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Policy & Politics

Legality of cryptocurrency in India and RBI’s recent guidelines to banks

It is known that there is little clarity as far as cryptocurrency regulations in India are concerned. What one needs is a well-structured framework along with the knowledge of the digital currency.

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With the increasing technology there’s also seen big development in the Fin-Tech sector. With the gaining popularity and awareness of online trading it’s majorly used by people in India. The popularity of virtual currencies such as Bitcoins, Ethereum, Doge, etc, has considerably increased both in India and globally. No wonder, more people have starting investing and giving their valuable time and money in these virtual currencies. According to media reports, there are various platforms where people can buy and sell these cryptocurrenices in India: Wazirx and CoinDCX. These trading platforms however claim that there are between 60 lakh to 1 crore cryptocurrencies holder in our country with the holdings of over Rs 10,000 crore. However, according to various media reports around 7 million Indians have already invested in over $1 billion into these cryptocurrencies. This increase in the growth of cryptocurrencies is tremendous which cited that it estimated that Fin-tech sector will grow tremendous in India in future which predicates India’s GDP will increase by additional $730 million by 2025 from Fin-tech itself.

WHAT ARE CRYPTO-CURRENCIES?

A cryptocurrency is a form of digital asset which is not issued by central government but designed to stimulate as a medium of exchange, that is secured by cryptography. These currencies are decentralized and non-administered that is based on blockchain technology. A blockchain technology is like a type of database, a database where collection of information that is stored electronically on a computer system. It means that this technology that is suitable for decentralized and transactional data shared across a large network around the world. This technology also allows distributed software architecture capable of finding concurrence on their shared without need to establish online trust with any participant. This eliminates any circulation of third party to validate transactions person-to-person.

WERE CRYPTOCURRENCIES EVER BANNED?

When cryptocurrencies started to rose up in India in 2017, investors were relishing upon them. But there illicit activities that happened by which people’s took undue advantage of it. Since from this time to curb these illicit activities, the government took measures which seen when in 2018 Finance Ministry followed by RBI released a statement which illustrates that “The government doesn’t consider cryptocurrencies as a coin” and they will take all necessary steps to eliminate the use of crypto assets in financing “illegitimate acts” and also the government will explore the use of blockchain technology. It was suggested by tem that all entities governed by them stop offering any kind of service to entities associated with virtual currencies.

KEY TAKINGS FROM THE GOVERNMENT STATEMENT

1) The government was never against this technology, they only intended to prevent the wrong usage of cryptocurrencies and blockchain by people.

2) It was clarified by the government that it nowhere mentioned that buying and selling or holding cryptocurrencies were prohibited.

3) They said that they don’t consider it as a part of the payment system. Meaning one can’t use crypto to buy and sell things; however, they never said it couldn’t be held as an asset.

RESERVE BANK GUIDELINES

With the enormous usage of cryptocurrencies within India and its potential revenue loss, the Government of India, the regulators and authorities began to take notice and as a consequence, in 2013 the Reserve Bank of India had issued a press release, admonishing to the public against dealing in virtual currencies including Bitcoins. In the year 2017, the Government of India did a high-level Inter-Ministerial Committee to report on various issues pertaining to the use of virtual currency and subsequently, in July 2019, this Committee submitted its report recommending a blanket ban on private cryptocurrencies in India. Despite of the fact Reserve Bank of India framed and issues certain guidelines to the Banks such as commercial, co-operative, small finance, payment banks etc, to not accept or deal in virtual currencies but also direct them to stop providing services to all entities which dealt with virtual currencies. This thus broke down the crypto industry as these exchanges needed banks services for sending and receiving money. It necessary for crypto industry that bank support it as it created a difficulty in exchange crypto in money, money which uses to buy accessories and paying for different services etc.

However, the whole scenario changed when on 4th March, 2020, when the Apex Court of India i.e. Hon’ble Supreme Court of India, quashed the earlier ban on crypto by Reserve Bank of India. The court examines the matter from the perspective of Article 19(1) (g) of the Indian Constitution. According to Article 19(1) (g) it specifies the freedom to practice any profession or to carry on any occupation, trade or business and Doctrine of Proportionality.

LEGAL POSITION OF CRYPTOCURRENCIES IN INDIA

The pattern of cryptocurrency of reluctance exhibited by India is evident through various events as:

RBI Press Releases: This press release on December 24th, 2013, when Reserve Bank of India, in a press release cautioned users, holders and traders about virtual currencies such as Bitcoins, dogecoins etc, and the risk related to it.

CONCERNS DEFINED BY RBI IN A PRESS CONFERENCE

• That there was no authorized central agency which regulates such payments.

• That there is no established framework for dispute solving.

• Digital wallets which have no regulation are prone to hacking, loss of passwords, cyber attacks etc.

• High scope of illicit activities and unintentional money laundering activities etc.

BILLS PROPOSED BY INTER-MINISTERIAL COMMITTEE

On November 2, 2017 the centre constituted an Inter-Ministerial Committee which introduced two bills. However, neither of two bills implemented.

• Crypto-token Regulation Bill, 2018.(First draft Bill)

• Banning of Cryptocurrency and Regulation of Official Digital Currency Bill, 2019 (Second draft Bill).

