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Foreign Direct Investment and protecting interests of passengers and ensuring safety

The Ministry of Civil Aviation is in line with best international best practices ( regulating safety, efficiency and viability in all aspects of aviation, with provisions to include areas like passenger protection and air navigation services) , is in the process of introduction of  Civil Aviation Act of 2012 which will replace the Aircraft Act of 1934, covering critical issues such as viability and security,

CBDT mandate E-filing of returns

Individuals or HUF having income exceeding Rs.10 lakh have to file their Income Tax Return the year 2011-2012 electronically. Digital signature will not be made mandatory as per CBDT officials

Food Safety and Standards Authority of India (FSSAI)

The Ministry of Health and Family Welfare, that has administrative control over the food regulatory body is in the process of issue of notification, based on the recommendations put forth by the Food Safety and Standards Authority of India (FSSAI) on fixing rules for antibiotics in honey based on the study carried out by Centre for Science and Environment (CSE) which has reveled how top honey brands were contaminated with antibiotic residue used by the beekeeping industry to control outbreak of diseases on honeybees which resulted into increase in production.

SEBI revise Time limit for effecting securities transfer as a step for betterment of Investors – Securities Contracts (Regulation) Act, 1956

With a view to expedite the transfer process in the interest of the investors, SEBI, in consultation with Registrars Association of India (RAIN), Stock Exchanges and market participants has reduced the time-line for registering the transfer of shares from one month to 15 days. The same time-line shall also be applicable for transfer of debt securities. [Circular NO. MIRSD/8/2012, dated 5-7-2012]

Furnishing of TDS/TCS Statement/ incorrect information in TDS/TCS Statement will cost high w.e.f.01.07.2012

It is proposed to provide for levy of fee of Rs.200 per day for late furnishing of TDS statement from the due date of furnishing of TDS statement to the date of furnishing of TDS statement. However, the total amount of fee shall not exceed the total amount of tax deductible during the period for which the TDS statement is delayed, and also to provide that in addition to said fee, a penalty ranging from Rs.10,000 to Rs.1,00,000 shall also be levied for not furnishing TDS statement within the prescribed time.

it is also proposed to provide that a penalty ranging from Rs.10,000 to Rs.1,00,000 shall be levied for furnishing incorrect information in the TDS statement.

RBI Circular on NBFC

Click here to view the circular

Registration of a Charitable Trust Under Income tax Act does not entitle exclusion from service tax


Bombay Flying Club


Commissioner of Service Tax, Mumbai-II

Order no. S/708/2012/CSTB/C-I

Application no. ST/stay 423 of 2012

APPEAL NO. ST/94 of 2012

JUNE 7, 2012


P.R. Chandrasekharan, Technical Member – This appeal and stay application are directed against Order-in-Original No. 20-23/ST-II/WLH/2011 dated 30-11-2011 passed by the Commissioner of Service Tax, Mumbai II, The stay application is taken up for consideration.

2. The appellant, M/s The Bombay Flying Club, Santacruz, Mumbai, (BFC in short) is engaged in providing training in Aircraft Maintenance Engineering. They also undertake maintenance and repair of air-crafts owned by their members. The department was of the view that the services provided by the appellant falls under the taxable service category of “Commercial Coaching or Training Services” and “Management, maintenance and repair, services”. Accordingly four show cause notices were issued to the appellant for the period from October, 2003 to 2010-11 as detailed below demanding service tax.

Sl. No.

SCN date

Amount of service tax involved (in Rs.)

Period of demand

Classification of service




 October, 03 to September, 08

Commercial Coaching or Training Services and Management, maintenance and repair services




October,08 to March,09












The case was adjudicated vide the impugned order and the entire service tax demand amounting to Rs. 2,56,05,682/- was confirmed under section 73 of the Finance Act, 1994 along with interest under section 75 ibid. A penalty of Rs. 5000/- was imposed under section 77 for non-registration and non-filing of returns and a penalty equal to service tax was imposed under section 78 of the said Finance Act. Hence the appellants are before us.

3. The ld. Counsel for the appellant makes the following submissions:-

3.1 The appellant is a company registered under the Companies Act, 1956 with the objective of promoting the art and science of flying, without any profit motive. The appellant is also registered as a Charitable Institution under the Income Tax Act, 1961.

