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1993 (3) TMI 114
The High Court of Judicature at Allahabad allowed the petitioner three months to comply with the Tribunal's order to pay duty. The Court directed the Tribunal to reconsider the petitioner's plea for financial hardship and provide a new opportunity for the petitioner to be heard. The Tribunal was instructed to grant more time if financial hardship was established, or to pass a new order if the hardship was proven.
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1993 (3) TMI 113
Issues:
1. Whether Ultramarine blue is liable to Duty under Tariff Item No. 14I(5) of the Central Excises and Salt Act, 1944.
Detailed Analysis:
The judgment revolves around the determination of whether Ultramarine blue, manufactured and marketed by the appellant, is subject to Duty under Tariff Item No. 14I(5) of the Act, which pertains to "Paints and Enamels not otherwise specified." Initially, a Single Judge held that the product is indeed liable to Excise Duty based on the understanding of Ultramarine blue as a pigment or colorant. This decision was influenced by a previous judgment in the case of Nilsin Company, where the Gujarat High Court ruled that Ultramarine blue is not excisable under the said tariff item. The High Court noted that the Supreme Court upheld this decision, leading to the conclusion that Ultramarine blue is not chargeable to Excise Duty under the specified item.
Furthermore, the judgment emphasized the interpretation of words in fiscal statutes based on their popular meaning rather than technical definitions. It cited various cases to support this principle, including the significance of common language in understanding terms within legal contexts. Additionally, references were made to judgments by other High Courts, such as the Rajasthan High Court and the Madhya Pradesh High Court, which also concluded that Ultramarine blue is not categorized as a paint, varnish, lacquer, enamel, glue, or polish.
The judgment highlighted the significance of the Gujarat High Court's decision regarding Tariff Item No. 14I(5) and its subsequent approval by the Supreme Court, which solidified the position that Ultramarine blue does not fall under the excisable category specified in the item. It was noted that the item in question has been renumbered to Item No. 32.06, indicating a change in the classification of goods.
Ultimately, the appeal was allowed, and the Rule was made absolute in favor of the appellant. The judgment clarified that the question of refunding any duty collected by the Excise authorities was not addressed in this decision, leaving the appellant the option to seek remedy for any potential refunds through the appropriate channels.
In conclusion, the judgment provided a comprehensive analysis of the legal interpretation surrounding the classification of Ultramarine blue under the relevant tariff item, drawing on precedents, statutory provisions, and judicial decisions to arrive at the final determination in favor of the appellant.
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1993 (3) TMI 112
Issues Involved:
1. Interpretation of Notification No. 65/87-C.E. regarding exemption for jute bags with polythene liner.
2. Validity of the respondent's rejection of the petitioner's classification lists.
3. Authority of the respondent to modify previously approved classification lists.
4. Whether the petitioner should be relegated to alternative remedies under the Act.
5. Interpretation of the phrase "bags of jute" in common parlance.
6. Application of the principle of predominance in classification.
7. Violation of the principles of natural justice.
Issue-wise Detailed Analysis:
1. Interpretation of Notification No. 65/87-C.E. regarding exemption for jute bags with polythene liner:
The central issue was whether jute bags with polythene liners qualify for the exemption under Notification No. 65/87-C.E. The court analyzed the language of the notification and found that it did not specify that the bags must be made exclusively of jute. Citing precedents (Union of India v. Tata Iron and Steel Co. Ltd., Indian Organic Chemicals Ltd. v. Union of India, Aravali Ispat Ltd. v. Collector of Central Excise, and Nayak Associates v. Union of India), the court held that the absence of terms like "only" or "exclusively" in the notification implies that the bags need not be made solely of jute to qualify for the exemption.
2. Validity of the respondent's rejection of the petitioner's classification lists:
The respondent rejected the petitioner's classification lists, arguing that the bags were not entirely made of jute and thus did not qualify for the exemption. The court found this reasoning flawed, emphasizing that the notification did not require the bags to be made exclusively of jute. The court concluded that the respondent's interpretation was incorrect and that the petitioner's poly-lined jute bags should be eligible for the exemption.
3. Authority of the respondent to modify previously approved classification lists:
The respondent modified the previously approved classification lists without issuing a show-cause notice for the period in question. The court held that this action violated the principles of natural justice, as the petitioner was not given an opportunity to respond. Additionally, the court noted that the Assistant Collector does not have the power to review or modify an earlier approved classification list, citing the case of Indian Organic Chemicals Ltd. v. Union of India.
4. Whether the petitioner should be relegated to alternative remedies under the Act:
The court rejected the respondents' preliminary objection that the petitioner should seek alternative remedies under the Act. It held that once a writ application has been entertained and affidavits have been filed, it would not be proper to relegate the petitioner to statutory remedies. The court emphasized that the issue was a pure question of law regarding the interpretation of the exemption notification, making it appropriate for judicial review.