CRYPTO-TOKEN REGULATION BILL, 2018

It recommended:

(i). It prohibits persons dealing with activities related to crypto tokens or coins from falsely posing these as not being investments due to gap in the existing regulatory framework.

(ii). It regulated Virtual Currencies exchanges and brokers where sale and purchase may be permitted.

Banning of Cryptocurrency and Regulation of Official Digital Currency ban Bill, 2019:

It proposed to ban usage of Virtual currencies as legal tender.

Further, mining, buying, holding, selling, dealing in, issuance, disposal or use of cryptocurrency in the country would be prohibited.

It specifies the use of cryptocurreny: It as a medium of exchange and payment. It provides cryptocurrencies related services to customers and investors and tech-persons for registration, trading and selling etc, and also as a basis of credit etc.

Imposition of a ban:

The Reserve Bank of India, on its press releases on April, 2018 directed that RBI shall not deal in virtual currencies. However the Hon’ble Supreme Court soon on March 4, 2020 comes with their views on this issue cited in a judgment named: Internet & Mobile Association of India vs. RBI

This judgment which was given by Hon’ble SC had a three-judge bench who lifted the ban imposed by the RBI Circular. The court principally examined the matter from the perspective of Article 19(1) (g) of the Indian Constitution. This judgment based on two issues, firstly It had been contended by the net and Mobile Association of India that RBI lacked jurisdiction to forbid dealings in cryptocurrencies. It also had been argued that cryptocurrencies can’t be equated with money as they weren’t money in its real sense. The court however also analyzed the definition of cryptocurrencies given by various regulators, government etc. On this the court held that these virtual currencies weren’t accepted mode of exchange and that they could also not be considered a final discharge of debt. Therefore, court determined as they didn’t perform 4 functions then they can’t be termed as tender. However, it had been acknowledged that Virtual Currencies have the potential to make a parallel system albeit they might not strictly be equated to currency and thus, in such a scenario the RBI can invoke its power to manage it. The court also talked about this circular of RBI didn’t protect the interests of the general public generally and also violated the Article 19(1) (g) of the Indian Constitution. Hence, it disproportionately affected the livelihoods of individuals dealing in cryptocurrencies. it had been argued that the measure by RBI was extreme and doesn’t pass the test for proportionality. It also said that reserve bank of India circular adversely impacted the business of exchanges that addressed cryptocurrencies.

CRYPTOCURRENCY AND REGULATION OF OFFICIAL DIGITAL CURRENCY BILL, 2021

A concern in the Fin-tech industry was in debate from a long time but the introduction of this new bill on cryptocurrencies by the Parliament which facilitates a framework for the creation of official digital currency to be issued by the RBI. The main proposal is to ban all private cryptocurrencies in India. However it allows surely exceptions to market the underlying technology of cryptocurrency and its uses.

CONCERNS ASSOCIATED WITH THE NEW BILL

• This new Bill takes due cognizance of what has been a long-standing within the area of cryptocurrencies.

• It aims to completely ban cryptocurrencies.

• The most concern is that if new bill imposes a ban on private cryptocurrencies.

• It can cause formation of an underground market wherein genuine investors could also be forced to operated in unmonitored environments.

RBI NEW CIRCULAR TO BANKS REGARDING INVESTING OF PEOPLE IN CRYPTOCURRENCIES

The Reserve Bank of India on June 1st, 2021 issued a clarification circular to the banks in the light of India’s biggest banks like HDFC Bank Limited & SBI Card as they had been sending cautionary electronic mails and messages to their customers against dealing in cryptocurrencies, where they gave the reference of RBI circular of 2018. That RBI circular mentioned that it prohibited dealing in cryptocurrenices. But as we all know that this RBI circular banning cryptocurrencies was later quashed by the Supreme Court order. That’s why in its new circular RBI clearly stated that its 2018 circular no longer stands and said to banks that they can’t stop people investing in cryptocurrencies.

RBI on the other hand also recommended due-diligence which was shown by banks on the matter as KYC. However the Supreme Court has scrapped RBI circular of March, 2020.

CONCLUSION

It is known that there exists a scarcity of clarity with cryptocurrency regulation in India. A framework requires with a well-structured framework associated with the knowledge of cryptocurrency. Nowadays it’s crucial to know and know the cryptocurrencies which has gained global momentum. We have seen how Bitcoin had an enormous boost in valuation in 2020, as a result of which new investors inclined towards it. Therefore, it can’t be examine whether on cryptocurrency is good or bad once we see different developments everywhere the world.

A cryptocurrency is a form of digital asset which is not issued by the Central government but designed to stimulate as a medium of exchange, which is secured by cryptography. These currencies are decentralised and non-administered that is based on blockchain technology. A blockchain technology is like a type of database, a database where collection of information that is stored electronically on a computer system. It means that this technology is suitable for decentralised and transactional data shared across a large network around the world.

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Policy & Politics

Second coronavirus wave, administration and Fundamental Rights

The pandemic saw the infringement of various Fundamental Rights guaranteed by our Constitution. The fundamental human rights that are most affected are ‘Right to Health’ and ‘Right to Life’ which also includes ‘Right to die with dignity’. In many well-known judgements, the Supreme Court and several High Courts agreed that the dead corpse should be treated with proper dignity and treated fairly. The Supreme Court recognised that right to life extends not only to living persons but also to their bodies after death.