3.2 The appellant is required to comply with the provisions of Aircraft Act, 1934 and the Rules made thereunder. Section 5(g) of the Aircraft Act provides for making of rules relating to the licensing of persons employed in the operation, manufacture, repair or maintenance of aircraft. In pursuance to section 5, The Aircraft Rules, 1937 has been formulated. Rule 41 of the said rules deals with “proof of competency” which inter alia stipulates that applicants for licences and ratings shall produce proof of having acquired the flying experience and having passed satisfactorily the test and examinations specified in Schedule II in respect of the licence or rating concerned. Rule 133B deals with “approved organization” by the Director General Civil Aviation and such approved organizations are training schools which carry out training apart from maintenance and overhaul of aircraft components. The appellant being an approved organization conducts training courses in – (1) Aircraft maintenance Engineering (AME) and (2) Flying school.

3.3 The AME course is of 3 year duration and comprises of 6 semesters. After completion of training, the students are eligible to appear for the examinations conducted by the DGCA. After completion of 3 years, the appellant issues a course completion certificate. In order to get the AME licence, the student has to pass the DGCA examination and viva thereafter. For this the student has to undergo one year practical training with the appellant.

3.4 Any student who wants to obtain a private pilot licence from DGCA has to undergo 4 months training with the appellant and has to train by flying 60 hours. After 4 months course and 60 hours of flying, the appellant issues a course completion certificate. Thereafter the student can appear for the examination conducted by DGCA and on passing the said examination, a private pilot licence is issued to him. A student who wants a commercial pilot licence has to obtain private pilot licence first and thereafter complete 200 hours of flying with the appellant and thereafter can appear for an examination conducted by DGCA and on passing the examination is given a commercial pilot licence. The issuance of the certificate by the appellant is as per the Air craft Rules mentioned above and the certificate issued by the appellant enables the person to appear for the examination conducted by DGCA for issuance of licences.

3.5 The appellant also undertakes overhauling of the aircrafts belonging to its members. This activity is also carried out by the appellant as it is an approved organization under rule 133B of the Aircraft Rules.

3.6 The appellant was under the bona fide belief that the activities undertaken by the appellant are statutory functions. Since the appellant was a charitable organization, there is no commercial aspect to its activities and consequently, the appellant never charged any service tax on any of its activities.

3.7 The activities undertaken by the appellant with respect to the training in AME and Flying are exempt from the levy of service tax under notification Nos. 9/2003-ST dated 20/6/2003 and 24/2004-ST dated 10/9/2004 up to 26th February, 2010 as the appellant is a vocational training institute as defined in the said notifications as the training given by the appellant is part of the license issuing process of the DGCA and this training enables the person to seek employment directly after such training. Training provided by the appellant in respect of flying activity amounts to training for the purposes of ‘recreation’ and therefore, the said activity is not liable to service tax.

3.8 The demand for service tax for the period from October 2003 to September 2007 is time-barred as the CBEC vide circular dated 28-6-03 had clarified that when an institute issues a certificate or degree recognized by law, they are outside the purview of the definition of commercial training or coaching. Further the hon’ble High Court of Kerala, in the case of St. Antony’s Educational & Charitable Society v. Union of India 2006 (1) STR 481 had held that courses for training students to appear in examination conducted by an organization under the control of Ministry of Communication and Information Technology would be a course recognized by law and the appellant’s case is similar to the said case. Hence the appellant is not liable to service tax.

3.9 Demand for service tax under the category of “management, maintenance or repair” for the overhauling of aircrafts of its members is bad in law as the said service is not provided under a contract or agreement. The memorandum of the appellant’s company wherein they have undertaken to provide the said service to its members is not a contract or agreement.

3.10 The appellant relies on the judgment of this Tribunal in the case of Gujarat Flying Club v. CCE [Decided on 21-3-2012 vide order No. S/457/WZB/Ahd/2012] wherein in identical circumstances, this Tribunal had granted stay. The said order, though not a binding precedent, has to be followed to maintain consistency of approach and uniformity in the exercise of judicial discretion as held by the hon’ble Supreme Court in Vishnu Traders v. State of Haryana [1995 Supp (1) SCC 461] and by this tribunal in several other cases.

In the light of these submissions, the ld. Advocate prays for unconditional waiver from pre-deposit of the dues adjudged in the impugned order.

4. The ld. Additional Commissioner (AR) appearing for Revenue, on the other hand strongly, opposes the prayer made by the appellant, on the following grounds.