5. Interpretation of the phrase "bags of jute" in common parlance:
The court considered whether poly-lined jute bags are understood as "bags of jute" in common parlance. Evidence, including trade orders referring to "polylined D.W. Tarpauline jute bags," indicated that such bags are indeed considered jute bags. The court also noted that the Excise Authorities had previously treated poly-lined jute bags as jute bags for other manufacturers, reinforcing this interpretation.
6. Application of the principle of predominance in classification:
The court applied the principle of predominance, which suggests that an excisable item should be classified based on its predominant material. It found that jute was the predominant component in the petitioner's bags, making them jute bags despite the polythene lining. The court cited the Supreme Court's decision in Collector of Central Excise v. Protein Products of India, which supported the application of the predominance principle in determining the nature of a product.
7. Violation of the principles of natural justice:
The court held that the respondent's action in modifying the classification list without issuing a show-cause notice violated the principles of natural justice. The petitioner was not given an opportunity to respond to the modification, which itself constituted prejudice. The court cited S.L. Kapoor v. Jagmohan to support this conclusion.
Conclusion:
The court allowed the writ petition, quashing the impugned order dated 21st April 1992 and the show-cause notices dated 17th February 1992 and 31st March 1992. It directed the respondents to allow the exemption under Notification No. 65/87-C.E. for the petitioner's poly-lined jute bags. The court emphasized that the interpretation of the notification should be in favor of the petitioner, aligning with established judicial precedents and principles of beneficial construction.
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1993 (3) TMI 111
Issues Involved:
1. Liability of the Collector of Customs to pay sales tax u/s the Kerala General Sales Tax Act, 1963 (KGST Act) for sales of confiscated and unclaimed goods.
2. Applicability of Article 285(1) of the Constitution in exempting the Central Government from state-imposed sales tax.
Summary:
Issue 1: Liability of the Collector of Customs to Pay Sales Tax
The petitioner, the Collector of Customs, Kochi, argued that sales tax is not exigible on sales of confiscated and unclaimed goods by the Customs Department, as these sales are conducted in the discharge of statutory functions under the Customs Act, 1962. The petitioner contended that the Government of India or its officers are not engaged in any business and that these sales are not incidental or ancillary to any business carried on by the Collector of Customs. Additionally, the petitioner asserted that Article 285(1) of the Constitution exempts such sales from state-imposed taxes.
The respondents, representing the State of Kerala, countered that Explanation 2 to the definition of "dealer" in Section 2(viii) of the KGST Act, as amended by Act 3 of 1968, deems the Central Government and State Government as dealers for the purposes of the Act, irrespective of whether the sales are conducted in the course of business. The respondents also argued that Article 285(1) does not apply to sales tax, which is an indirect tax levied on the occasion of the sale of goods.
The court examined the definitions of "business" and "dealer" in the KGST Act and noted that the definition of "dealer" includes the Central and State Governments, irrespective of whether the sales are conducted in the course of business. The court concluded that the Central Government and its officers, including the Collector of Customs, are deemed to be dealers under the Act and are liable to pay sales tax on the sales of confiscated and unclaimed goods.
Issue 2: Applicability of Article 285(1) of the Constitution
The petitioner relied on the Supreme Court decision in State of Punjab v. Union of India (1990) 79 STC 437, which held that sales by the Government are immune from state taxation under Article 285(1) of the Constitution. However, the court noted that this decision was rendered without considering the earlier decision of a nine-member Constitution Bench in In re: Sea Customs Act (1878) AIR 1963 SC 1760, which held that Article 285(1) exempts only direct taxes on property and not indirect taxes like sales tax.
The court observed that the decision in Sea Customs Act, which was not considered in the State of Punjab case, established that sales tax is an indirect tax imposed on the occasion of the sale of goods and not a direct tax on property. Therefore, Article 285(1) does not preclude the operation of state sales tax laws.
The court concluded that the petitioner, representing the Central Government, cannot claim immunity from state sales tax under Article 285(1) of the Constitution. The tax is imposed on the occasion of the sale of goods by the Collector of Customs and is within the legislative competence of the state under Entry 54 of List II to the Seventh Schedule to the Constitution.
Conclusion:
The court dismissed the original petition, holding that the Collector of Customs is liable to pay sales tax on the sales of confiscated and unclaimed goods under the KGST Act. The court also held that Article 285(1) does not exempt the Central Government from state-imposed sales tax. The petition was dismissed without any order as to costs.
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1993 (3) TMI 110
Issues Involved:
1. Correct classification and entry of Block Board under the Central Excise Tariff Act, 1985.
2. Applicability of entry 4408.90 vs. 4410.90 for Block Board.
3. Impact of amendments introduced by the Finance Act, 1990 and 1992 on the classification.
4. Interpretation of the term "similar laminated wood" and the definition provided in Note 5.
Detailed Analysis:
Issue 1: Correct Classification and Entry of Block Board
The primary dispute in these writ petitions is the correct classification of Block Board manufactured by the petitioners under the Central Excise Tariff Act, 1985 (1985 Act). The petitioners argue that Block Board falls under entry 4410.90, while the Department contends it falls under entry 4408.90.
