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1998 (11) TMI 140
Whether the goods in question, namely, gelatine would fall within the description of chemical as described in Entry 138 of the First Schedule to the Tamil Nadu General Sales Tax Act, 1959?
Held that:- In the present case, what we find is that no additional material was adduced before the High Court for showing that gelatine is a chemical. The High Court did not examine the finding of the Tribunal holding that gelatine is not a chemical, which was based upon the materials on record. The findings of fact arrived at by the Tribunal being the last fact finding body has to be given due weight unless it is found by the High Court that such a finding is either based upon no evidence or irrelevant evidence or incorrect principles. Admittedly, in the present case, no additional material was adduced by the Revenue. As such, the finding recorded by the High Court that gelatine comes under the description of chemical is not sustainable in law. We accordingly set aside the judgments under appeals. The appeals are allowed.
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1998 (11) TMI 139
Issues:
Challenge to conviction under Section 135(1)(a)(i) of the Customs Act based on lack of valid sanction, contradiction in evidence, and failure to follow search provisions under Section 102(1) of the Customs Act.
Analysis:
1. Validity of Sanction: The petitioner challenged the conviction on the grounds of lack of valid sanction under Section 135 of the Customs Act. The Counsel argued that the sanction did not demonstrate that all documents were presented before the sanctioning authority. However, both lower courts found the sanction to be valid as all materials were placed before the authority. The Judge upheld this finding, stating that the factual aspects had been correctly decided by the lower courts.
2. Contradiction in Evidence: The petitioner raised a point regarding a contradiction between the evidence of two witnesses regarding the recovery of gold bars from the accused. The Judge noted that both lower courts had already addressed and resolved this issue, finding no contradiction between the testimonies of the witnesses. Consequently, the Judge did not delve further into this matter.
3. Compliance with Search Provisions: The central issue revolved around the compliance with the search provisions under Section 102(1) of the Customs Act. The Counsel argued that the search was not conducted in accordance with the requirements of informing the accused of their right to be searched in the presence of a Gazetted Officer or a Magistrate. The Counsel relied on precedents related to the N.D.P.S. Act to support this argument. However, the Judge disagreed, stating that Section 102 of the Customs Act is not analogous to Section 50 of the N.D.P.S. Act. The Judge highlighted that the search was conducted based on suspicion, and there was clear evidence of the accused's suspicious behavior leading to the search. Therefore, the Judge concluded that the right to choose the officer under whose presence the search was conducted was not mandatory in this case.
In conclusion, the Judge dismissed the revision, upholding the conviction and sentence imposed on the petitioner by both lower courts. The Judge found no merit in the arguments presented by the petitioner's Counsel regarding the lack of valid sanction, contradiction in evidence, and failure to comply with search provisions under the Customs Act.
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1998 (11) TMI 138
Issues:
Delay in shipment of unaccompanied baggage, refusal of clearance, transfer of residence concession.
Analysis:
The petitioner sought a Writ of Certiorarified Mandamus to challenge the delay in the shipment of his unaccompanied baggage from Saudi Arabia, which arrived in India after 267 days. The petitioner had left Saudi Arabia due to the war in 1990 and entrusted his goods to a friend for shipment. The authorities refused clearance due to the delay. The second respondent found the delay unsatisfactory and denied transfer of residence concession. The first respondent upheld this decision, leading to the writ petition.
The petitioner's counsel argued that the extraordinary circumstances of the war in Saudi Arabia justified the delay. The petitioner had no means to expedite the shipment personally and had to rely on friends. Similar cases where delays were condoned were cited to support the petitioner's claim for concession. The authorities were urged to consider the petitioner's hardships during the war and grant the concession.
The government's counsel contended that the delay was substantial, and the petitioner should have acted promptly to seek the concession. The court carefully considered both arguments and acknowledged the petitioner's constrained situation during the war. It was noted that the petitioner had taken reasonable steps by entrusting the goods to a friend for shipment. The court found the authorities had not adequately considered the petitioner's explanation for the delay and set aside their decision. The impugned orders were quashed, and the writ petition was allowed without costs.
The court directed the first respondent to issue appropriate orders within twelve weeks for the transfer of residence concession and clearance of the goods, recognizing the petitioner's circumstances during the war in Saudi Arabia.
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1998 (11) TMI 137
Issues Involved:
Adjudication under Central Excise Act, 1944, pre-deposit waiver, stay of recovery, remand of the matter to Adjudicating Authority, refund of pre-deposit.