4.1 The CBE&C had examined the issue regarding leviability of service tax on the Flying Training Schools and Air Craft Maintenance Engineering Institutes in detail and had clarified that the said activity will come under the purview of “commercial training or coaching” service and is leviable to service tax. Further exemption under notification No. 24/2004-ST is not available to such training programmes. The said circular should be given due weightage while deciding the matter.

4.2 The Advance Ruling Authority (AAR) in the case of CAE Flight Training (India) Ltd. 2010 (18) STR 785 (AAR), in identical circumstances, had held that the activity undertaken is leviable to service tax under “commercial training or coaching” and benefit of notification No. 24/2004-ST is not available. This decision given by the AAR, though not binding on the Tribunal, has a great persuasive value while deciding the matter.

4.3 The Tribunal while deciding the case in respect of Gujarat Flying Club had not considered the matter in the light of the Board’s clarification and the AAR decision and it was only a prima facie view taken by the Tribunal. Such interim orders has no binding precedence.

4.4 He further relies on the judgment of the hon’ble apex court in the case of P.C. Paulose v. CCE&C [2011 (21) STR 353 (SC)] wherein the services provided to Airport Authority of India in collection of entry fee to the airport by a private person was held liable to service tax. Merely because a service has been rendered to a statutory authority, it cannot be said that the activity performed is a statutory function. Applying the ratio of this decision to the facts of the present case, the activity undertaken is liable to service tax as correctly held by the adjudicating authority.

In the light of these submissions, he prays for putting the appellant to terms.

5. We have carefully considered the rival submissions.

5.1 It will be useful at this juncture to refer to the statutory definitions under the Finance Act, 1994 in respect of the taxable services involved in the matter. With respect to commercial training or coaching, the taxable service was defined under clause (zzc) of section 65 (105) as follows:-

“any service provided to any person, by a commercial training or coaching centre in relation to commercial training or coaching”.

Section 65(26) and 65(27) defined the relevant terms as follows:-

‘(26) “commercial training or coaching” means any training or coaching provided by a commercial training or coaching centre;

(27) “commercial training or coaching centre” means any institute or establishment providing commercial training or coaching for imparting skill or knowledge or lessons on any subject or field other than sports, with or without issuance of a certificate and includes coaching or tutorial classes but does not include pre-school coaching and training centre or any institute or establishment which issues any certificate or diploma or degree or any educational qualification recognized by law for the time being in force.’

5.2 The first issue to be considered is whether the appellant falls under the exclusion clause of the definition, that is, whether “it issues any certificate or diploma or degree or any educational qualification recognized by law for the time being in force”. The appellant imparts training in air craft maintenance engineering and flying and issues a course completion certificate. Thereafter, the students who have undertaken the course has to appear for examinations conducted by the Direetorate General of Civil Aviation and on successful completion of the same, the DGCA issues/grants licence to the student under the Aircraft Act and the Rules. What is recognized under the law is the licence issued by the DGCA and not course completion certificate issued by the appellant. With that certificate, the student can not get any employment or engage in self-employment, without clearing the examination conducted by the DGCA. Since the appellant is a charitable institution, can they be considered as a commercial training or coaching centre ? Here again the answer is negative. So long as the appellant imparts training or skill in any subject or field other than sports for a consideration, the said activity would come under the purview of “commercial training or coaching”. It is on record that the appellant is collecting substantial amount of fees from the students for imparting training. Merely because the appellant is registered as a Charitable Institution under the Income-tax Act, 1961, that does not entitle the appellant to claim exclusion from the ambit of service tax. Thus it is obvious that the appellant does not come under the exclusion clause of the definition of “commercial training or coaching centre”.

5.3 The next issue for consideration is whether the appellant is eligible for duty exemption under notification No. 24/2004-ST dated 10-9-2004 during the impugned period. The said notification reads as follows:-

“……….the Central Government, ……….hereby exempts the taxable services provided in relation to commercial training or coaching, by,-

(a)  a vocational training institute; or

(b)  a recreational training institute,

to any person, from the whole of the service tax leviable thereon under section 66 of the said Act.

Explanation.– For the purposes of this notification, –

(i)  “vocational training institute” means a commercial training or coaching centre which provides vocational training or coaching that impart skills to enable the trainee to seek employment or undertake self-employment directly after such training or coaching;

(ii)  “recreational training institute” means a commercial training or coaching centre which provides training or coaching relational to recreational activities such as dance, singing, martial arts or hobbies.

