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1989 (12) TMI 325
Issues Involved:
1. Scope of exigibility of sales tax u/s 5-E of the Andhra Pradesh General Sales Tax Act, 1957 on hire charges for machinery.
2. Determination of whether there is a transfer of the right to use the machinery.
3. Validity of the provisional assessment levying tax on hire charges.
Summary:
1. Scope of Exigibility of Sales Tax u/s 5-E:
The primary issue in this writ petition is the scope of exigibility of sales tax u/s 5-E of the Andhra Pradesh General Sales Tax Act, 1957, on the hire charges collected by a person on the supply of machinery for execution of work to any contractor. The insertion of clause (29A) in article 366 by the Constitution (Forty-sixth Amendment) Act, 1982, significantly expanded the tax base for sales tax, including the transfer of the right to use any goods for any purpose.
2. Determination of Transfer of Right to Use:
The court examined whether the transaction between the petitioner and the contractors involved a transfer of the right to use the machinery. It was noted that the effective control of the machinery remained with the petitioner-company, and the contractor was not free to use the machinery for other works or move it out during the period of use. The court concluded that there was no transfer of the right to use the machinery in favor of the contractor, as the fundamental requirement of section 5-E was absent.
3. Validity of Provisional Assessment:
The respondents made a provisional assessment levying tax on the hire charges u/s 5-E of the Act, arguing that the petitioner lent machinery to contractors for use in the execution of project work, thereby attracting tax liability. However, the court found that the transaction did not involve a transfer of the right to use the machinery, making the imposition of sales tax on the hire charges illegal.
Conclusion:
The court held that providing machinery to the contractor by the petitioner for the execution of its work does not amount to a transfer of the right to use the machinery. Consequently, the imposition of sales tax on the hire charges of the machinery u/s 5-E of the Act is ultra vires and illegal. The writ petition was allowed, and the parties were directed to bear their own costs.
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1989 (12) TMI 324
Whether Allahabad High Court correct in quashing the Gazette Notification dated 27th August, 1969, amending the octroi Schedule of the Bareilly Municipality so as to impose octroi on "mineral oil"?
Held that:- Appeal allowed. The 1963 rules had been framed under section 296 of the Act in supersession of the existing rules after publication by the State Government, in the Gazette as provided under section 300 and therefore rule 131 in the 1925 rules ceased to have any operation in respect of the matters dealt with therein so far as the Bareilly Municipality is concerned. 16.. In this view of the matter, we hold that the appellant-Board had authority to levy octroi on mineral oils and the challenge against the impugned notification is not sustainable. The High Court was clearly in error in quashing the same and restraining the Board from assessing and collecting the tax.
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1989 (12) TMI 318
Issues Involved:
1. Constitutional validity of certain notifications issued under the Uttar Pradesh Sales Tax Act, 1948, and the Central Sales Tax Act, 1956.
2. Whether the impugned notifications violate Articles 14, 19(1)(g), and Part XIII (Articles 301-305) of the Constitution of India.
3. The impact of these notifications on the economic unity of India and inter-State trade.
4. The power of States to grant tax exemptions and incentives for economic development.
Issue-wise Detailed Analysis:
1. Constitutional Validity of Notifications:
The petitioners challenged the constitutional validity of Notification No. ST-II-7558/X-9(208)-1981 U.P. Act XV-48-Order-85 dated 26th December, 1985, and Notification No. ST-II/8202/X-9(208)-1981 issued by the Uttar Pradesh Government under sections 4-A of the U.P. Sales Tax Act, 1948, and 8(5) of the Central Sales Tax Act, 1956. The petitioners argued that these notifications exempted new manufacturing units in U.P. from paying sales tax, thereby discriminating against manufacturers and dealers from other States who were liable to pay sales tax, thus making their goods costlier.
2. Violation of Constitutional Articles:
The petitioners contended that the notifications violated Articles 14 and 19(1)(g) of the Constitution by creating gross discrimination and crippling their business. They also argued that the notifications violated Articles 301 to 305 of Part XIII of the Constitution, which enshrines the principle of economic unity and free trade across India. Article 301 guarantees freedom of trade, commerce, and intercourse throughout India, while Articles 302-305 provide conditions under which restrictions can be imposed.
3. Impact on Economic Unity and Inter-State Trade:
The Court examined whether the impugned notifications directly and immediately restricted the free flow of trade and commerce. It was noted that taxes may sometimes amount to restrictions, but only those taxes that directly and immediately restrict trade fall within the purview of Article 301. The Court referred to previous judgments, including Atiabari Tea Co. Ltd. v. State of Assam and Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan, to highlight that regulatory measures or compensatory taxes do not come within the restrictions contemplated under Article 301.