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In the words of William Shakespeare which says “All that lives must die, passing through nature to eternity.”While death is regarded as a natural occurrence, the basic decent treatment that is anticipated and should be provided to the deceased does not always germinate and materialize naturally. We recently had to witness such tragic cases which have not only shocked the entire country but have also witnessed and drawn intervention towards this grave issue from all over the world.

Sightings of dead bodies floating on the bank of the holy river Ganga were reported in the country’s top newspapers. Villagers in Bihar and Uttar Pradesh discovered bodies in the Ganga and Yamuna rivers on May 11, 2021. Ganga, a holy river where people undertake various rituals in relation to ceremonies that are therein mentioned in their holy book, they not only perform ceremonies but also venerate river Ganga for its purity. On May 11, seven bodies wrapped in plastic bags were discovered floating in Uttar Pradesh’s Ghazipur and Hamirpur districts. Similar incidents have also been reported in the Baksar district of Bihar. The greatest concern among residents was that stray dogs and birds would devour the carcasses which would then result in spreading the coronavirus. However, instead of taking action against those responsible for the malafide attacks, the state authorities are now playing a blame game with one another. The world is in danger and the situation has been seen severely detrimental among masses. The heart-rending incidents from these states remind us of the last Mughal emperor and his poetic lament. Unable to find a final resting place in his beloved homeland (India), the last Mughal emperor quite rightly put forth the plight of the dead – Kitna hai badnaseeb Zafar dafn ke liye/Do gazz amen bhi na milikoo-e-yaar mein (How unlucky is Zafar! For burial, even two yards of land were not to be had in the land of his beloved). In the recent past, a ‘novel’ difficulty, similar to the ‘novel’ Corona Virus, has arisen for our contemplation, which would be guided eventually from the foundations of this present article. The article shall examine three major contentions vis-à-vis the issue of dead bodies which were found floating on the banks of river Ganga. Firstly, whether the actions of state authorities being negligent towards the horrendous issue i.e the floating of dead bodies, be condemned? Secondly, the fundamental right of a dead person, enumerated under the constitution of India violated or do we not owe a duty to cremate the deceased respectfully? Third, is there a need to amend the guidelines issued by the Ministry of Health and Family Welfare on management of corpses?

NEGLIGENCE ON PART OF STATE AUTHORITIES

The term other authorities that are enumerated under Article 12 of the constitution of India has given interpretation to the term ‘AUTHORITIES’ by the means of landmark precedents. It is settled law that the State under Article 12 is the custodian of the welfare and wellbeing of its citizens. However, looking at the present scenario the situation seems to be such where the actions on part of state authorities are not at all seems to be custodian but seems to become a warrior against the interest of masses.

Legislation derives its power from the constitutions of India, 1950 which grant the liberal interpretation of Articles 21, 48 and 51(g) by the Hon’ble Judges of Apex court and other courts across the country. In the famous case of Narmada Bachao Andolan v. union of India 2010 SCC 664, The Supreme Court has held that the right to clean water is a fundamental right under article 21 of the Indian constitution. Water prevention and control of pollution act of 1974 is the key specific legislation for preventing water pollution and for taking care and maintaining water bodies. It also aims for promoting for restoration of water bodies. For better implementation of the act, the Central pollution control board and the state pollution control board have been established by the Central and the state government. Under the aforesaid act, the board has the requisite power to encourage and conduct research and investigation with the view of promoting, the prevention of contamination of water in a significant manner and also to add the central government for the matters relating to environmental issues and for the prevention and control of water pollution. In the present issue, the duties and obligations that have been imparted to such boards and the ones enumerated in the aforesaid act have been brazenly ignored by state authorities. They have failed to impart their duties in such remorse condition because of which the lives of masses are now at stake. Hence, because of the aforesaid reason the actions of state authorities should be condemned.

DEAD PERSON TOO HOLDS A FUNDAMENTAL RIGHT

The flagrants acts during the pandemic has resulted in the infringement of various Fundamental Rights guaranteed by our Constitution.The fundamental human rights that are most affected are “Right to Health” and “Right to Life which also includes Right to die with dignity.” In many well-known judgements, the Supreme Court of India and many High Courts agreed that the dead corpse should be treated with proper dignity and treated fairly. The Supreme Court of India recognized that right to life, to fair treatment and dignity, extends not only to a living person but also to their bodies after death. In a landmark judgment (Common Cause, A Regd. Society V. Union of India & Anr.) delivered on 9th March, 2018, the Supreme Court of India held that the right to die with dignity is an intrinsic facet of the right to life under Article 21 of the Constitution of India. In fact, in the year 2007, the Madras high court in the case of S.Sethu Raja vs The Chief Secretary (2007) 5 MLJ 404 had held in Para 18 of the Judgment that the same human dignity (if not more) with which a living being is suppose to be treated by our tradition and our culture should also apply to the dead person and he too holds a right of dignified burial or cremation of a dead body. The right to decent burial is upholding in Indian context, but who is authorized for burial is not explained in any Indian Law. There is a strong societal interest in the proper disposition of the bodies of deceased person. It is universally accepted that a duty is owed to both society and the deceased that the body be buried without any unnecessary delay.