Adjudication and Pre-Deposit:
An order of adjudication u/s Central Excise Act, 1944 resulted in a demand against the petitioner. The Tribunal directed a pre-deposit of Rs. 50 lakhs, which was complied with by the petitioner.
Remand and Technical Literature:
The appeal was remanded to the Adjudicating Authority due to the need to consider technical literature provided by the petitioner. The Tribunal found itself inappropriate to decide based on technical aspects and referred the matter back for fresh adjudication.
Refund of Pre-Deposit:
Upon remand, the petitioner requested a refund of the pre-deposit, which was denied by the CEGAT. The petitioner approached the High Court seeking refund, arguing that once the order of adjudication was set aside, there was no basis for withholding the deposited amount.
Court's Decision:
The High Court held that the Tribunal had no authority to retain the pre-deposit after setting aside the order of adjudication. As there was no legal provision for such retention, the Court directed the refund of the pre-deposit amount to the petitioner within four weeks. The impugned order of the Appellate Tribunal was set aside, and no costs were awarded.
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1998 (11) TMI 136
The High Court of Punjab & Haryana at Chandigarh disposed of a writ petition challenging recovery notices under Section 11A of the Central Excises and Salt Act, 1944. The petitioner argued that the notices were without jurisdiction. The court directed the Assessing Authority to decide the matter promptly, considering previous orders, and allowed the petitioner to respond to the show cause notices within three weeks. No costs were awarded. (Case citation: 1998 (11) TMI 136 - High Court of Punjab & Haryana at Chandigarh)
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1998 (11) TMI 135
Issues:
1. Maintainability of the writ petition under Article 226 without exhausting alternative remedy of appeal.
Analysis:
The respondent in this case sought the dismissal of a writ petition, CWP No. 8498 of 1990, on the grounds of it being premature as the petitioner had not exhausted the alternative remedy of appeal. The petitioner had filed the writ petition under Article 226 of the Constitution to challenge a show-cause notice issued by the Additional Collector, Central Excise, demanding Central Excise Duty. The petitioner argued that the demand was illegal as excise duty can only be levied on manufactured and marketable goods. The petitioner contended that the writ petition was not premature as the demand itself was without jurisdiction. The petitioner also cited a case to support the argument that a party cannot be compelled to exhaust alternative remedies if a writ petition is pending for a significant period.
The court acknowledged the legal principle cited by the petitioner but found it inapplicable to the present case. The court noted that the issues involved, such as whether the petitioner was engaged in the fabrication of certain items and whether those items were sold or assembled at their proper place, were questions of fact. The court emphasized that such factual determinations cannot be made in a petition under Article 226 of the Constitution. Referring to previous judgments, the court highlighted that when a statute provides a complete mechanism to challenge an assessment order, the aggrieved party must utilize the remedy provided by the statute rather than resorting to a writ petition. The court cited relevant cases to support this principle.
Ultimately, the court found that the Assessing Authority had not yet considered the case based on any reply from the petitioner. Therefore, the court deemed the writ petition premature and ordered its dismissal. However, the court allowed the petitioner to file a reply to the show-cause notice within a specified timeframe, indicating that the objection regarding prematurity would not be raised if the reply was submitted within the given period. The court directed that no action should be taken against the petitioner until the Assessing Authority made a final decision on the matter.
In conclusion, the court ruled in favor of the respondent's application to dismiss the writ petition as premature, emphasizing the importance of exhausting alternative remedies provided by the statute before seeking relief through a writ petition under Article 226 of the Constitution.
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1998 (11) TMI 134
Issues Involved:
1. Applicability of the six months' period of limitation u/s 11A of the Central Excise Act to notices issued under Rule 57-I for recovery of wrongly availed Modvat credit.
2. Whether the decision in the Collector's conference regarding the application of the time limit prescribed in Section 11A for the recovery of wrong credit is binding.
3. Admissibility of Modvat credit for Endless P.B. Wire Mesh and Industrial Cloth used in the manufacture of printing paper.