4. Power of States to Grant Exemptions and Incentives:
The Court recognized that the Constitution of India envisages a federal structure where States have plenary powers to legislate and grant exemptions to boost economic development. The power to grant exemptions is inherent in all taxing statutes. The Court emphasized that economic unity and development of States are vital for achieving the constitutional goal of economic equality. The Court held that the impugned notifications, which provided tax exemptions to new manufacturing units for a limited period, were based on cogent and intelligible reasons for economic encouragement and growth and did not violate the constitutional provisions.
Conclusion:
The Court dismissed the writ petitions, holding that the impugned notifications did not violate Articles 14, 19(1)(g), or Part XIII of the Constitution. The Court emphasized that the States' power to grant exemptions for economic development is essential for achieving economic equality and unity in India. The Court also allowed the intervention applications and considered the submissions made by the intervenors, but no order as to costs was made.
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1989 (12) TMI 317
Whether this Court can direct the authorities to revise the assessment or refund the excess tax paid in this writ petition?
Whether the petitioner can recover the said amount by filing a suit?
Held that:- Appeal allowed. In view of the facts and circumstances of the case and especially in view of the fact that in this case there is no controversy or denial by the respondents as to the date when the appellant came to know of the excess payment, this appeal has to be allowed. The judgment and order of the High Court are set aside. It is declared that the appellant is entitled to the refund of the amount subject to setting off of arrears, if any, due from the appellant.
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1989 (12) TMI 306
Whether supply of articles of food and drinks to a customer in a hotel constitute sale of goods invoking a transfer of the property in the goods to the customer?
Held that:- Appeal allowed. Set aside the orders of the appellate authorities declining or confirming, as the case may be, the refusal of the benefit of an order under the said proviso and direct that the appeals filed by the respondents before the first appellate authority be now restored and proceeded with on the merits in accordance with law, subject to the condition that the respondent, in each of the appeals, deposits a sum of ₹ 5,000 towards the assessed tax and furnishes security in respect of the balance of the tax to the satisfaction of the said first appellate authority within two months from today.
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1989 (12) TMI 296
Issues Involved:
1. Deductibility of surtax liability.
2. Allowability of gratuity liability without provision.
3. Weighted deduction for freight and insurance u/s 35B.
4. Proportionate head office expenses u/s 35B.
5. Legal expenses for amalgamation.
6. Revaluation of closing stock.
Summary:
1. Deductibility of Surtax Liability:
The Tribunal held that the surtax liability of Rs. 2,66,405 is not deductible in computing the income from business under the provisions of the Income-tax Act, 1961. This issue is concluded by the judgment in Molins of India Ltd. v. CIT [1983] 144 ITR 317, and thus, the question is answered in the affirmative and in favor of the revenue.
2. Allowability of Gratuity Liability:
The Tribunal held that the liability for gratuity of Rs. 17,15,175 is not allowable when no provision has been made in the books of account. This issue is covered by the Supreme Court decision in Shree Sajjan Mills Ltd. v. CIT [1985] 156 ITR 585, and the question is answered in the affirmative and in favor of the revenue.
3. Weighted Deduction for Freight and Insurance u/s 35B:
The Tribunal held that the amounts of Rs. 9,26,963 as freight and Rs. 1,641 as insurance are not covered for weighted deduction u/s 35B of the Income-tax Act, 1961. This issue is covered by the judgment in Bharat General & Textile Industries Ltd. v. CIT [1985] 153 ITR 747, and the question is answered in the affirmative and in favor of the revenue.
4. Proportionate Head Office Expenses u/s 35B:
The Tribunal confirmed the disallowances made by the Commissioner of Income-tax (Appeals) and restricted the claim of Rs. 1,87,978 to Rs. 1,08,155 for proportionate head office expenses u/s 35B. The Tribunal did not commit any error in principle, and the question is answered in the affirmative and in favor of the revenue.
5. Legal Expenses for Amalgamation:
The Tribunal deleted Rs. 22,221 being the legal expenses incurred for the amalgamation of a subsidiary, holding it as revenue expenditure. However, the High Court held that the expenditure was to alter the framework or structure of the company, thus it is of capital nature. This question is answered in the negative and in favor of the revenue.
