving the appellant in time-consuming and expensive litigation at the behest of this concerned branch of the bank/respondent (Kotak Mahindra Bank). It is a settled law that the practice of forum shopping be condemned as it is an abuse of law. This case, beyond doubt, falls under the category of forum shopping... the respondent bank has approached one court for relief but does not get the desired relief and then approached another court for the same or similar relief.”

IT services to foreign associate is ‘export of service’

When Celtic Systems Pvt Ltd provided a little help, in terms of an IT service, to its associate company in the US, Celtic Cross Holding Inc, does it amount to an ‘export of service’, on which a service tax could be demanded?

The matter came up before the Customs, Excise and Service Tax Appellate Tribunal, Mumbai, which said, yes, it is a taxable service.

From the facts on record, it is not disputed that the appellant company is working under the banner of Celtic Systems Pvt Ltd, registered with the registrar of companies in India. Whereas, the service recipient is working under the banner of Celtic Cross Holding Inc, USA. Both companies are separately registered in their respective countries. Though two directors are common to both, the rest are different. Even if there is a note in the balance sheet of the appellant company that they are associate of Celtic Cross Holding Inc, USA, they are independent entities as per the Companies Act. Therefore, Clause (f) of Rules 6A (1) of Service Tax Rules, 1994, are complied with.

This issue has been considered by the Gujarat High Court in the case of Linde Engineering India Pvt Ltd & Ors, and it held that even where the Indian company was a 100 per cent subsidiary of the foreign company, namely Linde AG Germany, they are different entities. In the present case, the appellant is on a better footing as they have constitutionally two different entities — the appellant and Celtic Cross Holding Inc, USA.

Therefore, in view of the Gujarat High Court judgement, it is clear that in the present case the appellant and the service recipient are two distinct persons; hence the service provided by the appellant to Celtic Cross Holding Inc, USA, clearly falls under ‘export of service’.

Electricity from waste not excisable

When deciding a dispute between Vandana Global Ltd and the Commissioner of Central Excise and Service Tax, the Customs, Excise and Sales Tax Appellate Tribunal, New Delhi bench, made two fundamental observations.

First, electrical energy is neither an excisable good nor an exempt good. Second, in a recurring issue, the authorities cannot allege “suppression of facts”.

Vandana Global manufactures sponge iron and electricity, which it uses captively, selling only a small surplus to the grid. The company took Cenvat credit on the inputs. What was under dispute was the part of the Cenvat credit related to inputs that went into electricity generation.

Judicial member Dr Rachna Gupta recalled a judgement of the Allahabad High Court in the case of Gularia Chini Mills vs Union of India, which noted that “Rule 6 of 2004 (central excise) Rules will only apply where a manufacturer manufactures both the excisable dutiable final products and also manufactures excisable exempted goods. Furthermore, for the applicability of Rule 6, manufacture of dutiable goods and manufacture of exempted goods are condition precedent”.

In this case, electricity generated was not an exempted good.

The judge further noted: “There is no denial for the fact that similar show cause notices have already been served upon the appellants for the previous years. Suppression of facts in those circumstances cannot be alleged. The decision of Hon'ble Apex Court in Nizam Sugar Factory vs Collector of Central excise is absolutely clear that when all relevant facts were in knowledge of authorities at the time of first show cause notice, while issuing subsequent show cause notices on same/similar facts, suppression of facts on part of assessee cannot at all be alleged. In view of this, it is held that invocation of extended period of limitation has also been wrongly confirmed. Once there was no suppression, question of imposition of penalty does not at all arise.”