The term “vocational training institute” used in the notification was amended as follows vide notification 3/2010-ST dated 27-2-2010,-

‘(i)  “vocational training institute” means an industrial training institute or an industrial training centre affiliated to the National Council for Vocational Training, offering courses in designated trades as notified under the Apprentices Act, 1961.”

5.4 From the records it is seen that on completion of the training by the appellant, the trainee cannot seek any employment or undertake self-employment directly after such training or coaching. The trainee needs to successfully complete the examination and viva voce conducted by the DGCA to obtain the appropriate licence under the Aircraft Act or the rules thereunder before seeking employment or undertaking self employment. Thus the appellant does not satisfy the definition of vocational training institute specified in the notification. The appellant has made a feeble attempt to say that at least flying should be considered as recreation. After training by the appellant, the trainee has to appear before the DGCA for clearing the requisite examination to obtain a private pilot licence or a commercial pilot licence. Therefore, flying by itself can not be said to be a recreation. The appellant has also not adduced any evidence whatsoever showing that they are affiliated to the National Council for Vocational Training for the period after 27-2-2010 to claim benefit under the said notification. It is also relevant to mention here that “aircraft maintenance engineering or flying” does not figure in the list of 116 engineering and non-engineering trades notified by the Directorate General of Employment and Training, Govt. of India under the Apprentice Act, 1961. Therefore, prima facie we are of the view that the appellant is not eligible for the benefit under the aforesaid exemption.

5.5 The Central Board of Excise & Customs had examined issues relating to the service under consideration on several occasions in the past and issued clarifications. Vide circular No. 107/1/2009-ST dated 28-1-2009, the Board had clarified as follows:-

“2. Commercial Nature of Institute

The first issue arises from the very name, i.e., “commercial training or coaching centre”. Many service providers argue that the word commercial appearing in the aforementioned phrase suggests that to fall under this definition, the establishment or institute must be commercial (i.e. having profit motive) in nature. It is argued that institutes which are run by charitable trusts or on no-profit basis would not fall within the phrase ‘commercial training or coaching centre’ and none of their activities would fall under the taxable service. This argument is clearly erroneous. As the phrase ‘commercial training or coaching centre’ has been defined in the statute, there is no scope to add or delete words while interpreting the same. The definition ‘commercial training or coaching centre’ has no mention that such institute must have commercial (i.e. profit making) intent or motive. Therefore, there is no reason to give a restricted meaning to the phrase. Secondly, service tax, unlike direct taxes, is chargeable on the gross amount received towards the service charges, irrespective of whether the venture is ‘profit-making, loss making or charity oriented’ in its motive or outcome. The word “commercial” used in the phrase is with reference to the activity of training or coaching and not to the nature or activity of the institute providing the training or coaching. Thus, services provided by all institutes or establishments, which fulfils the requirements of definition, are leviable to service tax.”

5.6 The CBEC had once again considered the leviability of service tax on the Flying Training Schools and Aircraft Maintenance Engineering Institutes and issued clarification vide circular. F. No. 137/132/2010-Service Tax dated 11th May, 2011. In the said circular, it was clarified that the training imparted by the aforesaid institutions cannot be considered as courses recognized by law as the institutes are not created or recognized by the law. It was also clarified that the training programmes conducted by these institutes will not be eligible for the benefit of service tax exemption under notification 24/2004-ST as the institute courses do not directly enable the trainee getting the requisite employment.

5.7 We are well aware that these instructions issued by the Board is not binding on this Tribunal. However, these clarifications have been issued by the authority responsible for the levy and collection of service tax. Therefore, due weightage and consideration need to be given to these clarifications as laid down by the hon’ble apex court.

“Courts in construing a statute will give much weight to the interpretation put upon it at the time of its enactment by those whose duty has been to construe, execute and apply the same enactment” [CCE v. Andhra Sugars Ltd. 1989 AIR 625]. “The meaning ascribed by the authority issuing the notification is a good guide of a contemporaneous exposition of the position of law” in K.P. Varghese v. ITO [1982] 1 SCR 629.