Issue 2: Applicability of Entry 4408.90 vs. 4410.90
Pre-Amendment Period (Before 1990):
- 1944 Act: Block Board was classified under Item 16(B) along with plywood and other wood articles.
- 1985 Act: The relevant entries were:
- 44.08: Plywood, Veneered panels, and Similar laminated wood.
- 4408.90: Others (30% duty).
- 44.10: Articles of wood not elsewhere specified.
- 4410.90: Others (12% duty).
The CEGAT judgment dated 18-10-1989, in Wood Graft Products Ltd. v. Collector of Central Excise, upheld that Block Board falls under entry 4410.90, as it is not considered "similar laminated wood" in the commercial sense.
Post-Amendment Period (1990 onwards):
- Finance Act, 1990: Introduced Note 5 defining "similar laminated wood" to include Block Board with cores glued together.
- Finance Act, 1992: Amended Note 5 to include "glued or otherwise joined together."
The Excise authorities classified Block Board under entry 4408.90 based on the amended definitions.
Issue 3: Impact of Amendments Introduced by the Finance Act, 1990 and 1992
Finance Act, 1990:
- Introduced Note 5, defining "similar laminated wood" to include Block Board with cores "glued together."
- The purpose was to enlarge the meaning of "similar laminated wood" to include Block Board with specific characteristics.
Finance Act, 1992:
- Amended Note 5 to include cores "glued or otherwise joined together."
- This further clarified and expanded the definition to include different manufacturing processes of Block Board.
Issue 4: Interpretation of "Similar Laminated Wood" and Note 5
Pre-1990 Interpretation:
- The term "similar laminated wood" did not include Block Board, as per the commercial understanding and the Indian Standards Institution (ISI) definitions.
- Block Board was distinct from laminated wood and fell under entry 4410.90.
Post-1990 Interpretation:
- Note 5 (1990) included Block Board with cores "glued together."
- The Court interpreted "glued together" in its natural sense, meaning blocks must be glued or adhered together.
- The 1992 amendment expanded this to include cores "glued or otherwise joined together," encompassing different manufacturing methods.
Court's Conclusion:
- For the period before the 1990 amendment, Block Board falls under entry 4410.90.
- For the period after the 1990 amendment but before the 1992 amendment, the definition in Note 5 (1990) applies, meaning Block Board with cores "glued together" falls under entry 4408.90.
- After the 1992 amendment, Block Board with cores "glued or otherwise joined together" falls under entry 4408.90.
Judgment:
The Court allowed the writ petitions, directing the respondents to classify Block Board manufactured by the petitioners under entry 4410.90 for the period before the 1990 amendment and under the appropriate entry based on the amendments for subsequent periods. Each party will bear their own costs.
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1993 (3) TMI 109
Issues Involved:
1. Legality of the refusal to grant exemption under Rule 7 of the Bombay Municipal Corporation Exemption from Octroi (Free Gift, etc.) Rules, 1966.
2. Determination of whether the activity of reducing the thickness of wire bars constitutes processing or manufacturing.
3. Finality of the Municipal Commissioner's decision regarding the exemption.
Detailed Analysis:
1. Legality of the refusal to grant exemption under Rule 7:
The Bombay Municipal Corporation (BMC) appealed against the trial Judge's decision, which held that the Corporation was not justified in refusing the benefit of exemption under Rule 7 of the Bombay Municipal Corporation Exemption from Octroi (Free Gift, etc.) Rules, 1966, to the respondent Company. The trial Judge also issued an injunction restraining the Corporation from refusing the exemption and directed the Corporation to refund the octroi duty collected on such imports from April 29, 1983, onwards. Rule 7 provides that articles liable to octroi temporarily imported into Greater Bombay for purposes like processing are exempted from octroi on certain conditions. The Company had applied for the 'R' form facility under this rule, asserting that the process did not involve any change in form, condition, or appearance except to the extent inherent in the processing. However, the Deputy Assessor and Collector denied the request, citing a lack of suitable provision in the Act and the Rules. The Company then filed a writ petition under Article 226 of the Constitution of India, claiming that it satisfied all the ingredients of Rule 7. The Corporation resisted, arguing that the process was a manufacturing activity, not processing, and that the list of processing activities under sub-rule (6)(b) of Rule 7 did not include the Company's activity. The trial Judge ruled in favor of the Company, concluding that the activity was purely processing and not manufacturing, thus qualifying for the exemption under Rule 7.
2. Determination of whether the activity of reducing the thickness of wire bars constitutes processing or manufacturing:
The primary question was whether the activity referred to by the respondents amounted to processing or manufacturing. The term "process" in relation to the Octroi Rules means subjecting a product to improve its quality without transforming it into a new commodity. The trial Judge found that the Company's activity of reducing the thickness of wire bars and wire rods did not result in a change in the chemical composition or significant loss of weight, thus not constituting manufacturing. The Corporation argued that heating the wire bars in a furnace and rolling them to smaller sizes should be considered manufacturing. However, the court held that heating alone does not make an activity manufacturing. The trial Judge's conclusion that the activities amounted to processing and not manufacturing was upheld.