Summary:
1. Applicability of Limitation Period u/s 11A to Rule 57-I:
The primary question was whether a demand for recovery of Modvat credit wrongly availed of can be made under Rule 57-I regardless of any period of limitation or whether the period of limitation provided u/s 11A of the Act would also govern a demand for recovery under Rule 57-I. The court noted that before the amendment of Rule 57-I on 6-10-1988, no period of limitation was explicitly provided in the rule. However, the court held that the six months' period of limitation provided u/s 11A of the Act would also apply to demands made under Rule 57-I. This view was supported by the decisions of the Bombay High Court in Fabril Gasosa v. U.O.I. and the Madras High Court in Advani Oerlikon Ltd. v. Assistant Collector of Central Excise. The court rejected the Gujarat High Court's decision in Torrent Laboratories Pvt. Limited v. U.O.I., which had held that Rule 57-I was independent of Section 11A.
2. Binding Nature of Collector's Conference Decision:
The Tribunal restricted the demands for recovery within the period of limitation as provided u/s 11A, without stating that the decision in the Collectors' conference was binding. The court noted that the Tribunal did not base its order on the decision of the Collectors' conference but merely referred to it as being in accord with its view. Therefore, the question of whether the decision in the Collectors' conference was binding did not arise from the Tribunal's order and needed no answer from the court.
3. Admissibility of Modvat Credit for Specific Inputs:
The court also addressed whether Modvat credit of excise duty paid on Endless P.B. Wire Mesh and Industrial Cloth would be available in the manufacture of printing paper. The Tribunal had initially denied the Modvat benefit for these inputs, but later decisions by the Tribunal and a Larger Bench held that Modvat credit was available for these items. The court agreed with the later decisions, holding that these inputs were eligible for Modvat credit.
Conclusion:
All the questions in all the tax cases were answered in favor of the respective assessees and against the Revenue. The court directed that a copy of the judgment be sent to the Tribunal for necessary action and disposed of the writ petition accordingly, with no order as to costs in any of these cases.
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1998 (11) TMI 133
The Supreme Court declined to entertain the petition under Article 136 of the Constitution of India regarding the recovery of duty, directing the petitioner to file an appeal under Section 128 of the Customs Act, 1962. The Court granted six weeks to file the appeal and ordered maintenance of status quo for seven weeks regarding the recovery. Further stay will depend on the decision of the appellate authority. The Special Leave Petition was disposed of with these observations.
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1998 (11) TMI 132
Issues Involved:
1. Right of Customs Authorities to claim payment of duty and other charges for goods imported by a company in liquidation.
2. Liability of the purchaser to pay Customs Duty.
3. Applicability of Sections 529A and 530 of the Companies Act, 1956.
4. Validity of sale of warehoused goods without payment of duty.
5. Limitation and procedural issues regarding the appeal.
Summary:
1. Right of Customs Authorities to Claim Payment of Duty:
The Customs Authorities contended that, under the Customs Act, 1962, goods could not be removed from the warehouse without payment of import duty and accumulated interest. They argued that the statutory right to confiscate and sell the goods for the realization of duty and interest was taken away by the orders under appeal. The Court acknowledged that the Customs Authorities had a statutory right to detain and sell the goods for realizing their duties, as reinforced by Sections 68, 71, and 72 of the Customs Act, 1962.
2. Liability of the Purchaser to Pay Customs Duty:
The purchaser denied liability for Customs Duty over and above the purchase price. The Court held that the duties on the chemicals were payable by the importer, defined u/s 2(26) of the Customs Act, 1962, as the company or its representative in interest, i.e., the Official Liquidator. The sale notice and terms did not obligate the purchaser to pay the duty. Therefore, the purchaser was not liable for the duty, and the duty remained the responsibility of the company or its representative.
3. Applicability of Sections 529A and 530 of the Companies Act, 1956:
The Bank of India argued that the Customs Authorities' claim should be determined u/s 529A and 530 of the Companies Act, 1956. The Court clarified that the Customs Authorities' claim to the chemicals, which included a statutory right of detention and confiscation, had to be met before the chemicals could be sold as assets of the company in liquidation. Thus, the Customs Authorities' claim stood outside the proceedings under Sections 529, 529A, and 530 of the Companies Act, 1956.
4. Validity of Sale of Warehoused Goods Without Payment of Duty:
The Court found that the chemicals were not legally available for sale to the purchasers until the Customs Duties and statutory dues were paid. The sale of the warehoused goods without payment of duty was in contravention of the statutory provisions. The Court directed the Official Liquidator to make over the amount claimed by the Customs Authorities, including interest, and allowed the Customs Authorities to realize the balance claim from any further sums paid by the purchaser.