5.8 The Authority for Advance Ruling Authority (AAR in short) had occasion to give a ruling on a similar matter in the case of CAE Flight Training (India) Pvt. Ltd. (CFTL in short) [2010 (18) STR 785 (AAR)]. In that case CFTL was imparting aircraft-specific training called “type rating training” to commercial pilot licence holders which was in intensive course of a minimum 37 days wherein the trainees are imparted specified skills and knowledge about specific aircraft. AAR framed two questions of law for ruling, namely,-

“1.  Whether CFTI can be considered as an institute imparting training which is specifically excluded from the definition of ‘commercial coaching and training centre’ as defined under section 65(27) of the Finance Act, as an establishment which issues a certificate recognized by law for the time being in force ?

2.  Whether CFTI can be considered as a ‘vocational training institute’ so as to be exempted from tax under the category of ‘commercial training and coaching service’ as provided under notification No. 24/2004 dated 10-9-2004, in the light of the fact that it provides aircraft specific training to CPL holders so as to enable them to qualify for flying specified aircrafts and to subsequently enable them to obtain employment in various airlines.”.

After considering the provisions of the Aircraft Act, 1934 and the Rules made thereunder and the provisions of the Finance Act, 1994, the AAR held as follows:-

“18. Taking all the aspects into consideration, it is noted that CFTI has been given, as on date, provisional approval for conducting Type Rating Courses. The candidates who receive training from CFTI would be subjected to examination by DGCA approved examiners. It is based on the results of these examinations and fulfilment of other prescribed conditions that the DGCA would endorse the type rating of aircraft in the licence of the trainee pilots. In the present circumstances, therefore, the Certificate of Course Completion issued by CFTI cannot be said to be a certificate which is recognized by law for the time being in force. The fact that such a certificate may be taken into account by the DGCA approved examiner for the purpose of evaluating the experience and content of training, will not make it statutory in character.”

On this reasoning, the AAR held that CFTI cannot be considered as an institute or establishment excluded from the definition of “commercial training or coaching centre” under clause (27) of section 65 of the Finance Act, 1994.

As regards the second issue, the AAR made the following observations:-

“22. The issue to be considered is whether the Type Rating Training by CFTI enables the trainee to seek employment or undertake self-employment directly after such training or coaching. It is important to note that only in cases where trainee can seek employment directly after the training can the institute be considered to be covered by the exemption. From the facts placed before us it is noted that as per rule 6A of the Aircraft Rules, no person shall fly as a pilot of an aircraft which is not included in the Aircraft Rating of the Licence. Thus a person can fly an aircraft and consequently seek employment with an Airlines only after his licence has been endorsed with the aircraft rating for the said aircraft by the DGCA. Merely undergoing training with a TRTO without endorsement of the licence by a competent authority will not enable a pilot to fly an aircraft or seek employment. The training does not directly result into an employment or even enable the trainee to undertake self-employment.”

On this reasoning CFTI cannot be considered as a “vocational training institute” for the purposes of exemption from service tax under the category of “commercial training and coaching service” in terms of notification No. 24/2004-ST dated 10-9-2004.

5.9 The above ruling of the AAR has direct implication for the case before us. It is true that the decision of the AAR is binding only to the parties involved in that ruling. But when the facts involved are similar and the question for decision is identical, due consideration needs to be given to the said ruling, especially considering the fact the AAR is presided by a Retired Judge of the hon’ble apex court and the other members of the authority are erstwhile members of the Central Board of Excise & Customs and Central Board of Direct Taxes. Thus the status of AAR is higher than that of this Tribunal and therefore, this Tribunal cannot ignore the ruling given by the AAR in a case where the facts are similar/identical and the questions of law are identical.

5.10 The ld. Counsel for the appellant has made a submission that another co-ordinate bench of this Tribunal has granted stay in the case of The Gujarat Flying Club. We have carefully examined the said decision of the Tribunal. While granting stay, the circulars issued by the CBEC in 2009 and 2011 (discussed supra) on the subject matter were not brought to the notice of the Tribunal. Further the decision of the AAR on more or less identical issue in the case of CFTI was also not brought to the notice of the Tribunal. Therefore, the Tribunal did not have any occasion to examine the matter in the light of the clarification given by the Board or ruling of AAR. Therefore, the said decision cannot be cited as binding precedent. Further it is a well accepted principle that interim orders do not have any binding precedent value.