3. Finality of the Municipal Commissioner's decision regarding the exemption:
The Corporation argued that the Municipal Commissioner's decision on whether to grant the exemption was final and could not be challenged. However, the court noted that the decision communicated to the Company was by the Deputy Assessor and Collector, not the Commissioner, and lacked reasons for denial. The court also observed that the list of processes approved by the Commissioner did not include the Company's activity, but sub-rule (4) of Rule 7 and sub-rule 6(b)(2) allowed the Commissioner to include other processes. The court held that the Commissioner's decision is final for the Corporation but does not bind the court exercising powers under Article 226 of the Constitution of India. The trial Judge's decision to grant the exemption was affirmed, and the appeal was dismissed with costs.
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1993 (3) TMI 106
Whether under the Land Acquisition Act and public purpose is required to be specified in the notification with particularity and the specification should not be vague?
Held that:- The notification in the present case specifically provides that the land was being acquired for the purpose of "development plan and construction of residential, commercial and administrative buildings". The Division Bench of the High Court has, after discussing the material on the record in detail, found as a fact that ample opportunity of hearing was given to Bhawani Singh by the Officer-on-Special Duty who heard the objections. The High Court further found that the objections filed by the Samiti Were fully considered by the said officer. We find no infirmity in the findings of the High Court and agree with the same. Appeal dismissed.
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1993 (3) TMI 104
Whether the goods were covered by the OGL and as such the order of confiscation under Section 111(d) of the Act was wrong as held by Tribunal ?
Whether the Collector had no authority to impose the penalty of ₹ 50,000/- as held by Tribunal ?
Whether the Corporation had under-invoiced the price of the goods and the Collector had rightly fixed the price per bearing at ₹ 1,79,631.76/ as held by Tribunal ?
Held that:- The fact that the trade representative of USSR in his letter dated January 20,1987 has asked the appellant not to divulge the specially quoted price to any other party in India, in itself indicates that the price offered to the appellant was a special price and not the ordinary price of such goods in the course of international trade. The price in the ordinary course of international trade has been indicated in the price list published by the manufacturers in USSR. We, therefore, find no ground to interfere with the order of the Tribunal. We agree with the reasoning and the findings reached therein. We also endorse the wish and hope entertained by the Tribunal in Para 3.3 of its order regarding heavy demurrage. Appeal dismissed.
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1993 (3) TMI 102
Issues:
1. Challenge against the order of the Tribunal directing a pre-deposit under the Customs Act and the Gold (Control) Act.
2. Allegation of illegal order depriving the right of appeal and rendering appeal provisions illusory.
3. Interpretation of Section 129E of the Customs Act regarding pre-deposit of duty demanded or penalty levied.
4. Argument on the applicability of Section 129E to the case where the goods are under the control of the customs authorities.
5. Consideration of laches on the part of the petitioner in filing the appeal without complying with the pre-deposit order.
6. Examination of the Tribunal's discretion in considering hardship and seriousness of the offense in the case.
Analysis:
1. The writ petition challenges the Tribunal's order for a pre-deposit under the Customs Act and the Gold (Control) Act. The petitioner alleges being falsely implicated in a customs offense involving gold bars found in his house. The petitioner argues that the order is illegal, depriving the right of appeal and rendering appeal provisions illusory.
2. The petitioner contests the interpretation of Section 129E of the Customs Act, stating it does not apply when the goods, such as gold bars in this case, are under the control of the customs authorities. The petitioner relies on constitutional guarantees and argues that the order demanding the penalty is illegal.
3. The court examines the statutory right of appeal under Section 129E of the Customs Act, emphasizing the conditional nature of the right. Referring to previous judgments, the court clarifies that the right to appeal can be circumscribed by conditions, including the deposit of duty demanded or penalty levied pending the appeal.
4. The court dismisses the petitioner's argument that Section 129E does not apply to the case, emphasizing that the order of imposing a penalty must be paid regardless of the confiscation of goods. The court highlights that the order of confiscation is separate from the penalty levied under the Customs Act and the Gold (Control) Act.
5. Considering the laches on the part of the petitioner in filing the appeal without complying with the pre-deposit order, the court holds that there is no right to prefer an appeal without fulfilling the conditions set by the Tribunal. The court dismisses the petition on the grounds of laches.
6. Finally, the court addresses the Tribunal's discretion in considering hardship and seriousness of the offense. While acknowledging the seriousness of the offense, the court finds that the Tribunal's decision was discretionary and that there was no undue hardship considered. Consequently, the court dismisses the writ petition on both procedural and merit-based grounds, without awarding costs.
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1993 (3) TMI 100
Issues Involved:
1. Validity of show cause notices and orders issued by the Central Excise authorities.
2. Approval of price-lists and calculation of excise duty based on submitted price-lists.
3. Claims for various deductions from the assessable values of products.
Summary:
1. Validity of Show Cause Notices and Orders:
The petitioners challenged certain show cause notices and orders issued by the Central Excise authorities. The court did not specifically address the validity of these notices and orders in the judgment.