5. Limitation and Procedural Issues Regarding the Appeal:
The purchaser raised a preliminary objection regarding the limitation, stating that no list of relevant dates was filed. The Court rejected this objection, noting that sufficient particulars were provided in the requisitions. The appeal was allowed, and the Court directed the Official Liquidator to pay the Customs Authorities within two weeks.
Conclusion:
The appeal was allowed, and the Official Liquidator was directed to pay the Customs Authorities the claimed amount, including interest. The Customs Authorities were entitled to realize the balance from any further payments by the purchaser. The Bank of India's prayer for a stay of the judgment was refused.
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1998 (11) TMI 131
Issues Involved:
1. Date of Effectiveness of Gazette Notification
2. Assessment of Customs Duty
3. Requirement of Publication for Subordinate Legislation
4. Binding Nature of Judicial Precedents
Summary:
1. Date of Effectiveness of Gazette Notification:
The primary question in this application is the date from which a notification issued in a Gazette comes into effect. The petitioner argued that the notification dated 11-9-1996 should only be effective from the date it was made available for sale to the public, which was 16-1-1997. The court held that a notification cannot be said to have been duly published until it is made known to the public, and mere printing in the Gazette is not sufficient. The court relied on precedents such as *State of Madhya Pradesh v. Ram Ragubir Prasad Agarwal* and *Collector of Central Excise v. New Tobacco Co.*, which emphasized the necessity of making laws known to the public.
2. Assessment of Customs Duty:
The respondents assessed the Customs Duty based on the notification dated 11-9-1996, which was not made available to the public until 16-1-1997. The petitioner contended that the duty should be assessed based on the previously prevailing rate as the notification was not effectively published. The court agreed with the petitioner, directing the reassessment of the bills of entry in terms of the earlier rate of duty.
3. Requirement of Publication for Subordinate Legislation:
The court reiterated that publication of subordinate legislation is essential for it to take effect. Citing *B.K. Srinivasan v. State of Karnataka*, the court held that if the subordinate legislation does not prescribe the mode of publication, it will take effect only when published through the official Gazette or another reasonable mode of publication. The court emphasized that the executive must make all reasonable efforts to make the law known to the public, aligning with principles of natural justice.
4. Binding Nature of Judicial Precedents:
The court noted that not every statement in a judgment constitutes a precedent. Only the principle upon which the case is decided is binding. The court referred to *Union of India v. Dhanwanti Davi* and other cases to highlight that a decision is an authority for what it decides and not what can logically be deduced therefrom. The court distinguished the present case from *Pankaj Jain Agencies v. Union of India* and *ITC Limited v. Collector of Central Excise, Bombay*, where the specific issue of the date of publication was not raised.
Conclusion:
The application was allowed, and the respondents were directed to release the goods by reassessing the bills of entry based on the previously prevailing rate of duty. The court emphasized the necessity of making laws known to the public and the importance of publication in the official Gazette. The decision underscores the principle that laws must be promulgated or published to be enforceable.
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1998 (11) TMI 130
Issues:
1. Denial of total exemption from customs duty and additional duty on "Infusion sets" under Notification No. 208-Cus.
2. Interpretation of Entry No. 19 and Entry No. 44 in the notification.
3. Validity of the claim for total exemption of duty on "Infusion sets" under the notification.
4. Authority of Customs Department to assess duty on imported goods.
5. Impact of clarifications issued by Director General of Health Services on the case.
Analysis:
1. The petitioner sought a writ of declaration challenging the denial of total exemption from customs duty and additional duty on "Infusion sets" under Notification No. 208-Cus. The petitioner argued that the goods imported fell under the category of life-saving equipment eligible for full exemption, as per the liberalized policy of the Union Government for life-saving drugs and equipment.
2. The court analyzed Entry No. 19 and Entry No. 44 in the notification to determine the applicability of the exemption. Entry No. 19 referred to "Intravenous Canulae and tubing for long term use," while Entry No. 44 included "Butterfly needle G., Infusion sets." The court highlighted the distinction between the two entries and emphasized that the petitioner's "Infusion sets" did not fall under the specific category mentioned in Entry No. 44.
3. The court considered the petitioner's claim for total exemption of duty on "Infusion sets" under the notification. Despite the petitioner's reliance on clarifications from the Director General of Health Services, the court found that the goods imported did not qualify for exemption under Entry No. 44. The court emphasized the importance of correct classification for levy of duty.