5.11 The next issue for consideration is whether the overhauling work of the aircrafts undertaken by the appellant for its members can be levied to service tax under the category of “management, maintenance or repair” service. The appellant’s contention is that there is no written contract or agreement with the members in this regard and therefore, in the absence of such an agreement or contract, their activity is not leviable to service tax. Section 65 (64) defines the taxable service as follows:-

“management, maintenance or repair” means any service provided by-

(i)  any person under a contract or an agreement; or

(ii)  a manufacturer or any person authorized by him,

in relation to,-

(a)  management of properties, whether immovable or not;

(b)  maintenance or repair of properties, whether immovable or not; or

(c)  maintenance or repair including reconditioning or restoration, or servicing of any goods, excluding a motor vehicle.


5.12 The statute does not stipulate that the there should be individual or separate contract or agreement with each of the service recipient so as to bring the activity under the tax net. The definition also does not stipulate that the contract/agreement should be in writing. It is on record that the in the Memorandum and Articles of Association of the company, which enumerates the object for which the company was formed, it is clearly stated that the company would provide overhauling of aircrafts belonging to its members. If that be so, it cannot be said that there was no understanding as to the entitlement of overhauling of aircrafts belonging to the members. The purpose of any contract or agreement is to reach an understanding. Whether that understanding is reached by individual contracts/ agreements or by a general one as provided for in the memorandum and articles of association, the purpose is the same. Therefore, prima facie, the activity of overhauling for a consideration comes under the purview of “management, maintenance or repair service” and is liable to service tax.

5.13 The last issue for consideration is whether there has been any suppression of fact on the part of the appellant so as to invoke the extended period of time for the demand of service tax. The appellant claims the benefit of “bona fide” belief. It is seen that three show cause notices involving a revenue of Rs. 1,50,31,718/- have been issued in time. Only in the case of show cause notice dated 20-4-09 demanding service amounting to Rs. 1,05,73,964/- for the period from October, 03 to September, 08 the extended period has been invoked. Even in this case, the demand is within time for the period from October, 07 to September, 08. Though period wise details are not available, the demand within the normal period will be about Rs. 21 lakhs on a proportionate basis. In other words, the demand of service tax for Rs. 1.71 crore will be within the normal period and the bar of limitation will not apply.

5.14 The appellant has not brought on record any evidence as to any financial hardship nor made any plea to the said effect in their submissions before us.

5.15 The hon’ble High Court of Andhra Pradesh in the case of SQL Star International Ltd. v. Commissioner of Customs [2012 (276) ELT 465 (AP)] laid down the principles governing stay application. The hon’ble High Court held as follows:

“Petitions for stay should not be disposed of in a routine manner unmindful of the consequences flowing from the order requiring the assessee to deposit full or part of the demand. There can be no rule of universal application in such matters, and the order has to be passed keeping in view the factual scenario involved. The petitioner has no absolute right of say.”

The hon’ble High Court further held that:

“(1) Three aspects to be focused while dealing with the applications for dispensing of pre-deposit are: (a) prima facie case, (b) balance of convenience, and (c) irreparable loss.

(2) Interim orders ought not to be granted merely because a prima facie case has been shown;

(3) The balance of convenience must be clearly in favour of making of an interim order and there should not be the slightest indication of a likelihood of prejudice to the interest of public revenue;

(4) While dealing with the applications, the twin requirements of consideration, i.e., consideration of undue hardship, and imposition of conditions to safeguard the interest of revenue must be kept in view;

(5) When the Tribunal decides to grant full or partial stay, it has to impose such conditions as may be necessary to safeguard the interests of the revenue. This is an imperative requirement; and

(6) An Appellate Tribunal, being a creature of the statute, cannot ignore the statutory guidance while exercising general powers or expressly conferred incidental powers.”

In the case before us, not only that no prima facie case has been established but also that no undue hardship has been pleaded. Therefore, the balance of convenience lies in favour of Revenue. Thus the appellant needs to be put to terms.

6. In the light of the foregoing discussion, we are of the considered view that the appellant has not made out any prima facie case for waiver of 100% of the pre-deposit of the dues adjudged. Accordingly we direct the appellant to make a pre-deposit of Rs. 1.5 crore (Rs. One crore and fifty lakhs only) within a period of eight weeks and report compliance by 16.08.2012. On such compliance, pre-deposit of balance of service tax, interest and penalties adjudged shall stand waived and recovery thereof stayed during the pendency of the appeal.