2. Approval of Price-Lists and Calculation of Excise Duty:
The petitioners sought approval of their price-lists and permission to clear goods upon payment of excise duty based on these lists. The court directed the assessing authorities to permit the submission of statements of deductions/amendments for proper determination of excise duty liability.
3. Claims for Various Deductions:
- Trade Discount: The assessing authority allowed a trade discount of 3% shown on invoices.
- Annual Turnover Rebate: Allowed at a uniform rate of 2% for decorative sales but disallowed for industrial sales due to lack of evidence.
- Bonus Discount: The Assistant Collector was directed to recalculate the bonus discount after finding the method of calculation used by the petitioners unacceptable.
- Product Rebate and Additional Product Rebate: The Assistant Collector's rejection was set aside, and he was directed to calculate the rebate afresh.
- Free Supply Scheme: The rejection based on non-uniformity was overturned, and the Assistant Collector was directed to grant the discount.
- Incentive Discount: The disallowance was found unjustified, and the Assistant Collector was directed to grant the discount.
- Cash Discount: The Assistant Collector was directed to grant the discount in light of the judgment in Jenson & Nicholson.
- Freight: The petitioners were entitled to deduct freight charges from the sales godowns to local customers' premises.
Additional Observations:
- The court noted that the Assistant Collector's findings were contrary to law or not supported by material evidence.
- The court did not address the applicability of Section 11-D of the Central Excises and Salt Act, 1944, due to lack of material evidence.
- The court made the rule absolute to the extent set out and ordered no costs.
Conclusion:
The court directed the Central Excise authorities to reconsider various deductions claimed by the petitioners and to finalize the price-lists/refund claims within specified periods, ensuring compliance with legal precedents and proper calculation methods.
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1993 (3) TMI 98
Issues Involved:
1. Applicability of the proviso to Section 11A of the Central Excises and Salt Act, 1944.
2. Alleged mis-statement or suppression of facts by the petitioner.
3. Validity of the show cause notice dated January 4, 1993.
Detailed Analysis:
1. Applicability of the Proviso to Section 11A of the Central Excises and Salt Act, 1944:
The primary issue is whether the proviso to Section 11A is applicable, which extends the period for issuing a show cause notice from six months to five years in cases involving fraud, collusion, wilful mis-statement, or suppression of facts. The court noted that the proviso applies only if there is evidence of such misconduct. The relevant portion of Section 11A states:
"Provided that where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of fraud, collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, by such person or his agent, the provisions of this sub-section shall have effect, as if for the words 'Central Excise Officer', the words 'Collector of Central Excise', and for the words 'six months', the words 'five years' were substituted."
2. Alleged Mis-statement or Suppression of Facts by the Petitioner:
The petitioner manufactures and sells windscreens of laminated sheet glass, classified under sub-heading No. 7004.20 of Chapter 70 Section XIII of the Central Excise Tariff Act, 1985. The petitioner contends that the thickness described as 6 mm and 8 mm should be treated as 6.38 mm and 8.38 mm respectively, as per the Bureau of Indian Standards and Indian Standard Specifications for laminated safety glass. The petitioner has been paying excise duty based on nominal thickness, which was known and accepted by the excise department. The court observed that the respondents knew that the petitioner was describing the thickness on a nominal basis and not on an actual basis. The respondents later became aware of the technical manufacturing process through literature and IS 2553 (Part II) 1992, which clarified that the thickness of laminated safety glass includes the thickness of the sheet glass and the interlayer.
3. Validity of the Show Cause Notice Dated January 4, 1993:
The court examined whether the petitioner had committed any fraud, collusion, wilful mis-statement, or suppression of facts. It was found that the petitioner had disclosed all relevant information, including the nominal thickness and the manufacturing process. The court noted that the technical know-how was not exclusively within the petitioner's domain and was available to the respondents through various sources. The court concluded that the petitioner had not made any wilful mis-statement or suppressed any facts. Therefore, the extended period of five years under the proviso to Section 11A was not applicable. The court relied on precedents such as Jaishri Engineering Co. (P) Ltd. v. Collector and M/s. Padmini Products v. Collector of Central Excise, Bangalore, which emphasized that mere failure or negligence does not attract the extended period under Section 11A.
Conclusion:
The court found that the show cause notice dated January 4, 1993, was unsustainable as there was no evidence of fraud, collusion, wilful mis-statement, or suppression of facts by the petitioner. The writ petition was allowed, and the show cause notice was quashed. Costs were awarded to the parties.
Judgment:
The writ petition is accordingly allowed. Costs on parties.
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1993 (3) TMI 96
Whether Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 applies only in case of persons who have been detained under the COFEPOSA prior to the commencement of the Act (SAFEMA)?