6. Revaluation of Closing Stock:
The Tribunal held that the revaluation of closing stock by including the subsidy as part of the sale price was not proper. The subsidy did not accrue simultaneously with the sale and hence was not part of the sale price. The High Court upheld this view, and the question is answered in the affirmative and in favor of the assessee.
Conclusion:
The questions raised by the assessee are answered in the affirmative and in favor of the revenue. The first question raised by the revenue is answered in the negative and in favor of the revenue, while the second question is answered in the affirmative and in favor of the assessee. There will be no order as to costs.
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1989 (12) TMI 290
Validity of an amendment to the Schedule to the Andhra Pradesh General Sales Tax Act, 1957 challenged
Held that:- Appeal dismissed. In the instant case the tax is at the same rate and, hence, tax cannot be said to be higher in the case of imported goods. When the rate is applied the resulting tax may be somewhat higher but that does not contravene the equality contemplated by article 304 of the Constitution. In the facts and the circumstances of the case, there is no ground to complain about the breach of article 14 of the Constitution.
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1989 (12) TMI 282
Issues:
Company petition for winding up under sections 433, 434, and 439 of the Companies Act, 1956 based on the company's inability to pay debts as per section 433(e).
Detailed Analysis:
The petition was filed seeking winding up of the company due to unpaid debts, specifically citing an outstanding amount of Rs. 1,40,350.36. The petitioner claimed to have sent multiple letters and reminders to the company regarding the payment, but the company disputed the amount owed. The company admitted a liability of Rs. 32,855.36, which it considered time-barred. An interim order was passed directing the company to pay the admitted amount, which the company complied with. The petitioner argued that despite the payment, there were still amounts due, justifying winding up under section 433(e) of the Act.
The legal position regarding winding up under section 433(e) was discussed, emphasizing that if a company is unable to pay a due amount after notice, it may be ordered to be wound up. However, in this case, since the company disputed the balance amount claimed by the petitioner, and had paid the admitted sum, the court found no justification for winding up. The court clarified that the purpose of the petition was not to recover the debt but to wind up the company, and if the amount is seriously disputed, it does not warrant winding up under the provision.
A reference was made to a legal case that upheld the principle that a company petition is not an alternative for debt recovery, and equity should be maintained between the parties. The court highlighted that an interim order had already been issued for the payment of the admitted amount, aligning with the principles of equity. Consequently, the court concluded that the present case did not meet the requirements for ordering the winding up of the company, and thus, dismissed the company petition. Costs were awarded to the parties based on the circumstances of the case.
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1989 (12) TMI 273
Issues Involved:
1. Validity of ex parte summons under Section 478(1) of the Companies Act, 1956.
2. Examination of officers under Section 477 of the Companies Act.
3. Allegations of oppressive and vexatious examination.
4. Compliance with procedural rules for issuing summons.
Detailed Analysis:
1. Validity of Ex Parte Summons Under Section 478(1) of the Companies Act, 1956:
Ex parte judge's summons were issued to the non-petitioners for their public examination under Section 478(1) of the Companies Act, 1956. The non-petitioners contested the issuance of these summons, arguing that such summons should not have been issued ex parte and that the public examination would be oppressive as it might compel them to provide information that could be used against them in pending criminal prosecutions under Section 454 of the Act.
2. Examination of Officers Under Section 477 of the Companies Act:
The court has the power to summon any officer of the company or person suspected to have possession of the company's property or books, or who can provide information about the company's affairs under Section 477 of the Act. The non-petitioners, being officers of the company, fall under this category. The court emphasized that the examination under Section 477 is primarily to seek information to facilitate the winding-up proceedings. The examination is mandatory and is resorted to for the purpose of collecting materials to assist in the winding-up process.
3. Allegations of Oppressive and Vexatious Examination:
The non-petitioners argued that the examination under Section 477 was sought to gather information to aid the official liquidator in the criminal case under Section 454(5) of the Act, making the examination oppressive and vexatious. The court noted that while the examination might indirectly help in the criminal proceedings, it is primarily for assisting the winding-up process. The court referred to several cases, including Pravin Sankalchand Shah v. D.B. Dalai and Official Liquidator, Nagpur Glass Works Ltd. v. D.P. Ogale, to support the view that the examination is permissible if it aids the winding-up process and is not solely for prosecuting the non-petitioners.
4. Compliance with Procedural Rules for Issuing Summons:
The court acknowledged that the prescribed rules for issuing ex parte summons were not followed. However, it held that the private examination was necessary to facilitate the winding-up proceedings. The non-petitioners had already appeared, and the court directed them to make themselves available for private examination. The court noted that private examination by interrogatories would not serve the purpose in this case.