4. The authority of the Customs Department to assess duty on imported goods was upheld by the court. It was noted that the Customs Department has the competence to independently decide on the levy of customs duty, irrespective of clarifications from other authorities. The court highlighted the role of the Chief Controller of Imports and Exports in granting licenses and the Customs Department's responsibility in assessing duty on imported goods.
5. The court discussed the impact of clarifications issued by the Director General of Health Services on the case. While the petitioner relied on these clarifications to support their claim for exemption, the court emphasized that the clarifications did not change the classification of the goods under the notification. The court concluded that the petitioner's arguments were not acceptable, leading to the dismissal of the writ petition.
In conclusion, the court dismissed the petitioner's claim for total exemption from customs duty and additional duty on "Infusion sets" under Notification No. 208-Cus, emphasizing the importance of correct classification and the authority of the Customs Department in assessing duty on imported goods.
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1998 (11) TMI 129
Issues:
1. Interpretation of import licences and their transferability.
2. Discrepancy in goods imported and licence specifications.
3. Requirement to establish nexus between import and export products.
4. Application of import-export policy on thickness specifications.
5. Jurisdiction of customs authorities in assessing import clearance.
6. Legal implications of transferable import licences.
7. Obligation to establish nexus post discharge of export obligation.
Analysis:
1. The judgment addresses the petitioner's purchase of transferable advance licences for importing stainless steel sheets. The licences were transferred to the petitioner after fulfilling export obligations and obtaining necessary endorsements, making the petitioner the valid licence holder for importation.
2. The petitioner faced challenges when attempting to clear a partial shipment of imported goods due to a discrepancy in thickness specifications not mentioned in the licences. Customs authorities demanded proof of nexus between the imported goods and licence specifications, leading to a dispute over clearance.
3. The court considered the necessity of establishing a nexus between the imported and exported products, especially regarding thickness specifications. The petitioner argued that post-discharge of export obligations by the original licensee, the petitioner, as a transferee, was not obligated to prove the nexus.
4. The judgment delves into the evolution of import-export policies concerning thickness specifications for steel products. The court examined the application of policy revisions and public notices regarding the necessity of verifying thickness, emphasizing the importance of adhering to policy guidelines.
5. The jurisdiction of customs authorities in assessing import clearance based on licence specifications was a key issue. The court scrutinized the legality of the authorities' demands and the petitioner's compliance with import regulations, highlighting the need for proper assessment in accordance with the law.
6. The legal implications of transferable import licences were discussed, focusing on the petitioner's rights and obligations as a transferee. The court analyzed the petitioner's position in relation to the original licensee's responsibilities and the implications of transferring licences under duty exemption schemes.
7. Ultimately, the judgment emphasized that once the export obligations were fulfilled and the licences were transferred, the petitioner was not bound to establish a nexus between the import and export products. The court referenced a relevant Bombay High Court judgment to support the petitioner's position, leading to the allowance of the writ petitions without costs.
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1998 (11) TMI 128
Issues:
1. Maintainability of writ petition under Article 226 of the Constitution of India.
2. Requirement of a license for the import of a Water Scooter under the Foreign Trade (Development and Regulation) Act, 1992.
3. Classification of Water Scooter as "personal and household effects" under Baggage Rules, 1994.
Issue 1: The judgment addresses the maintainability of the writ petition under Article 226 of the Constitution of India. The Standing Counsel for the Department argued that the writ petition is not maintainable as the appellate and revisional authorities had examined the impugned fine order. However, the court held that legal questions regarding the applicability of relevant rules were raised, making the writ petition maintainable.
Issue 2: The court considered whether the import of a Water Scooter required a license under the Foreign Trade (Development and Regulation) Act, 1992. It was noted that Paragraph 156J(2) of the Exim Policy prohibits the import of water transport crafts without a license. The petitioner claimed exemption under Baggage Rules, 1994, but the court ruled that the Baggage Rules do not override the requirement for a license under the Foreign Trade Act, concluding that the import of the Water Scooter necessitated a license.
Issue 3: The judgment also delved into the classification of the Water Scooter as "personal and household effects" under Baggage Rules, 1994. The court found that the Water Scooter, being a pleasure craft used for joy-riding, did not qualify as a personal effect under the Baggage Rules. Additionally, the petitioner failed to provide evidence of the Water Scooter being in personal use abroad for the minimum required period. Consequently, the court upheld the authorities' decision that the Water Scooter did not fall under the category of personal and household effects exempt from duty.