Whether it is not proved that the properties forfeited are "illegally acquired properties" within the meaning of clause (c) of sub-section (1) of Section 3 - in particular of sub-clause (iii) thereof?
Held that:- There is nothing in the Act to indicate either directly or by necessary intendment that the Act is confined only to those persons who have been detained under COFEPOSA or who have been convicted under the Customs Act or FERA prior to the commencement of the SAFEMA. The use of the words "has been made" in Section 2(2)(b) does not and cannot lead to such conclusion. The use of the said words must be understood in the context of Section 2(2) which provides that every person in respect of whom an order of detention has been made and which detention order has not been revoked or withdrawn by the competent authority nor has been set aside by a competent court, can be proceeded against under SAFEMA.
There is also no reason to presume that the Parliament intended to extend any immunity to smugglers and manipulators of foreign exchange who are proceeded against under enactments other than those mentioned in Sections 11 and 16 of the Voluntary Disclosure Act. So far as the argument that the authorities under the Act have not properly considered the explanation offered by the appellants and the material produced by them, we must say that we are unable to agree with the same. Both the competent authority and the Appellate Authority have considered the same and held against the appellants. We see no reason to interfere with the concurrent findings in this appeal under Article 136 of the Constitution. Appeal dismissed.
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1993 (3) TMI 94
Whether Factory A was entitled to the benefit of rebate provided in Clause (1) of the Table contained in the notification No. 203/72 dated 28-9-1972 with respect to the said 1,000 quintals?
What will be the working of Clause (2) in Notification No. 146/74 dated 12-10-1974 relating to the sugar year 1974-75?
Held that:- On a consideration of the rival points of view, we are of the opinion that it does take in. Holding otherwise would have this absurd consequence : a factory which has produced, say, just one quintal of sugar during the relevant corresponding period and has produced 1000 quintals during October-November, 1972 would qualify for the rebate on 999 quintals while another factory which has not produced any sugar - nil production - but has produced 1000 quintals during October-November, 1972, would not qualify. How does this interpretation advance the purpose of the notification, is difficult to appreciate.We must reiterate that no factory owner would keep his factory idle during a particular period only with a view to produce sugar during the same period in the next sugar year and earn rebate in the next year. More particularly, it can not reasonably be expected that a factory-owner would deliberately keep his factory idle during the peak production period (December to April) only with a view to produce sugar during that period next year and earn rebate in such next year. It would be unrealistic to say so.
Keeping in mind that the basis for these percentages is the average production of the previous five years and not the excess production. Out of 2,500 quintals produced during the said period in the current sugar year (December 1, 1974 to September 30, 1975), the average of the five previous sugar years i.e., 1000 quintals should be deducted first, which means the excess production during the current year is 1500 quintals. 7.5% of 1000 quintals is 75 quintals. On this quantity of 75 quintals, the rate of rebate as per sub-clause (a) will be ₹ 20 per quintal in the case of free sale sugar and ₹ 5 per quintal in the case of levy sugar. Next 10% of excess production means 100 quintals which would be eligible for rebate under sub-clause (b) at the rate of ₹ 40 per quintal in the case of free sale sugar and ₹ 10 per quintal in the case of levy sugar. The next 100 quintals would be eligible for rebate under sub-clause (c) at the rate of ₹ 50 per quintal in the case of free sale sugar and ₹ 14 per quintal in the case of levy sugar. Then again the next 100 quintals would be eligible for rebate under sub-clause (d) at the rate of ₹ 60 per quintal in the case of free sale sugar and ₹ 18 per quintal in the case of levy sugar. The balance of 1125 quintals would qualify for rebate under sub-clause (e) at the rate of ₹ 82 per quintal in the case of free sale sugar and ₹ 22 per quintal in the case of levy sugar. This is the interpretation and understanding contended for by Shri Ganguli and we must say that none of the counsel for the factory-owners' disputed the same. It is accordingly directed that the above method shall be followed in working out clause (2) of the notification dated 12-10-1974.
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1993 (3) TMI 92
The Supreme Court allowed the Revenue's appeal against the Bombay High Court's decision. The case involved the Commissioner's power under section 16(1) of the Surtax Act, 1964, to revise an order made by the Income-tax Officer. The Tribunal's decision was overturned, and the Tribunal was directed to refer the question to the High Court for opinion.
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1993 (3) TMI 90
Whether the repayment under the agreement was " during a period of not less than seven years " within the proviso to rule 1(v) of the Second Schedule to the Companies (Profits) Surtax Act, 1964?
Held that:- Set aside the judgment of the High Court and answer the question in the manner that the entire term loan of ₹ 50,00,000 taken from the bank does not qualify for inclusion in the capital base under rule 1(v) of the Second Schedule to the Act, but in view of the fact that the order of the Tribunal granting relief to the respondent-company to the extent of ₹ 16 lakhs has not been challenged by the Department, the Revenue shall be entitled to relief to the extent of ₹ 34 lakhs only as not qualified for inclusion in the capital base.