AMENDEDMENT IN THE GUIDELINES AMID COVID-19 IS ‘THE NEED OF THE HOUR’

A document containing ‘Dead Body Guidelines (COVID-19)’ – [hereinafter, ‘Document’], was released by the Directorate General of Health Services (EMR División), Minister of Health and Family Welfare of India on March 15, 2020. To date, it remains unamended and builds on the epidemiological understanding of COVID-19 of the Ministry at present. The aforesaid document lacks some crucial quintessential.

Thereby, the authors would like to propose some takeaways from the other jurisdiction of the nations across the globe, which can be included in the aforesaid guidelines for the benefit of the masses across the country.

The guidelines should be inclusive or seeks to impose a compulsory cremation of the covid-19 victims, which is foremost aimed to prevent local bodies from being able to cremate the body of the deceased overriding his/her religious belief.

In the midst of the global pandemic of covid-19 where graveyards and crematoriums crammed, the locals people of various states are of the view that there emerged shortage of woods for pyre, thereby resulted in the hike in the cost of cremation, whereby this becomes the sole reason why the bodies were buried or seen floating. Hence, the guidelines should impose a reasonable amount or capped a certain amount that crematoriums can charge from families at the time of cremation of a dead body.

Prices should be regulated for hearse or ambulance services so that people are not used and are not exposed to difficulty transporting dead bodies.

The guideline should impose sanction on those people committing horrendous acts such as throwing bodies in rivers, not cremating bodies as per rules enumerated therein.

In order to avoid health risks from smoke emission from burning pyres in large numbers, the use of electric crematoria can be encouraged.

The burial or cremation of masses should not occur because it infringes the right to dignity of the dead.

CONCLUSION

India has been overwhelmed by a devastating second wave of the pandemic in recent weeks. It has recorded more than 25 million cases and 2,75,000 deaths. But the experts say the real death toll is several times higher. The bodies dumped on the river banks and the funeral pyres burning round the clock and cremation grounds running out of space are the proof that the official tally of deaths represent a substantial undercount of the true burdens. In recent times, various eye opening incidents surfaced through media wherein humans were seen to be treated worse than animals. There were interminable news reports which reported incidents like dumping of corpses in a pit at a burial ground without performing their last rites. Many photographs and videos of the half burnt and decomposed dead bodies have gone viral on social media. In order to stop this menace that is bulging the entire nation, all those aforesaid measure as stated hereinabove should be adopted and the the adminstration should pay heed and curb against all those activities that are disturbing not only the rights of dead person but all the right of a living person.

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Policy & Politics

Freedom of speech & sedition law in India : An analysis in the light of recent controversy

The definition of sedition must be narrowed down to encompass only the problems pertaining to the territorial integrity of India, in addition to the sovereignty of the country. The word ‘sedition’ is extraordinarily nuanced and needs to be implemented with caution. It should rarely be used but kept by and large as a deterrent.

Raju Kumar

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INTRODUCTION

It is an irony for the mostdemocratic nation, ie, India, where freedom of speech and expression has been granted under the Indian Constitu- tion, and while exercising their power enshrined un- der the Constitution of India. they are being booked for the offence of sedition. Accord ing to the report of Rights and Risks Analysis Group, as many as 55 journalists were targeted by the government during 25 March and 31 May for covering facts about the government handling of the Covid-19 pandemic.

Recently, the Supreme Court of India has quashed the sedition case registered against senior journalist Vinod Dua in Himachal Pradesh. The verdict was pronounced by a single judge bench led by Hon’ble Justice UU. Lalit.

Vinod Dua was booked for sedition for criticising the Narendra Modi government’s handling of the Covid-19 lock down and had uploaded the same on Youtube last year, While granting the relief the court relied on the principles laid down in the Judgment of Kedar Nath. The judg ment was delivered in the year 1962, where the consti- tutional validity of sedition law in India was validated. However, it was observed that free speech, discussions on matters of government functioning and their criti cism, and freedom of press are “essential for the proper functioning of the processes of popular government Currently, in the Vinod Dua case, the Hon’ble Court has also observed that the jour nalist will be entitled to pro tection under the judgment”.

It was further observed that “It must, however, beclarified that every Journalist will be entitled to protection in terms of Kedar Nath Singh, as every prosecution under Sections 124 and 505 of the IPC must be in strict conformity with the scope and ambit of said Sections as explained in, and completely in tune with the law laid down in Kedar Nath Singh”. The Court Held that

HISTORICAL

BACKGROUND OF SEDITION LAW

Sedition laws were enacted during 17th century England, when the lawmakers believed that only good opinions of the government should survive as the criticism of a Govern- ment may result in detri- mental to the government and monarchy. The law was originally drafted in 1837 by the father of the Indian Penal Code, Thomas Macaulay, but it was omitted when the In- dian Penal Code (IPC) was enacted in the year 1860.

Many freedom fighters were charged under this provision which includes the case of Joggendra Chandra Bose, who was the editor of the newspaper, Bangbosi, who wrote an article criticis ing the age of consent Bill for posing a threat to the religion and for its coercive relation ship with Indians.