Conclusion:
The applications filed by non-petitioners Nos. 1, 2, and 6 for revocation of the judge's summons for private examination were dismissed. They were directed to appear for private examination on April 20, 1990. Non-petitioners Nos. 3 and 4 were exempted from appearing for private examination due to the replies they had filed with the official liquidator. Necessary expenses for the examination were to be provided by the counsel for the official liquidator.
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1989 (12) TMI 272
Issues:
1. Amount due from respondent
2. Recovery of interest
3. Future interest entitlement
4. Limitation on claim
5. Maintainability of the petition
6. Relief sought
Detailed Analysis:
1. The main issue was whether an amount of Rs. 10,168.80 was due from the respondent to the petitioners. The respondent claimed that the petitioner did not provide the required declaration in Form C, resulting in the respondent paying excess sales tax of Rs. 5,269.35. The respondent adjusted this amount and remitted the balance to the petitioner. The court found that the respondent was entitled to claim set-off for the excess sales tax paid due to the non-issuance of Form C by the petitioner. As there was no denial of the order placed by the petitioner and its status as a registered dealer under the Central Sales Tax Act, the court ruled in favor of the respondent on this issue.
2. The issue of recovering interest at the rate of 12% per annum was raised. However, the court ruled that since the claim for interest was not sustainable based on the findings of the first issue, the petitioners were not entitled to recover any interest. Therefore, issue 2 was decided against the petitioners.
3. Regarding the entitlement to future interest at the rate of 12% per annum, the court concluded that based on the findings of the first and second issues, the petitioners were not entitled to claim any future interest. Therefore, issue 3 was decided against the petitioners.
4. The question of whether the claim of the petitioners was barred by limitation was raised. The court referred this issue to a larger bench, which determined that the period of limitation for such claims starts from the date of the winding-up order. As a result, the claim was not barred by limitation, and issue 4 was decided in favor of the petitioners.
5. The issue of the maintainability of the petition without obtaining the court's sanction was raised. The court found that there was no impediment for the petitioners to maintain the petition, especially since the official liquidator had been appointed, and the company had gone into liquidation. Therefore, issue 5 was answered in favor of the petitioners.
6. Finally, the court dismissed the petition based on the findings of the first issue. The parties were directed to bear their own costs, and the relief sought in the petition was not granted.
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1989 (12) TMI 271
Issues Involved:
1. Execution of a foreign decree in India.
2. Violation of natural justice principles.
3. Judgment on merits.
4. Compliance with the Foreign Exchange Regulation Act, 1973.
Detailed Analysis:
1. Execution of a Foreign Decree in India:
The plaintiff-bank sought to execute a decree from the Supreme Court of Hong Kong against the defendant in Bombay under Order 21, Rule 22 of the Code of Civil Procedure (CPC). The decree was filed under Section 44A of the CPC, which allows execution of decrees from superior courts of reciprocating territories as if they were passed by a District Court in India. Hong Kong is recognized as a reciprocating territory under Section 44A by a notification dated November 18, 1968.
2. Violation of Natural Justice Principles:
The defendant argued that the decree violated Section 13(b) of the CPC, claiming that the proceedings in Hong Kong were opposed to natural justice as he was denied an opportunity to defend the suit on merits. However, the court found no substance in this contention. The defendant had engaged solicitors, obtained unconditional leave to defend, and actively participated in the proceedings. The court noted that the defendant had ample opportunity to defend the suit but chose not to appear at the final hearing. Therefore, the court concluded that there was no violation of natural justice principles.
3. Judgment on Merits:
The defendant contended that the foreign judgment was not given on the merits of the case, violating Section 13(b) of the CPC. The court examined whether the Hong Kong judgment was on merits. It referred to several precedents, including D.T. Keymer v. P. Visvanathan Reddi, AIR 1916 PC 121, which held that a judgment given without investigating the merits is not considered a judgment on merits. The court observed that the Hong Kong court's judgment did not indicate any examination of the defendant's contentions or evidence. The judgment was based on the defendant's failure to appear and the plaintiff's pleadings. Therefore, the court concluded that the Hong Kong judgment was not on merits and refused leave to execute the decree under Order 21, Rule 22 of the CPC.