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1993 (3) TMI 89
Issues Involved:
1. Whether commission and discount to wholesale dealers and agents fall within "sales promotion" u/s 37(3A) of the Income-tax Act, 1961.
2. Whether expenditure on contributions to various organizations during festivals is considered "sales promotion expenses" u/s 37(3A).
3. Whether 15% of the interest paid on security deposits received from shop managers should be disallowed u/s 40A(8).
Summary:
Issue 1: Commission and Discount as Sales Promotion
The primary issue was whether the sum of Rs. 6,31,76,886 paid as commission to wholesale dealers and retail agents constituted "sales promotion expenses" and was thus disallowable u/s 37(3A) of the Income-tax Act, 1961. The Tribunal held that trade discount and commission paid for actual services rendered cannot be treated as "sales promotion expenses." The court referenced CIT v. The Statesman Ltd. [1992] 198 ITR 582, which clarified that "sales promotion" involves elements of advertisement and publicity, not ordinary selling costs. Thus, the commission paid to agents was deemed an essential incident of trade, not wasteful expenditure on sales promotion. The court affirmed the Tribunal's decision, ruling in favor of the assessee.
Issue 2: Contributions During Festivals
The second issue was whether Rs. 1,87,411 paid as contributions to various organizations during festivals could be considered "sales promotion expenses" u/s 37(3A). The Tribunal found that these contributions were made to ensure the smooth running of retail shops and not for promoting sales. The court noted that such contributions were a practical necessity for maintaining business relations and not for advertisement or publicity. Consequently, the court ruled that these expenses did not attract the provisions of section 37(3A) and answered the question in favor of the assessee.
Issue 3: Interest on Security Deposits
The final issue was whether 15% of the interest paid on security deposits received from shop managers should be disallowed u/s 40A(8). The Tribunal accepted the assessee's argument that these security deposits did not fall within the definition of "deposit" as per the Explanation to section 40A(8), which excludes security deposits from employees. The court upheld this view, stating that the interest paid on such security deposits could not be disallowed under section 40A(8). The court clarified that no part of the sum of Rs. 9,94,891 should be disallowed if it was paid on security deposits made by shop managers who are employees of the assessee.
Conclusion:
The court ruled in favor of the assessee on all issues, affirming that:
1. Commission and discounts to wholesale dealers and agents are not "sales promotion expenses" u/s 37(3A).
2. Contributions during festivals are not "sales promotion expenses" u/s 37(3A).
3. Interest on security deposits from shop managers is not disallowable u/s 40A(8).
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1993 (3) TMI 88
The High Court of Karnataka modified the order of the learned single judge in a case involving the invocation of Chapter XX-C of the Income-tax Act, 1961. The appellant, a lessee, was found to have leasehold rights that were not affected by an order of pre-emptive purchase. The court held that the appellant's possession as a lessee was not disputed, and directed that the auction of the property be subject to the appellant's leasehold rights. The Department was permitted to take lawful action to evict the appellant before auctioning the property.
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1993 (3) TMI 87
Issues Involved:
1. Validity of the order under section 269UD(1) of the Income-tax Act, 1961.
2. Opportunity of hearing for the purchaser before the appropriate authority.
3. Right of the purchaser to challenge the order of the appropriate authority.
4. Locus standi of the intervener.
5. Remand of the matter to the appropriate authority.
Detailed Analysis:
1. Validity of the Order under Section 269UD(1) of the Income-tax Act, 1961:
The court examined the validity of the order dated July 25, 1989, under section 269UD(1) of the Income-tax Act, which directed the purchase of the property by the Central Government for Rs. 1,84,06,325. The learned single judge quashed the order on grounds that the appropriate authority had previously considered the consideration amounts adequate and granted a no objection certificate. The escalation in price within a year did not justify a different conclusion by the authority without strong reasons or suspicion. The court found that there was hardly any application of mind to the relevant facts, and the reasons for resiling from the earlier view were not forthcoming, thus quashing the impugned orders.
2. Opportunity of Hearing for the Purchaser Before the Appropriate Authority:
The court emphasized the necessity of providing a reasonable opportunity of being heard to the parties affected by an order under section 269UD(1), as established in C.B. Gautam v. Union of India [1993] 199 ITR 530. The Supreme Court held that the requirement of a reasonable opportunity must be read into the provisions of Chapter XX-C, and failure to provide such an opportunity renders the order bad in law. The court found that respondent No. 1 (the purchaser) and respondents Nos. 2 and 3 (the owners) had the right to be heard and show cause against the pre-emptive purchase order.
3. Right of the Purchaser to Challenge the Order of the Appropriate Authority:
The court acknowledged that the purchaser had the right to challenge the order of the appropriate authority. Despite the contention that the Central Government had already made the payment and taken possession, the court held that the legal position, as clarified in Gautam's case, necessitated affording an opportunity to the purchaser. The court distinguished this case from Rajata Trust v. Chief CIT [1992] 193 ITR 220, noting that the latter was decided before the Supreme Court's interpretation in Gautam's case.
