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2001 (12) TMI 87
Issues:
Challenge to denial of benefit under Clause 66 of Export-Import Policy 1992-97.
Analysis:
The writ petition challenged the denial of benefit under Clause 66 of the Export-Import Policy 1992-97. The petitioner applied for an Advance Licence under the Value Based Advance Licence Scheme in March 1997, and the application was approved shortly after. The petitioner exported electronic goods, entitling it to a Value Based Free Licence. A significant plea in the petition highlighted the approval date of the application, which was contested by the respondents. The petitioner argued that the approval entitled it to invoke the norms in force on the application date, regardless of subsequent policy changes. The respondents claimed the petitioner had options under a new policy circular from April 1997, allowing for conversion or drawback. The primary issue was the interpretation of Clause 66, with the respondents contending the petitioner was bound by new norms from April 1997. However, the court held that the petitioner could rely on the norms in force on the application date, irrespective of subsequent changes. The court ruled in favor of the petitioner, directing the respondents to process the application based on the norms in force on the application date, i.e., March 18, 1997, within eight weeks.
This judgment clarifies the entitlement of an applicant under Clause 66 of the Export-Import Policy 1992-97 to invoke the norms in force on the date of application approval, regardless of subsequent policy changes. It underscores the importance of upholding vested rights in export licenses granted under the policy. The court's interpretation of the clause ensures that applicants are not unfairly disadvantaged by changes in policy after their application approval. The ruling provides a clear directive to the respondents to process the petitioner's application based on the norms applicable on the date of application, emphasizing the need for adherence to legal provisions in such matters.
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2001 (12) TMI 86
Issues:
Regular bail under Section 135 of the Customs Act, 1962 - Interpretation of Table II of the First Schedule appended to the Code of Criminal Procedure, 1973 - Classification of offences - Bail granted by the Additional Chief Metropolitan Magistrate, New Delhi - Merits of releasing the petitioners on bail.
Analysis:
The judgment pertains to the disposal of three bail applications filed by the petitioners-accused facing trial under Section 135 of the Customs Act, 1962. The primary issue revolves around the interpretation of Table II of the First Schedule appended to the Code of Criminal Procedure, 1973, concerning the classification of offences based on the term of imprisonment. The petitioners argued that since the offence they are charged with is punishable with imprisonment for up to three years, it falls under the third entry of Table II, making it a bailable offence. However, the court disagreed, emphasizing that the word 'for' in the table refers to the term of imprisonment that may extend up to the specified period of punishment, thus including offences where the punishment may not reach the full term. The court cited a previous decision to support this interpretation, highlighting the importance of the specific wording in determining the classification of offences.
Regarding the bail granted by the Additional Chief Metropolitan Magistrate, New Delhi, the petitioners contended that the bail given was regular up to the period they were taken into custody. The court examined the order sheets and noted that the interim bail granted was not based on merits but rather as a temporary measure until a certain date. Therefore, the court rejected the argument that the bail was regular and pointed out that the petitioners were eventually ordered into judicial custody after the bail was declined.
Lastly, the court addressed the merit of releasing the petitioners on bail based on the argument that they could potentially be let off by imposing a fine under Section 135(1)(ii) of the Act. After reviewing the complaint alleging customs duty evasion worth crores of rupees by the petitioners, the court concluded that considering the gravity of the allegations and the circumstances of the case, it was not appropriate to grant bail to the petitioners. Consequently, all three bail applications were dismissed by the court, denying the petitioners' request for release on bail.
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2001 (12) TMI 85
Issues Involved:
1. Jurisdiction of the Principal Bench at Allahabad to hear the writ petitions.
2. Entitlement of the petitioners to the benefit of Notification No. 202/1988-C.E., dated 20-5-88 as amended by Notification No. 33 of 1992-C.E., dated 1-3-1992.
3. Onus of proving the duty-paid nature of the inputs used by the petitioners.
Issue-wise Detailed Analysis:
1. Jurisdiction of the Principal Bench at Allahabad:
The respondents raised a preliminary objection regarding the jurisdiction, arguing that since the goods were purchased at an auction in Barabanki, which falls under the jurisdiction of the Lucknow Bench, the Principal Bench at Allahabad lacks jurisdiction. The petitioners countered that the cause of action arose with the passing of the order by respondent no. 2 at Kanpur, which is within the jurisdiction of the Principal Bench at Allahabad. The court agreed with the petitioners, citing a precedent from the Division Bench in Sahara India Limited v. Commissioner of Income-tax, Kanpur, which established that the cause of action arises where the impugned order is passed. Therefore, the court held that it had jurisdiction to hear and decide the writ petitions.
2. Entitlement to the Benefit of Notification No. 202/1988-C.E., as Amended:
The petitioners claimed exemption under Notification No. 202/1988-C.E., as amended, which exempts certain goods from duty if they are manufactured from duty-paid inputs. The petitioners argued that they used unserviceable rails, fishplates, etc., purchased from railway auctions, which were duty-paid. The court examined Sections 3, 3(1), and 3(1A) of the Central Excise Act and Rules 7 and 9 of the Central Excise Rules, which indicate that excise duty is levied and recoverable at the point of clearance by the producer, manufacturer, or curer of any excisable goods. Since the railway is not a manufacturer, producer, or curer, the goods auctioned by it should be deemed duty-paid. The court concluded that the authorities below erred in denying the benefit of the notification to the petitioners.