4. Compliance with the Foreign Exchange Regulation Act, 1973:
The defendant argued that the judgment sustained a claim founded on a breach of the Foreign Exchange Regulation Act, 1973, specifically Section 26(6), which prohibits residents in India from giving guarantees for debts of persons resident outside India without permission from the Reserve Bank of India (RBI) or the Central Government. The court referred to Section 47(3) of the Act, which allows legal proceedings for such guarantees but requires permission from the RBI or the Central Government for enforcing any judgment. The court held that an application under Order 21, Rule 22 is a step in enforcing a judgment, and prior permission from the RBI or the Central Government is necessary. Since the plaintiff-bank did not obtain such permission, the application was not maintainable.
Conclusion:
The court refused the leave to execute the decree under Order 21, Rule 22 of the CPC and discharged the notice. There was no order as to costs.
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1989 (12) TMI 270
Issues Involved:
1. Existence of debt due and payable.
2. Bona fide dispute.
3. Legality of instalment payments.
4. Failure to file affidavit-in-opposition.
5. Company's conduct and payment history.
6. Validity of promissory notes and cheques.
7. Court's discretion in winding up proceedings.
Detailed Analysis:
1. Existence of Debt Due and Payable:
The court emphasized the basic requirement under section 434 of the Companies Act, 1956, which is the existence of a debt due and payable by the company to the petitioning creditor. If the creditor establishes such a claim, the petition for winding up cannot be doubted. The court noted that the burden lies on the company to satisfy the court about the existence of a bona fide dispute regarding the debt.
2. Bona Fide Dispute:
The court discussed the meaning of "bona fide" as genuine and in good faith. A bona fide dispute should be based on substantial grounds. The court referenced previous cases and English law to clarify that a lack of bona fides does not necessarily imply fraud, but can lead to it. The court must assess the genuineness of the dispute and if satisfied, should allow the petitioning creditor to file a suit rather than proceed with winding up.
3. Legality of Instalment Payments:
The court acknowledged a growing practice of allowing companies to pay debts by instalments. Although the legality of this practice was not deeply explored, it was deemed healthy given the socio-economic conditions, as it allows companies to survive and maintain employment rather than face liquidation.
4. Failure to File Affidavit-in-Opposition:
The court noted that the company failed to file an affidavit-in-opposition despite multiple extensions. Justice Mrs. Monjula Bose observed that the company's failure to file the affidavit indicated a lack of bona fide defense and an attempt to delay and harass the petitioning creditor. The appellate court later directed the matter to be reconsidered based on an affidavit that was inadvertently not considered by the trial judge.
5. Company's Conduct and Payment History:
The company's conduct was scrutinized, particularly its repeated failure to adhere to court orders for payment and its attempts to delay proceedings. The court highlighted instances where the company was given multiple opportunities to pay its dues by instalments but failed to comply fully. The company's dilatory tactics were evident from the repeated requests for extensions and failure to make payments as directed.
6. Validity of Promissory Notes and Cheques:
The court examined the promissory notes and cheques issued by the company. The company claimed that the promissory notes were issued without consideration and based on the petitioner's representation that they would not be used. The court found this defense unconvincing, noting that the company's explanations were not credible. The existence of promissory notes and the issuance of cheques were significant factors in determining the company's liability.
7. Court's Discretion in Winding Up Proceedings:
The court concluded that the company failed to establish a bona fide defense that would warrant further adjudication. The defense was deemed a sham and not worth serious consideration. However, the court decided to give the company one final opportunity to pay its debts in instalments, with a strict schedule for payment. Failure to comply would result in the winding up of the company.
Conclusion:
The court directed the company to pay all outstanding dues to the petitioning creditor with interest at the agreed rate of 16% per annum. Payments were to be made in monthly instalments of Rs. 1 lakh each, with the first instalment due by January 15, 1990. In case of default, the court would order the winding up of the company. The court's decision balanced the need to enforce the debt while providing the company a last chance to avoid liquidation.
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1989 (12) TMI 246
Issues:
1. Maintainability of the petition by the petitioner
2. Conduct of the company's affairs in a prejudicial manner
3. Relief sought by the petitioner
Issue 1 - Maintainability of the petition:
The petitioner filed a petition under sections 397, 398 read with section 166 of the Companies Act, 1956, alleging certain acts of the respondents as illegal and seeking the constitution of a new managing committee. The respondents contended that the petition was not maintainable as it was not filed by 1/5th of the total number of members of the company, as required by the Act. The court referred to a previous judgment and held that the petition could only be filed by a specific number of members, which the petitioner did not meet. Despite this ground for dismissal, evidence was considered under Issue 2.