In conclusion, the court dismissed the original petition, upholding the authorities' decision that the import of the Water Scooter required a license under the Foreign Trade Act and did not qualify as personal and household effects under the Baggage Rules.
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1998 (11) TMI 127
Whether a notice to the importer which is served on the clearing agent of the importer, long after the goods have been cleared by the clearing agent, will amount to a valid notice to the respondent?
Held that:- We do not find that in the present case, any notice has been served on the clearing agent on the ground that the department cannot recover the duty from the owner or importer thus making the agent liable. The notice, therefore, cannot be construed as a valid notice against the agent for the recovery of any duty from the agent under the proviso to Section 147(3). In fact, in the present case, on 9-10-1986, such notice could not have been served on the agent because on 9-10-1986, there was nothing which would lead the Assistant Collector of Customs to come to the conclusion that the duty could not be recovered from the importer. Even a notice for recovery of duty had not been served on the importer on 9-10-1986. Notice has been served on the importer only later, on 14-10-1986, when such service of the notice was barred by limitation. We have not been shown any reason why the notice could not be served on the importer within the period of six months prescribed under Section 28. Therefore, on the facts of the present case, the proviso to Section 147(3) is not attracted.
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1998 (11) TMI 126
Whether a private person or the subordinate court, is only an informant and does not have the status of a litigant in the contempt of court case?
Held that:- The first respondent, although he received the pseudonymous complaint of November 15, 1997, seems to have written a letter to the so called sender of the complaint only on January 12, 1998, and that too asking only for a confirmation whether the complaint was made by that person. When he wrote the letter of December 30, 1997, he had not even checked the veracity of the complaint. Thereafter, although the first respondent had not received any response to his letter of January 12, 1998, he did not hesitate to address the letter of February 3, 1998, to the President of the Tribunal.
In our view this kind of conduct and that too on the part of the Law Secretary, who is expected to maintain the independence of the Income-tax Appellate Tribunal and not interfere with its judicial functioning, amounts to gross contempt of court. It is a deliberate attempt on his part to question the judicial functioning of the Tribunal coming as it does from a person of his rank. It is rightly perceived by the President as well as the two concerned Members of the Tribunal as a threat to their independent functioning in the course of deciding appeals coming up before them.
The first respondent has offered his apology, to us. However, looking to all the circumstances of the present case we cannot accept the apology offered. He has travelled far beyond exercising administrative control over the Tribunal.
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1998 (11) TMI 125
Whether an assessee-company which manufactures and sells soft drinks, can claim deferred payment in respect of bottles and crates used by it and the company is entitled for the same, as the bottles and crates must be deemed to be plant for the purpose of the Acts and Rules?
Held that:- As pointed out in the affidavit in rejoinder, the company had applied for an eligibility certificate claiming the status of a small-scale industry. It is, in fact, registered as a small scale industrial unit. While declaring its investment at the time of seeking registration as a small-scale industrial unit, it did not include investment in bottles and crates under the head "Plant and machinery". The investment in bottles and crates was shown under a separate head. It is further pointed out in the said affidavit that if the investment of the company in bottles and crates is included under the head "Plant" then its total fixed capital investment will reach the level of ₹ 137.36 lakhs and it can no longer be regarded as a small scale industrial unit. As the company had applied as an SSI unit, the District Level Committee had to verify the status of the company as an SSI unit and, therefore, it was bound to take into account the abovereferred two notifications of the years 1991 and 1993. If under these circumstances, the District Level Committee came to the conclusion that the company is not entitled to the benefit of deferment in respect of its investment in bottles and crates, it cannot be said that it has acted contrary to law. Appeal allowed, set aside the judgment of the High Court and dismiss the writ petition filed by the company..
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1998 (11) TMI 124
Merely because no appeal is provided for under the statute against an order passed by the appropriate authority under Chapter XX-C of the Act does the supervisory power of the High Court under article 226 get enlarged in any way and can the High Court in such a case exercise an appellate power and reappreciate findings to come to its own conclusion?
Whether in the case in hand the conclusion arrived at by the appropriate authority with regard to the fair market value of the property in question was by taking into consideration all relevant and germane materials and whether the Department discharged the burden that lay on it in establishing that the apparent consideration of the property as indicated in the agreement of sale was less than its fair market value by 15 per cent.?