Great freedom fighters like Bal Gangadhar Tilak and Mahatma Gandhi were also booked under this offense.

SEDITION LAW IN INDIA: CURRENT SCENARIO

Sedition is an offense under Sectio 124A of the Indian Penal Code (Hereinafter re- ferred to as IPC), 1860. See tion 124A IPC, defines the offense sedition when “any person by words, either spo- kenorwritten, or by signs, or by visible representation, or otherwise, brings or attempts to bring into hatred or con- tempt, or excites or attempts toexcite disaffection towards the government established by law in India”. Disaffection also includes disloyalty and all feelings of enmity. How ever, it is here notable that comments without exciting or attempting to excite ha tred, contempt or disaffee tion, will not constitute an offense under this section.

PUNISHMENT FOR SEDITION

Sedition is a non-bailable offense. Punishment un der Section 124A ranges from imprisonment up to three years to a life term. to which fine may be added. It is also notable that if a person is charged under this law, he will be barred from a govern ment Job. They have to live without their passport and must produce themselves in
constitutional. Furthermore, it was also held that the dis turbing the public order will mean nothing less than en dangering the foundations of the Stateor threatening its overthrow: These Judgments prompted the First Constitu tion Amendment, where Ar ticle 19 (2) was rewritten to replace “undermining the security of the State” with “in the interest of public order”. In the year 1962, in the historic judgment of Kedar Nath Singh vs State of Bihar. the supreme court decided on the constitutionality of See tion 124A. The Hon’ble court upheld the constitutionality of sedition, but had limited its application to “acts involving intention or tendency tore ate disorder,ordisturbance of law and order, or incitement to violence”. Itdistinguished these from “very strong speech” or the use of “vigor ous words” strongly critical of the government.

In the year 1965, the Su preme Court, in the judgment of Balwant Singh vs State of Punjab, held that mere slo ganeering which evoked no public response did not amount to sedition.

ARGUMENTS FOR SECTION 124A

The Provision of Sedition law has its application in fighting anti-national, secessionist and terrorist elements. It is argued withinside the fa- vour of this law that, it pro tects the elected government from tries to overthrow the authorities with violence and unlawful means. The continued existence of the government set up through regulation is an important circumstance of the stability of the State. Furthermore, it is also believed that if Contempt of court results in the penal action, the contempt of Gov ernment should also attract
the same.

ARGUMENTS AGAINST SECTION 124A

The Provision of Sedition Law isarelic of colonial lega cyand it is not fit for democra- ey This is a restriction on the legal exercise of the freedom of speech guaranteed by the Constitution. Government disagreements and criti cisms are an important part of healthy public debate in dynamie democracy. They should not be constructed as sedition. It is notable that The British who resisted the suppression of the Indians overturned their countrys laws. India has no reason not to abolish this part and
the time has come to amend this portion. It is also argued against this law that the terms usedunder Section 124A like disaffection are vague and subject to different interpre- tations to the whims and fan- cies of the investigating offi- cers. The sedition law isbeing misused as a tool to persecute political dissent. A wide and concentrated executive dis- cretion is inbuilt into it which permits the blatant abuse.

CONCLUSION AND WAY FORWARD

Dr Justice (Retd.) Balbir Singh Chouhan has observed that “The sedition law needs reconsideration”. Since the creation of this British Sedition Law, its application has always been inconsistent. In all cases, its application is vague and self-contradictory. Considering that it is used to suppress the masses, when it serves the masses, its application was initially vague. It is used as a tool to strengthen political motivations by preventing speeches that threaten the authority of the country. A clear and unam- biguous explanation of the crime. In recent years, the ap- plication of the sedition law has been too arbitrary and has become a controversial topic. Although our sedition position was established in 1960, it still exists. Over the past 50 years, Indian society has developed rapidly, and people have shown “toler ance” towards summons and violence. The nature of the government has also changed, and people’s under- standing of the government is different from that of its representatives.

India is the largest de- mocracy of the world and the right to free speech and expression is a vital aspect of democracy. The expres- sion or thought that isn’t in consonance with the policy

Freedom of speech & sedition kew in India: An analysis in the light of recent controversy

of the government of the day must now no longer be taken into consideration as sedition. Section 124A mus now no longer be misused as a device to scale down loose speech. The SC caveat, giver in Kedar Nath case, on pros ecution beneathneath the regulation can test its misuse It needs to be tested under the modified facts and situation: 1 additionally at the anvi of ever-evolving tests of ne cessity, proportionality and arbitrariness. The higher judiciary must use its super visory powers to sensitize the magistracy and police to the constitutional provision: protective free speech. The definition of sedition mus be narrowed down, to en compass only the problem: pertaining to the territoria integrity of India in addi tion to the sovereignty of the country. The word ‘sedition is extraordinarily nuancec and needs to be implement ed with caution. It is sort of a cannon that ought now no longer for use to shoot a mouse; however the arsena additionally needs posses sion of cannons, by and larg as a deterrent, and sometimes for shooting.