Issue 2 - Conduct of the company's affairs:
The petitioner alleged misappropriation of funds by respondent No. 2 and detrimental acts against the company's interest. Witnesses were examined, including PW-1 and PW-2, who reiterated the allegations. However, in cross-examination, it was revealed that the accounts were regularly audited, approved in annual general meetings, and expenditures were accounted for during the petitioner's tenure on the managing committee. The respondents' witness, RW-1, testified that the company's affairs were properly managed, accounts audited, and expenditures approved in meetings. The court found the petitioner's claims unsubstantiated, lacking good faith, and filed for ulterior motives, leading to the dismissal of the petition with costs.
Conclusion:
The court dismissed the petition as the petitioner failed to meet the required number of members to file the petition and failed to substantiate the allegations of mismanagement and misappropriation of funds. The court found the petition lacking in good faith and ordered costs to be paid by the petitioner.
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1989 (12) TMI 245
Issues Involved:
1. Maintainability of a petition under sections 397 and 398 by the legal heirs of a deceased shareholder.
2. Whether a composite petition under sections 397, 398, and 433(f) of the Companies Act is maintainable.
Detailed Analysis:
1. Maintainability of a Petition Under Sections 397 and 398 by Legal Heirs:
The primary issue was whether the legal heirs of a deceased shareholder could be treated as members of the company for the purpose of maintaining a petition under sections 397 and 398 of the Companies Act, 1956. The appellants argued that only a member whose name is entered in the register of members could file such a petition. They contended that there was no automatic transmission of shares upon the death of a shareholder and that the board of directors had the discretion to refuse the registration of shares in the name of legal heirs.
The court examined the relevant provisions of the Companies Act, including sections 2(27), 41, and 109, as well as articles 25 to 28 of Table A of the Act, which deal with the transmission of shares. It was noted that section 41 defines a member as someone whose name is entered in the register of members, and section 109 validates the transfer of shares by a legal representative of a deceased member.
The court referred to the English case of Jermyn Street Turkish Baths Ltd., In re [1970] 3 All ER 57, where it was held that personal representatives of a deceased member could maintain a petition under section 210 of the English Companies Act, which is similar to section 397 of the Indian Act. The court found this reasoning persuasive and concluded that legal representatives of a deceased member should be allowed to maintain a petition under sections 397 and 398, as they represent the estate of the deceased member whose name is still on the register of members.
The court emphasized that this interpretation aligns with the equitable and just purpose of sections 397 and 398, which aim to provide relief in cases of oppression and mismanagement. The court rejected the view that legal representatives must first be registered as members before filing a petition, as this would frustrate the purpose of the provisions.
2. Whether a Composite Petition Under Sections 397, 398, and 433(f) is Maintainable:
The second issue was whether a combined petition under sections 397, 398, and 433(f) of the Companies Act was maintainable. The appellants argued that such a composite petition was not permissible.
The court referred to the observations in Shanti Prasad Jain v. Kalinga Tubes [1965] 35 Comp Cas 351 and the reasoning of the Bombay High Court in Bilasraj Joharmal v. Akola Electric Supply Co. P. Ltd. [1958] 28 Comp Cas 549. It was noted that the averments required to invoke sections 397 and 398 are not destructive of those required for a winding-up petition under section 433(f) on the just and equitable ground. The court explained that a petition under sections 397 and 398 must state that the affairs of the company justify winding up but that winding up would unfairly prejudice the members.
The court held that the procedural differences between the two types of petitions are not irreconcilable and can be simultaneously addressed. The court has the discretion to determine whether the facts justify a winding-up order and, if so, whether an alternative relief under section 397 would be more appropriate. This approach ensures that the remedy provided is not worse than the issue being addressed.
Conclusion:
The Supreme Court dismissed the appeal, affirming that legal heirs of a deceased shareholder whose name is still on the register of members can maintain a petition under sections 397 and 398 of the Companies Act. Additionally, the court upheld that a composite petition under sections 397, 398, and 433(f) of the Act is maintainable. The appeal was dismissed with costs assessed at Rs. 5,000.
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1989 (12) TMI 244
Issues: Jurisdiction of the court, Sanction for filing the petition, Limitation period, Validity of payments made, Entitlement to interest, Relief sought.
Jurisdiction of the Court: The court decided in favor of the petitioners regarding its jurisdiction to try the claim. The learned company judge ruled in favor of the petitioners and against the respondents in this regard.
Sanction for Filing the Petition: The court held that the petitioners had obtained the necessary sanction from the court before filing the petition, citing an order passed by the learned company judge in a previous case.