Foreign Investment in India – Sector Specific conditions

A.P. (DIR Series) Circular No. 137

June 28, 2012


All Category – I Authorised Dealer banks


Foreign Investment in India –
Sector Specific conditions

Attention of Authorised Dealer Category – I (AD Category-I) banks is invited to  Annex A and B of Schedule 1 to Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000 notified by the Reserve Bank vide Notification No. FEMA 20/2000-RB dated 3rd May 2000, as amended from time to time whereby description of sectors/activities wherein FDI is prohibited as also the entry norms, sectoral cap and other conditions for sectors/activities in which FDI is permitted under Government route and Automatic route are specified.

2. The Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce & Industry, Government of India has been updating/notifying  the FDI policy through issue of Consolidated FDI Policy Circular.  Accordingly, Government has notified the latest FDI policy changes vide FDI Policy Circular 1 of 2012 dated  April 10, 2012 and the same is available at Government website www.dipp.gov.in. In order to bring uniformity in the sectoral classification position for FDI as notified under the Consolidated FDI Policy Circular with the FEMA Regulation, the revised position on  Schedule 1 to Notification No. FEMA 20/2000-RB dated 3rd May 2000, has been suitably revised and is enclosed.

3. Necessary amendments to the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000 notified vide Notification No.FEMA 20/2000-RB dated May 3, 2000 will be issued separately.

4. AD Category – 1 banks may bring the contents of this circular to the notice of their constituents and customers concerned.

5.  The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions/approvals, if any, required under any other law.

Yours faithfully,

(Rudra Narayan Kar)
Chief General Manager


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1st Bulletin: Welcome to Aparajita Compliance Solution

Dear Client, Greetings!

With immense pleasure and gratitude, first, we would like to thank you for your continuous support. The thirst in you about Regulatory Compliance Management ( hereinafter called RCM) has motivated us all the way and we are very happy that we could quench a little of it, by keeping you updated with information’s about all kind of regulatory changes / amendments now and then taking place every days. Due to the increasing number of rules and regulations and need for operational transparency, organizations are need to  adopt the use of consolidated and harmonized sets of compliance controls. This approach is used to ensure that all necessary governance requirements under various laws both civil and criminal are complied within due date to avoid the  unnecessary litigations, penalties, prosecution, damage of goodwill and reputation, withholding and suspension of licenses and permission, duplication of effort and resources.

Thee rules and regulations are so varied in India it is not even possible for the business owner that whether he has been carrying his business in full compliance of laws, the answer to this question is definitely not certain, because he/she is always of the believe that the employees are honestly complying required laws. No doubt all the organizations are  complying the laws to certain extent. The answer is only a prospective and not affirmative. The owner of the organization need to have finger tips the level of compliance by his employees in full lest manner and that too in time and further need to ensure that compliance is made in letter and spirit. It warrants periodical review of regulatory compliance by an independent body who is not having vested interest in the organization who will assess the compliance level and report to the top management. This can be compared with the total body scanning of the entire organization to find out the timely ailment to avoid sickness and to prevent damages. This scanning can be carried out depend on the size of the organization at frequent interval of every three months or half yearly basis. Hence this is preventive rather postmortem.

Now, we take pride to inform you that, we are planning to extend our services and that will be possible only with your support.

In view of number of legal changes by way of amendment taking place now and there i.e Recently the Ministry of Environment and Forests (“MoEF”) has taken the first step towards reducing the alarmingly growing menace of pollutants from the information age. The E –Waste (Management and Handling) Rules, 2011 framed under the Environment Protection, Act 1986  were published on May 30, 2011 and have come into effect on 1st May 2012.

It is our endeovours to keep all our esteemed clients updated information’s about all kind of RCM related news. We seek your feedback so as to the contents of  the news letter. We would be too happy to have your suggestions for making the newsletter more useful and informative.

What is Regulatory Compliance Management(RCM)

Cent percent regulatory compliance is crucial for any business entities be it Proprietary concern, partnership firm, Private or Public companies. Non-compliance can leads to hefty fines, reputation risks, product recalls or delays in product approval, plant shutdowns, monetary loss, imprisonment etc., in addition to unnecessary waste of time and energy. RCM will bean unbiased examination and evaluation of the various statements of an organization. If you miss you are in mess.

This requires expertise and full time monitoring. Small and medium companies may not afford to appoint experts and hence treating this area in a postmortem manner rather preventive is an unnecessary risk. Simply these kinds of organization hand over the professional work in the hands of an non-professional who is mostly unaware of the day to day changes by way of amendment that are taking place every days. As long as the  organization is not receiving any adverse notice from the government bodies they are happy, the moment they organization are under scrutiny of Government bodies the consultant became disappear by leaving the entire risk on the head of owner. It is not a healthy practice and it need to be rationalize by engaging professional and utilizing their timely advises.  While the Governing guidelines state that business operations should be conducted within the four corner of the rules and regulations so that the business entities are kept out of trouble; prosecutions, penalties, fines and liabilities are avoided; and in as much as fostering the image of a responsible corporate citizen.