India is the largest democracy of the world and the right to free speech and expression
is a vital aspect of democracy. The expression or thought that isn’t in consonance
with the policy of the government of the day must now no longer be taken into
consideration as sedition. Section 124A must now no longer be misused as a device
to scale down loose speech. The SC caveat, given in the Kedarnath case, can test its
misuse. It needs to be tested under the modified facts and situations and additionally
at the anvil of ever-evolving tests of necessity, proportionality and arbitrariness.

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Policy & Politics

Tax on ocean freight: A case of inequitable double taxation at its best

Supply of ocean freight service is not covered either by Section 7 (inter-state supply) or Section 8 (intra-state supply) of the IGST Act. The Act does not contemplate levy or collection of tax from a person who is neither the supplier nor the recipient of supply.

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HOW TAX ON OCEAN FREIGHT WORKS

 Ocean Freight is a method of transporting huge quantities of goods through the sea. The levy of taxes on Ocean Freight has been a matter of dispute in India for a while now. The GST law requires the importers to pay tax on ocean freight services under Section 9(3) of the CGST Act and Section 5(3) of the IGST Act, better known as the ‘Reverse Charge Mechanism’.

The location of the Service Provider (SP) and the Service Recipient (SR) must be considered. If the location of the SP and the SR is in India, Section 12(8) applies. But when the Location of SP or SR is outside India, the location of the SR is considered, unless the location of the SP is not known, then the SP’s location is considered but only for transportation [under Section 13(9)]. If the SP and SR are both outside India, the Importer is liable to pay IGST @ 5%. In addition to this, the importer also pays customs duty, freight on the CIF (Cost, Insurance and Freight) value and insurance even if the importer has paid IGST on the CIF value, he is still required to pay GST on ocean freight. This, is what any prudent person would term as “double taxation”.

When it comes to import on the CIF basis, the foreign supplier transports goods from a place outside India through a foreign shipping agency, to a port located in India. In CIF, the freight is paid by the foreign exporter to the shipping agency and the foreign supplier transports such shipment through the foreign shipping agency.

BEFORE GST

 From 01.06.2016, transportation of goods from a place outside India up to the customs clearance station in India became liable to service tax, through the Finance Act, 2016. But an exemption was given for services by way of transportation of goods by an aircraft from a place outside India up to the customs clearance station.

If the service provider was situated outside India, the liability to pay service tax would be on the service recipient. In Free on Board (FoB) imports, service tax would be payable by the shipping line, if the shipping line was based in India; and the service tax would be payable by the importer under reverse charge if the shipping line is not based in India.

In case of CIF imports, there was no service tax levy on freight, as the service provider as well as the service recipient are situated outside India.

There existed ambiguity in levy of service tax that was attracted on ocean freight component only in case of FOB imports, and not attracted for CIF imports.

Vide Notifications dated. 12.01.2017 (Notification 3/2017) and 20.06.2012 (Notification 30/2012 ST), some efforts were made to clear the ambiguities. In addition to this, in respect of services provided or agreed to be provided by way of transportation of goods by a vessel from a place outside India up to the customs clearance station in India, the person liable for paying service tax other than the service provider would be the person in India who complies with sections 29, 30 or 38 read with section 148 of the Customs Act, 1962.

In addition to this a series of Notifications were issued pursuant to the problem at hand:

 1. Vide Notification dated. 13.04.2017 (Notification 2/2017 ST), the definition of “person liable for payment of service tax” under Rule 2 (1) (d) (i) was amended and a new sub rule (Rule 7CA) was introduced in the Service Tax Rules, 1994.

 2. Vide Notification dated. 13.04.2017 (Notification 14/2017 ST), a new rule, Rule 8B was introduced in Point of Taxation Rules, 2011, which spoke about the “Determination of point of taxation in case of services provided by a person located in non-taxable territory to a person in non-taxable territory.”

3. Vide Notification dated. 13.04.2017 (Notification 10/2017 CE NT), the definition of “input service” in the CENVAT Credit Rules, 2004, was amended to further facilitate proper implementation of the respective tax provisions.

The importer was thus made liable to pay service tax for the services of transportation of goods by vessel from a foreign port to Indian port in case of CIF imports.

 The above position continued up to 30.06.2017, i.e., until the introduction of GST.

UNDER GST

 And as per Section 14 of the Customs Act, 1962, the value of the imported goods shall be the transaction value of such goods for the purpose of levy of Customs duty and such transaction value in the case of imported goods shall include, in addition to price, any amount paid or payable for costs and services, including commissions and brokerage, royalties and licence fees, costs of transportation to the place of import, insurance, loading, unloading and handling charges to the extent as per Rule 10(2) of the Customs valuation (Determination of Value of Imported Goods) Rules, 2007.

Section 5(3) of the IGST Act, 2017 empowered the Centre to issue notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both and the recipient of such goods or services or both is liable to pay tax under reverse charge in relation to the supply of such goods or services or both.

Where the value of taxable service provided by a person located in non-taxable territory to a person located in non-taxable territory by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India is not available with the person liable for paying integrated tax, the same shall be deemed to be 10 % of the CIF value of imported goods.

How ocean freight suffers double taxation

Ocean freight component suffers tax twice; first, it suffers IGST as component of Customs Duty on imported goods on CIF basis and second time IGST @ 5% in the form of Import of Services (Reverse Charge Mechanism) for payment by the importer. Therefore, IGST payment is levied twice on Ocean freight in the guise as part of transaction value of imported goods.