4. Locus Standi of the Intervener:
The court examined whether the intervener, a shareholder of the first respondent-company, had the locus standi to challenge the order. It held that a shareholder does not acquire any interest in the assets of the company and cannot equate his interest with the company's assets. The court referred to Mrs. Bacha F. Guzdar v. CIT [1955] 27 ITR 1 (SC) and other cases, concluding that the intervener had no locus standi to challenge the order as his personal rights were not infringed.
5. Remand of the Matter to the Appropriate Authority:
The court decided to remit the matter to the appropriate authority for fresh consideration and decision in accordance with law, after affording an opportunity to the purchaser and the owners to put forth their case. The court provided specific directions for the remand, including the requirement for the purchaser to deposit the agreed amount with interest, and stipulated the conditions under which the appropriate authority should decide the matter afresh.
Conclusion:
The court allowed the writ appeals, set aside the order of the learned single judge, and quashed the order of the appropriate authority dated July 25, 1989. The matter was remitted to the appropriate authority with directions to decide afresh after providing an opportunity to the affected parties. The court also outlined conditions for the remand, including the deposit of the consideration amount with interest by the purchaser and the retention of the property by the Central Government until the matter is decided.
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1993 (3) TMI 86
Issues involved:
The issue involves the deletion of interest charged u/s 216 of the Income-tax Act, 1961.
Details of the Judgment:
The case pertains to an assessee, a limited company engaged in the manufacture and sale of tea, for the assessment year 1977-78. The Inspecting Assistant Commissioner of Income-tax issued a notice under section 210 for payment of tax, with subsequent estimates provided by the assessee. The assessment resulted in a determined tax liability and surcharge, with arrears and interest charged on the amounts. The Commissioner of Income-tax, on appeal, found the assessee not in default and deleted the interest charge. The Tribunal upheld this decision, noting the lack of a speaking order by the Inspecting Assistant Commissioner and the absence of reasons for the interest charge.
The relevant provision, section 216 of the Income-tax Act, outlines the payment of interest by an assessee in cases of underestimation or wrongful deferral of advance tax. While the Inspecting Assistant Commissioner may have believed there was underestimation in this case, the discretion to charge interest lies with the assessing authority. In this instance, it was found that the assessing authority did not properly exercise this discretion, as charging interest is not mandatory under section 216. The Commissioner of Income-tax (Appeals) and the Tribunal were justified in deleting the interest charge, as the assessing authority did not consider the relevant facts and circumstances nor apply the discretion to charge interest.
The High Court, acting as a court of reference, ruled in favor of the assessee and against the Revenue, answering the question in the affirmative. A copy of the judgment will be transmitted to the Appellate Tribunal, with no order as to costs.
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1993 (3) TMI 85
Issues:
1. Deductibility of subsidy received by the assessee from the government for calculating depreciation on plant and machinery.
Analysis:
The case involved a reference under section 256(1) of the Income-tax Act, 1961, where the Appellate Tribunal referred a question to the High Court regarding the deductibility of a subsidy received by the assessee for calculating depreciation on plant and machinery. The respondent, a public limited company, received a subsidy under the Central Subsidy Scheme, 1971, against the investment made for purchasing plant and machinery. The dispute arose when the Inspecting Assistant Commissioner deducted the subsidy amount from the capital cost to calculate depreciation, which was challenged by the assessee. The Commissioner of Income-tax held that the subsidy amount should not be deducted for depreciation calculation, leading to appeals by both parties before the Tribunal. The Tribunal upheld the Commissioner's decision, resulting in the current reference before the High Court.
The High Court examined the nature of the subsidy scheme, emphasizing that it aims to promote industries in backward areas by providing incentives to entrepreneurs. The scheme does not dictate how the subsidy amount should be spent, allowing the beneficiary to utilize it for any industry-related purpose. The quantification of the subsidy is based on the cost of assets, such as plant and machinery, and is a percentage of such cost. The Court analyzed relevant provisions of the Income-tax Act, particularly sections 2(45), 5, 28, 29, and 32, which govern the computation of total income, profits from business, and depreciation on assets used for business or profession.
Regarding the computation of depreciation, the Court referred to section 43 of the Act, which defines terms related to asset costs and written down value. It highlighted that the actual cost of an asset to the assessee should be reduced by any portion met by another person or authority. The Revenue argued that the subsidy, being a part of the cost met by the government, should be deducted to determine the actual cost for depreciation calculation. In contrast, the assessee contended that the subsidy is unrelated to the asset cost and hence should not be deducted.
The Court aligned with the view of various High Courts in similar cases, emphasizing that the purpose of the subsidy scheme is to incentivize entrepreneurs and not specifically subsidize the cost of assets like plant and machinery. It concluded that the subsidy is a monetary incentive that does not reduce the actual cost borne by the assessee for the assets. Therefore, the Court ruled in favor of the assessee, holding that the subsidy received should not be deductible from the cost of plant and machinery for calculating depreciation. The judgment was transmitted to the Appellate Tribunal without any cost directions.
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