Held that:- Merely because no appeal is provided for against the order of the appropriate authority, directing compulsory acquisition by the Government, the supervisory power of the High Court does not get enlarged nor the High Court can exercise an appellate power.
Coming to the second question, on examining the order passed by the appropriate authority for arriving at a conclusion as to what would be the fair market value of the property in question agreed to be sold, we find that the said appropriate authority did consider all the germane and relevant materials produced before it in the course of the proceedings and formed its opinion that there is understatement of consideration in the agreement dated September 25, 1995, by an amount more than 15 per cent. of the fair market value. On the basis of several sale transactions which are all contemporaneously made and which have the same potentiality and situated in the same locality, the appropriate authority came to the conclusion that the fair market land rate could not be less than ₹ 850 per square foot. Further, in the absence of any irrebuttable materials adduced on behalf of the transferor or the transferee as to why in the impugned transaction the property has been agreed to be sold at ₹ 650 per square foot, the natural presumption arises that it was with a view to attempt to evade tax. We think it appropriate to direct that the entire amount lying in deposit together with the interest accrued thereon should be paid to the respondents. This appeal is accordingly allowed
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1998 (11) TMI 123
Issues involved: Interpretation of section 43B of the Income-tax Act, 1961 regarding the disallowance of sales tax paid after the close of the accounting year.
Analysis:
The case involved the interpretation of section 43B of the Income-tax Act, 1961, regarding the disallowance of sales tax paid after the close of the accounting year. The assessee-firm's liability to pay sales tax arose in the assessment year 1984-85, but the amount was paid within 30 days after the close of the accounting year as permitted by the Sales Tax Act and claimed as a deduction in the assessment year 1985-86. The Income-tax Officer disallowed the deduction under section 43B, which was confirmed by the Appellate Assistant Commissioner. The Tribunal, relying on a previous case, held that section 43B was not applicable, and the deduction claimed was wrongly disallowed.
The central question before the High Court was whether the Tribunal correctly construed section 43B in this case. Section 43B mandates that deductions for sums payable by the assessee, including taxes, shall only be allowed when actually paid, irrespective of the year in which the liability was incurred. The first proviso, added in 1988, allows for payment in the next accounting year if made before the due date for filing income tax returns. The Tribunal's decision was based on the fact that the assessee had paid the tax within the prescribed time, even though the liability arose in the previous accounting year.
The High Court, in its analysis, noted that the first proviso to section 43B, which came into force in 1988, was not applicable to the case. However, even if such a plea was raised, it was covered by a Supreme Court judgment that gave retrospective effect to the proviso to remedy unintended consequences and make section 43B workable. Therefore, the High Court held that the Tribunal correctly interpreted section 43B and deemed it inapplicable to the case as the assessee had paid the sales tax within the prescribed time under the statute, albeit after the close of the assessment year for which the liability arose. The reference was answered against the Revenue, affirming the Tribunal's decision.
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1998 (11) TMI 122
Issues Involved:
1. Meaning of "agreement for transfer" in Chapter XX-C of the IT Act, 1961.
2. Commencement of the obligation to file Form 37-I and its significance.
3. Meaning of defects in Form 37-I under s. 269UC(4).
4. Calculation of the 15-day period under r. 48-R.
5. Whether the 15-day filing period is mandatory or directory and if delay can be condoned.
Detailed Analysis:
1. Meaning of "Agreement for Transfer" in Chapter XX-C of the IT Act, 1961:
The phrase "agreement for transfer" as used in Chapter XX-C of the IT Act, 1961, has a specific meaning. It refers to an agreement that must be in writing, in the prescribed proforma, signed by or on behalf of both parties, and verified in the prescribed manner. This proforma agreement, unlike a private agreement, must set forth prescribed particulars and is foundational for subsequent rights and obligations under s. 269UL. The proforma agreement must be filed before the Appropriate Authority within 15 days of signing. The court emphasized that the proforma agreement is distinct from a private agreement and must be treated as such.
2. Commencement of the Obligation to File Form 37-I and its Significance:
The obligation to file Form 37-I commences when the proforma agreement is entered into. The proforma agreement must be filed within 15 days of its signing. This filing is crucial as it enables the Appropriate Authority to scrutinize the transaction for any undervaluation and decide whether to exercise the discretionary jurisdiction to direct compulsory purchase by the Central Government. The court clarified that the period of 15 days is to be calculated from the date of entering into the proforma agreement, not from the date of any preceding private agreement.