The impugned notifications are contrary to the provisions of Article 265 of the Indian Constitution which says that “no tax shall be levied or collected except by authority of law”. A delegated legislation (includes the notifications herein or rules) cannot provide levy or collection of tax which is not authorised by the parent statute.

 Supply of ocean freight service is not covered either by Section 7 (inter-state supply) or Section 8 (intra-state supply) of the IGST Act. The Act does not contemplate levy or collection of tax from a person who is neither the supplier nor the recipient of supply.

A person other than a recipient cannot determine the “time of supply” as per the provisions of Section 13 of the IGST Act. In addition to this, Input Tax Credit can only be availed by the recipient of the supply which are intended to be used in the course of furtherance of business, under the provisions of Section 16 of the Act.

 The Supreme Court in case of State of Rajasthan v. Basant Agrotech (India) Limited [2014 (302) E.L.T. 3 (SC)], held that the rule of construction of a charging section is that before taxing any person, it must be shown that he falls within the ambit of the charging section by clear words used in the section. No one can be taxed by implication. A charging section has to be constructed strictly. If a person has not been brought within the ambit of the charging section by clear words, he cannot be taxed at all.

Commissioner of Central Excise v. Acer India Limited [2004 (172) E.L.T. 289 (S.C.)], the SC held – “The intention of the legislature in a taxation statute is to be gathered from the language of the provisions particularly where the language is plain and unambiguous. In a taxing Act it is not possible to assume any intention or governing purpose of the statute more than what is stated in the plain language. It is not the economic result sought to be obtained by making the provision which is relevant in interpreting a fiscal statute. Equally impermissible is an interpretation which does not follow from the plan, unambiguous language of the statute. Words cannot be added to or substituted so as to give a meaning to the statute which will serve the spirit and intention of the legislature. The statute should clearly and unambiguously convey the three components of the tax law i.e. the subject of the tax, the person who is liable to pay the tax and the rate at which the tax is to be paid. If there is any ambiguity regarding any of these ingredients in a taxation statute, then there is no tax in law.”

The Hon’ble Gujarat High Court in the case of Mohit Minerals Pvt. Ltd. Vs. Union of India [Special Civil Application No. 726 of 2018], has set aside IGST on Ocean Freight and held that no tax is leviable under the IGST Act, 2017 on the ocean freight for the services provided by a person located in a non-taxable territory by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India and the levy and collection of tax of such ocean freight under the impugned Notifications is not permissible in law and that taxing ocean freight is ultra vires and leads to double taxation.

Despite the attempts of the judiciary in defending the very concept of negating any occurrence of double taxation, the efforts made to amend the imprudent levy of IGST on ocean freight, or so to say, the lack thereof, is still very unsettling.

A person other than a recipient cannot determine the “time of supply” as per the provisions of Section 13 of the IGST Act. In addition to this, Input Tax Credit can only be availed by the recipient of the supply which are intended to be used in the course of furtherance of business, under the provisions of Section 16 of the Act.

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Policy & Politics

NCRTC SIGNS MOU WITH SECL FOR USING BLENDED RENEWABLE ENERGY FOR ITS DELHI-GHAZIABAD-MEERUT RRTS CORRIDOR

Tarun Nangia

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In line with its vision to improve the quality of life of people, National Capital Regional Transport Corporation (NCRTC) has signed MoU with SECI (Solar Energy Corporation of India) today to harness blended renewable energy for RRTS. MOU has provisions to explore possible opportunities in electric/ transformative mobility, Hydrogen based economy, and other alternative sources of fuels and energy.

MoU was signed in presence of Jatindra Nath Swain IAS, Secretary (Fisheries), GOI & CMD/SECI, Vinay Kumar Singh, Managing Director/NCRTC and Mahendra Kumar, Director(E&RS)/NCRTC alongwith other senior officials of NCRTC and SECI.

NCRTC, as part of its Energy Management Policy, intends to maximize the use of blended renewable energy such as solar power etc. for meeting full energy requirement of NCRTC. SECI, being an industry leader, will help in arranging blended renewable energy to NCRTC round the clock at affordable rates for Delhi-Ghaziabad-Meerut Corridor and cooperation to extend the same for other future corridors.

Use of clean energy, through this association will ensure reduction in expenditure on electricity and significantly lesser CO2 emissions, which is essential for sustainable development.

This cooperation is a part of NCRTC’s long term strategy to make RRTS and NCRTC financially as well as environmentally sustainable.

NCRTC is adopting following measures also for energy efficiency in India’s first RRTS corridor-

1. All elevated RRTS stations and depots will be provided with solar panels.

2. NCRTC is targeting to generate minimum 10 MW renewable energy.

3. 40% of the total energy requirement of Delhi Meerut RRTS corridor is targeted to be procured/generated from renewable energy.

4. RRTS rolling stock will be provided with state-of-the-art regenerative braking system which converts train’s kinetic energy into electrical energy..