The implementation of RCM does not mean replacement of consultants or retrenchment of employees however RCM is for periodical review of the works so far done by the consultant/employees under various laws so that any error or ignorance of laws can be ratified subsequently well within the period of law of limitation. RCM is designed to minimize the unnecessary litigation with Government bodies and at the same time offer an opportunities to protect the organization’s rights to fight against the unreasonable, illegal demand, penalties prosecutions that are slashed by the government authorities by wrongly interpreting the provisions of laws.

Benefits and Beneficiaries

a)    Promoter Shareholders/ Business Owners :-

RCM ensures the business owners those are in charge of management that the business are conducted in accordance within four corner of laws and the owners’ stake is not being exposed to undue risk and thereby saving invaluable time which could be deployed in further planning and development of business.

b)   Board of Directors / Management :-        

Ensure the management of the company that those who are charged with the duty and responsibilities of compliance with the requirements of law are performing their duties competently, effectively and efficiently, to that the people in charge of the day to day management of the company not likely to be exposed to penal action or other liability (and consequential risk and embarrassment) on account of non-compliance with  law. Non compliance of statutory provisions may lead to serious consequence by way of disqualification of directorship/ Managing directorship, imprisonment etc.

c)    Independent Directors

Ensure them that the company has complied with the laws and , therefore they are not likely to be exposed to action by law enforcement agencies for non-compliance by the Company.

d)   Compliance Officers

Ensure them that they have done every thing required under law.

e)    Investors/ Prospective Acquirer

To provide comfort to investors that the company has been conducting its affairs in accordance of laws and therefore, their investment is safe and being taken due care of. RCM will help unearth and check these practices and also enable organization to take timely corrective action by bringing to book the guilty. In the era of Corporate Governance, RCM will provide comfort to shareholders about the compliance as also to feel secure about their investment.

RCM can be an effective due diligence exercise for the prospective acquirer of a company or  controlling interest or a joint venture partner.

f)    Employees

RCM can empower employees to gauge or measure the levels of compliance and non-compliance by the companies where they are employed. They are likely to be benefited maximum under various labour welfare  laws such as EPF,ESI, Bonus, Gratuities, payment of wages act etc.,

g)   Government / Government agencies

As we know Government is of the people, for the people and by the people RCM being preventive measure for compliance with a plethora of laws, RCM will have a salutary effect of substantially by payment of taxes and statutory dues to the exchequers which can be used for national development.

It is worth to mention that the remark to the Supreme Court Justice Oliver Wendell Holmes, Jr. that

Taxes are the price we pay for a civilized society.
Taxes are the price we pay for civilization.
I like to pay taxes. With them I buy civilization.

In 1848 a committee report to the State Senate of Ohio emphasized that taxation paid for “social order” [JSOH]:

Rightful taxation is the price of social order. In other words, it is that portion of the citizen’s property which he yields up to the government in order to provide for the protection of all the rest. It is not to be wantonly levied on the citizen, nor levied at all except in return for benefits conferred.

Why we are fit to do RCM

We believe that identifying applicable business, labour, environment laws and implementation of industries specific laws etc. applicable to the organisation is the first stage to initiate the process. Even the Indian Great Chanakya 2000 years ago has quoted:

“All undertakings should be preceded by consultation. Holding a consultation with only one, he may not able to reach a decision in difficult matter. With more councillors it is difficult to reach decisions and maintain secrecy”. (1.15.2,35,40). Therefore sit and counsel with those who are mature in intellect(1.15.21)

Accordingly our organization is comprised of highly qualified and experienced team of professionals in different filed of laws supported by dedicated hands is most competent, fit and proper to advise the compliance in view of strong knowledge of law and procedure. A detailed profile is attached.

Documents to be scrutinized in general are Corporate Documents, Financial Information, Tax Status, Contracts and Agreements, Governmental Regulations, Litigation, Products and Services, Marketing, Management and Personnel, Property and Equipment, Research & Development and Other Company Information and through study will be undertaken based on further discussion with the compliance persons and management.


Chief Executive Officer