Limitation Period: The court referred to a Division Bench decision in a similar case to determine the limitation period. The court decided in favor of the petitioners based on the interpretation of the limitation period provided by the relevant law.
Validity of Payments Made: The court heard testimonies from various parties involved, including the official liquidator and respondents. The court noted discrepancies in the authorization of payments, lack of written orders, and contradictory statements from the respondents. Ultimately, the court ruled against the petitioners, stating that they were not entitled to claim a refund of the payments made.
Entitlement to Interest: Due to the court's decision on the validity of payments, the issue of interest did not arise, and the court ruled against the petitioners on this issue as well.
Relief Sought: The court dismissed the petition without any order as to costs based on the findings and decisions made on the various issues discussed during the proceedings.
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1989 (12) TMI 243
Issues:
- Winding up petition under sections 433/434 read with section 439 of the Companies Act, 1956.
- Dispute over outstanding amount owed by the respondent-company to the petitioner.
- Disagreement regarding the quality of goods supplied and rates charged.
- Claim for recovery of amount due to failure to supply Form 'C' for concessional rates of sales tax.
Analysis:
The petition before the High Court was filed under sections 433/434 read with section 439 of the Companies Act, 1956, seeking the winding up of the respondent-company due to its alleged inability to clear off debts and meet liabilities. The petitioner claimed an outstanding amount of Rs. 7,55,760.40 owed by the company for material supplied. The company, on the other hand, admitted the business dealings but disputed the quality of goods supplied and the rates charged. It contended that discrepancies in bills were rectified, and a lesser amount of Rs. 3,62,830.49 was due and paid during the proceedings. The company also argued that the petitioner's claim regarding Form 'C' for sales tax concessions was not valid as it was willing to supply the forms for accepted bills. The financial stability of the company was emphasized, supported by a certificate from a bank and the annual report for the year 1987.
The court, after considering the submissions and pleadings of both parties, held that the petitioner failed to establish the commercial insolvency of the company. The company had cleared a significant portion of the outstanding amount and demonstrated financial stability through bank certificates and annual reports. The court found the company's defense against the petitioner's claims to be genuine and not lacking good faith. Therefore, the petition for winding up was dismissed as the petitioner could not prove the company's commercial insolvency or the lack of bona fides in its defense.
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1989 (12) TMI 216
Issues Involved:
The issues involved in this case include the entitlement of the appellants to claim set off of duty paid on an input, the rejection of the claim for set off by the Assistant Collector, the subsequent appeal decision in favor of the appellants, the claim for refund in cash due to the rescinded notification, and the question of whether such cash refund can be claimed.
Entitlement to Set Off and Rejection of Claim:
The appellants, manufacturers of petrochemicals, sought to claim set off of Central Excise Duty paid on the input 'Cobalt Octate' used in manufacturing their products. The Assistant Collector initially rejected the claim, citing that set off was not permitted on estimated quantities of input used. However, the Ld. Appellate Collector later upheld the appellants' eligibility for set off, leading to the present appeal.
Claim for Cash Refund:
Following the rescission of the notification allowing set off, the appellants applied for a refund in cash for the duty paid on 'Cobalt Octate'. The Assistant Collector denied the refund claim on the basis that the appellants had not paid any Excise Duty, a decision which was upheld in the appeal. The main issue at hand was whether a cash refund could be claimed under these circumstances.
Precedents and Legal Interpretation:
The appellants cited various cases to support their contention that cash refund could be claimed, including cases where similar notifications were involved. The Tribunal examined these cases and noted that the principle had been established that set off could be claimed by way of cash refund. Additionally, a recent order by the Tribunal further supported the appellants' position that cash refund was permissible.
Decision and Ruling:
In light of the legal precedents and interpretations, the Tribunal ruled in favor of the appellants, allowing them to claim a refund in cash for the duty paid on 'Cobalt Octate'. The impugned order denying the refund was set aside, and the Assistant Collector was directed to re-examine the refund claim after providing the appellants with an opportunity for representation or hearing. No relief was claimed in cross-objections, which were also disposed of accordingly.
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1989 (12) TMI 215
The Appellate Tribunal found a basic error in the order regarding Notification No. 264/67 being treated as an independent notification instead of an amending one. The error was deemed significant and influenced the judgment outcome. The impugned order was recalled for fresh consideration.
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1989 (12) TMI 214
Issues:
1. Interpretation of Central Excise Notification 80/80-C.E. regarding duty-free clearances for patent or proprietary medicines and goods not elsewhere specified.