5. Regenerative braking will result in reduced wear and tear of wheels, brake pads and other associated moving brake-gear parts of rolling stock resulting in significantly less consumption of these spare part/items during train maintenance life cycle which again will result in substantial reduction in CO2 emission which otherwise would have been generated in the manufacturing and supply chain process of these spare parts/items.

6. RRTS trains will have push buttons for selective opening of doors on need basis. This eliminates the requirement of opening all doors at every station, thus leading to energy saving. RRTS rolling stock will have lighting and temperature control systems to enhance the passenger experience with less energy consumption.

7. All RRTS station and their premises, depot, office spaces and trains will be equipped with energy-saving LED lights.

8. Platform Screen Doors will be installed at every RRTS stations that will help in saving significant energy consumption in underground stations.

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Policy & Politics

TARGETED POLICY SUPPORT TO ENGINEERING EXPORT SECTOR NEEDED, SAYS EEPC INDIA

Tarun Nangia

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The growth in outbound shipments has been robust in the last few months and the outlook remains positive for the current year but rising cost of key raw materials especially steel is an area of concern, said EEPC India Chairman Mr Mahesh Desai.

As expected, the value of engineering goods exports jumped 53% to US$ 8.64 billion in May, 2021 as against US$ 5.65 billion in the corresponding month last year primarily due to low base effect and increasing demand from key markets.

“Soaring prices of various metals is a big challenge for the engineering goods manufacturers which were badly affected by the Coronavirus outbreak and the subsequent lockdowns,” he said.

While hoping that the rates for the export promotion scheme RoDTEP would be announced shortly, the EEPC India Chairman expects the government to provide more targeted support as suggested by the RBI.

Announcing the decisions of the Monetary Policy Committee (MPC) on June 4, RBI Governor Mr Shaktikanta Das had said that conducive external conditions were forming for a durable recovery beyond pre-pandemic levels. He further said that the need of the hour is for enhanced and targeted policy support for exports.

EEPC India Chairman said that while the export outlook has been projected to be positive in the current fiscal, there were downside risks too given that public health experts have predicted a possible third wave of the pandemic.

“The efforts must be made now to minimise the impact of pandemic on trade and business as protecting livelihood is no less important than lives. The plans should be in place to ensure goods movement, especially export consignments, are not affected by lockdowns, night curfews or any other restrictions imposed by states to prevent the spread of virus,” Mr Desai said.

Announcing the decisions of the Monetary Policy Committee (MPC) on 4 June, RBI Governor Shaktikanta Das said that conducive external conditions were forming for a durable recovery beyond pre-pandemic levels.

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Policy & Politics

India’s exports continue to perform impressively for third month in a row

FIEO president reiterated that though the government has announced a slew of measures to support exports, the need of the hour is to soon notify the RoDTEP rates to remove uncertainty from the minds of the trade and industry, thereby helping in further forging new contracts with the foreigner buyers.

Tarun Nangia

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Responding to the trade data for May, 2021, Sharad Kumar Saraf, President, FIEO said that the continuing impressive growth in exports by about 70% to USD 32.27 billion compared to a low base of USD 19.05 billion during May 2020, reiterate our assessment that order booking position of our exporters is not only extremely good but also the gradual opening up of major global markets and improvement of situation in the country is expected to push exports growth further. President FIEO said that growing by over 8% even on the base of May 2019 reflects a positive trend for the sector. Saraf particularly emphasised that the growth in labour-intensive sectors like Cereal preparations and miscellaneous processed item, Gems & Jewellery, Engineering goods, Leather and Leather Products, Ceramic products and glassware, Cotton yarn/fabrics/made-ups, handloom products, Marine products, Spices, Carpets and Man-made yarn/fabrics/made-ups etc. augurs well for the job scenario, which is most relevant in the current context.

FIEO Chief added that such a growth during the month has been mainly on account of growth in Petroleum products, Engineering goods, Organic & Inorganic Chemicals and Gems & Jewellery, the major contributors to the country’s export basket, which have shown impressive performance compared to May, 2020. He also said that 25 out of 30 major product groups of exports have either shown a very high growth or are in positive territory defying all the odds when there is still a bit of scepticism persisting in the global economy on the expectation of a third wave of Covid-19 pandemic.

Sharad Kumar Saraf further reiterated that continuing on with such a growth performance in exports during the second month of the new financial year not only shows signs of resilience of the exporting community facing squeezing profits but also the resolve of the government. FIEO Chief complimented the government for its continuous support during such challenging times. Increase in May 2021 imports by about 74 percent to USD 38.55 billion compared to the same period during the previous fiscal led to the increase in trade deficit of USD 6.28 billion, which is an increase of over 99.61 percent during the month and should be looked into.

FIEO President reiterated that though the government has announced a slew of measures to support exports, the need of the hour is to soon notify the RoDTEP rates to remove uncertainty from the minds of the trade and industry thereby helping in further forging new contracts with the foreigner buyers. Mr Saraf also reiterated that the government must address some of the key issues including priority status to exports sector, extension of Interest Equalisation Scheme beyond June 2021 till at least 31st March, 2024, release of the necessary funds for MEIS and clarity on SEIS benefits, resolving risky exporters’ issues and continuance of seamless refund of IGST and more importantly continuing with IGST option for exports to further give boost to the sector during these challenging times.

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