3. Meaning of Defects in Form 37-I within the Meaning of s. 269UC(4):
A defect in Form 37-I refers to the absence of requisite particulars that are necessary for the Appropriate Authority to make an informed decision. The court noted that defects capable of being cured should be rectified within the prescribed period. The Appropriate Authority can refuse to act upon or take cognizance of a proforma agreement if the necessary particulars are not supplied or if the form is filed prematurely before the property is in a state ready for transfer.
4. Calculation of the 15-day Period under r. 48-R:
The 15-day period for filing Form 37-I is calculated from the date of entering into the proforma agreement in Form 37-I. This period is directory, not mandatory. The court reasoned that interpreting the period as mandatory would result in anomalies, such as the inability to secure specific performance of a contract for sale through a court of law if the period had expired.
5. Whether the 15-day Filing Period is Mandatory or Directory and if Delay Can Be Condoned:
The court held that the 15-day period prescribed by r. 48L is directory and not mandatory. A delay in filing Form 37-I does not defeat the purpose of the filing. Instead, allowing the form to be filed even with delay ensures that the transaction is brought within the tax net and scrutinized by the Appropriate Authority. The court emphasized that excluding Form 37-I from consideration due to delay would result in transactions being excluded from scrutiny, defeating the object of Chapter XX-C.
Conclusion:
The court set aside the impugned orders passed by the Appropriate Authority, directing it to take fresh decisions in accordance with the principles stated in the judgment within three months. The court's interpretation ensures that the legislative intent behind Chapter XX-C is fulfilled while balancing the rights and obligations of the parties involved in the transfer of immovable property.
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1998 (11) TMI 121
Issues Involved:
1. Whether a claim for weighted deduction can be made by reference to sub-clause (ix) without a rule framed under "as may be prescribed."
2. Whether rule 6AA can be given retrospective operation from April 1, 1968.
3. Whether an assessee can claim weighted deduction under rule 6AA for inspection fees without maintaining its own inspection facilities.
4. Whether the claim can be considered under sub-clause (vi) if not admissible under sub-clause (ix).
Issue-wise Detailed Analysis:
Issue 1: Claim for Weighted Deduction Under Sub-clause (ix)
The court examined whether a claim for weighted deduction could be made by reference to sub-clause (ix) of section 35B(1)(b) without a rule being framed under "as may be prescribed." The Tribunal had held that the rule, once framed, could govern pending assessments as it merely gave substance to an existing section in the statute. However, the court emphasized that the benefit under sub-clause (ix) was conditional on the activities being prescribed, and without such prescription, the sub-clause could not come into operation.
Issue 2: Retrospective Operation of Rule 6AA
The court addressed whether rule 6AA, effective from August 1, 1981, could be given retrospective effect from April 1, 1968. It was held that rule 6AA could not apply to claims before its enactment date. The court noted that Parliament did not intend for the rule to have retrospective effect, as it was not expressly stated. The court cited principles from Salmond on Jurisprudence and other cases to assert that substantive law, including tax deductions, cannot be retrospective unless explicitly stated. Therefore, rule 6AA was not retrospective in operation.
Issue 3: Weighted Deduction for Inspection Fees Without Own Facilities
The court considered whether an assessee could claim weighted deduction under rule 6AA for inspection fees paid to third parties without maintaining its own inspection facilities. The Tribunal had allowed the claim, but the court disagreed, stating that clause (c) of rule 6AA explicitly required the assessee to maintain its own laboratory or facilities for quality control or inspection. Thus, expenses paid to third-party agencies did not qualify for weighted deduction under this clause.
Issue 4: Consideration Under Sub-clause (vi)
The court briefly addressed whether the claim could be considered under sub-clause (vi) if not admissible under sub-clause (ix). It concluded that inspection fees did not amount to furnishing technical information for promoting sales outside India. Therefore, the expenses could not be considered under sub-clause (vi) either.
Conclusion:
The court held that the Tribunal was incorrect in applying rule 6AA retrospectively and allowing weighted deduction for inspection fees without the assessee maintaining its own inspection facilities. The question was answered in favor of the Revenue and against the assessee, with no order as to costs.
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