2. Consideration of whether goods falling under Item 68 CET are excisable goods.
3. Application of Explanation V to Notification 80/80-C.E. in excluding certain goods from the aggregate value of clearances.
4. Determination of whether exempted goods are still considered excisable goods.
5. Assessment of the limitation period for issuing a demand notice beyond six months.
Detailed Analysis:
1. The case involved the interpretation of Central Excise Notification 80/80-C.E. concerning duty-free clearances for patent or proprietary medicines and goods not elsewhere specified. The notification exempted certain goods for home consumption up to a specified value but excluded manufacturers exceeding a certain limit of clearances. The appellants were served with a demand notice for exceeding the clearance limit, leading to a penalty imposed by the Assistant Collector, which was upheld by the Collector (Appeals).
2. The Counsel argued that goods falling under Item 68 CET were non-excisable goods based on Notification 55/75-C.E., creating a separate schedule for exemption. However, the Tribunal rejected this argument, stating that Item 68, although a residuary item, constituted excisable goods as per the Central Excises and Salt Act's definition. The contention lacked legal basis and was dismissed.
3. Another argument raised was the application of Explanation V to Notification 80/80-C.E., suggesting that certain goods should be excluded from the aggregate value of clearances. The Tribunal clarified that goods falling under Item 68 were not specified in the notification and, therefore, could not be excluded from the computation of clearances, as they were excisable goods subject to duty.
4. The Counsel further contended that exempted goods should not be considered excisable goods. However, referencing previous judgments, the Tribunal affirmed that goods fully exempt from duty remained excisable goods under the law, emphasizing that exemption did not alter their classification as excisable goods.
5. Regarding the limitation period for issuing a demand notice, the Tribunal analyzed the facts presented by the appellants, indicating that there was no suppression of facts on their part. The Tribunal concluded that the demand for the period beyond six months from the date of the notice was time-barred, as the authorities were aware of the goods manufactured by the appellants, and there was no justification for invoking the extended limitation period.
In conclusion, the Tribunal modified the order-in-appeal, allowing the appeal to the extent that the demand would be only for six months, based on the detailed analysis of the issues raised and the legal interpretations provided.
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1989 (12) TMI 213
Issues:
Interpretation of the effective rate of duty on Cloves imported as per Notification No. 431/76-Cus., dated 1-11-1976.
Detailed Analysis:
Issue 1: Interpretation of the effective rate of duty on Cloves
The dispute in this case revolved around the interpretation of the effective rate of duty on Cloves imported from specified areas as per Notification No. 431/76-Cus., dated 1-11-1976. The notification contained an entry for "cloves" showing the rate of duty as "Rs. 22/- per kg. less 7 1/2 %." The main contention was whether the 7 1/2 % mentioned was ad valorem or a specific percentage of the amount arrived at the rate of Rs. 20 per kg.
Analysis:
The appellants argued that 7 1/2 % should be considered as 7 1/2 % ad valorem, while the Department contended that it should be calculated as 7 1/2 % of the amount arrived at the rate of Rs. 20 per kg. The Tribunal had previously interpreted 7 1/2 % as ad valorem in a similar case but the appellants requested a reconsideration of this view. The Tribunal noted that the phrase "ad valorem" was not mentioned against the entry for cloves, unlike other entries in the notification. Therefore, the Tribunal concluded that 7 1/2 % should not be considered ad valorem in this case.
Issue 2: Specific vs. Ad Valorem Duties
The Tribunal also discussed the nature of duties, distinguishing between specific duties levied on a weight basis and ad valorem duties calculated as a percentage of the value of goods. The Tribunal upheld the Assistant Collector's view that the duty on cloves was specific, based on weight, and not ad valorem. The Tribunal rejected the argument that interpreting the duty as specific would be contrary to the scheme of the Act.
Analysis:
The Tribunal emphasized the importance of specific duties in the customs system and stated that specific duties are leviable in accordance with the law. The Tribunal found it difficult to accept the Collector (Appeals)'s view that interpreting the duty as specific would go against the Act's scheme. Consequently, the Tribunal set aside the Collector (Appeals)'s order and confirmed the Assistant Collector's decision, ruling in favor of the appellant.
Final Decision:
The Tribunal, in a majority decision, dismissed the appeal, upholding the view that 7 1/2 % should not be considered ad valorem in this case and that the duty on cloves was specific, not ad valorem. The Tribunal relied on previous decisions and legal principles to reach this conclusion, emphasizing the specific nature of duties and the interpretation of the notification provisions.
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