3. Onus of Proving Duty-Paid Nature of Inputs:
The court emphasized that under the explanation to the notification, all stocks of inputs in the country, except those clearly recognizable as non-duty paid, are deemed to be duty-paid. Therefore, the burden of proving that the inputs were non-duty paid rested on the Department. The court found that the Department failed to establish that the goods auctioned by the railway were non-duty paid. The authorities misdirected themselves by holding that the lack of registration of the railway with the Central Excise Department implied non-duty paid status of the goods. Consequently, the court held that the benefit of the notification was wrongly denied to the petitioners.
Conclusion:
The court allowed the writ petitions, quashed the impugned orders passed by respondent nos. 1 and 2, and declared that the petitioners are entitled to the benefit of Notification No. 202/1988-C.E., dated 20-5-88 as amended by Notification No. 33 of 1992-C.E., dated 1-3-1992.
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2001 (12) TMI 84
Issues Involved:
The petitioner's application under Section 35(G)(3) for referring a question of law to the High Court was rejected by the Customs Excise and Gold (Control) Appellate Tribunal, New Delhi (CEGAT) regarding the classification and rate of duty of Power Driven Pumps parts under Heading No. 84.13 and Exemption Notification No. 155/86.
Summary:
Issue 1: Rejection of Reference Application under Section 35(G)(1)
The Tribunal rejected the application under Section 35(G)(1) stating that no reference lies for matters involving valuation or rate of duty, as per the provisions of Section 35G. The Tribunal consistently held that no reference lies for matters related to classification vis-a-vis rate of duty, leading to the dismissal of the reference application.
Issue 2: Interpretation of Section 35G
The application under Section 35(G)(1) was dismissed not due to the absence of a legal question but because the question of law regarding the Tribunal's order, concerning the rate of Duty of Excise, cannot be referred under Section 35(G) as per the clear provision of Section 35G. The limitations of Section 35(G)(3) align with the Tribunal's power under Section 35(G)(1) in making a reference.
Issue 3: Controversy Surrounding Excise Duty Rates
The controversy revolves around the Excise Duty rates applicable to parts of power driven pumps. The petitioner argued that the parts fall under the same classification as the pumps, subject to a lower duty rate per an exemption notification. The question arises whether the exemption extends to parts and accessories of such goods, posing a legal question but ultimately related to the determination of the Excise Duty rate, making it ineligible for reference under Section 35(G).
Conclusion:
The High Court upheld the Tribunal's decision, stating that no reference application was maintainable under Section 35(G)(1) due to the nature of the legal question concerning the rate of Excise Duty. The application was dismissed, and no costs were awarded. The matter was deemed ineligible for reference under Section 35(G) and could be challenged directly to the Supreme Court under Section 35L.
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2001 (12) TMI 83
Issues Involved:
The petitioner challenged orders directing payment of redemption value for articles brought from Singapore, seeking to re-export them without paying redemption value.
Summary:
Issue 1: Redemption Value and Re-export
The petitioner contested orders to pay redemption value for articles from Singapore, expressing intent to re-export instead of using or selling within India. The Supreme Court decision in Siemens Limited v. Collector of Customs supports the right to re-export without paying redemption fine.
Issue 2: Imposition of Penalty
Petitioner's counsel argued against a penalty of Rs. 33,000, citing non-importation and non-use/sale of the articles in India. Department's counsel defended the penalty imposition for alleged violations.
Judgment:
The court found the penalty amount excessively high considering the circumstances and reduced it to Rs. 15,000. The petitioner must pay this reduced penalty within two weeks to re-export the items, allowing the writ petition in part with no costs.
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2001 (12) TMI 82
Issues:
1. Interpretation of Section 35H of the Central Excise Act, 1944 regarding the requirement of calling for a reference to the High Court.
2. Whether the use of explosives in mines for obtaining limestone, which is then used in the factory for cement production, qualifies for Modvat credit under Rule 57H of the Central Excise Rules, 1944.
Issue 1: Interpretation of Section 35H of the Central Excise Act, 1944
The High Court considered the requirement under Section 35H of the Act to call for a reference to the High Court when a question of law arises from an order of the Tribunal. The Court analyzed previous judgments from other High Courts, such as the Orissa High Court and the Delhi High Court, regarding the necessity of calling for a statement of the case. It was observed that if the facts necessary to answer the question of law are clear and settled by the Apex Court, calling for a reference would be a futile exercise leading to unnecessary delays, wastage of resources, and hindrance to early disposal of cases. The Court emphasized that the High Court's jurisdiction under Section 35H is confined to legal aspects only, and if the facts are undisputed and the legal issue is clear, there is no need to call for a statement of the case.
Issue 2: Modvat Credit for Use of Explosives in Cement Production
The High Court addressed the issue of whether the use of explosives in mines to obtain limestone for cement manufacturing qualifies for Modvat credit under Rule 57H of the Central Excise Rules, 1944. The petitioner, a cement manufacturer, claimed Modvat credit for duty paid explosives used in blasting operations in its captive mines. The Tribunal initially ruled against the petitioner based on a previous decision, which was later overturned by the Apex Court in a separate case. The Apex Court determined that under Rule 57J, even if the inputs are used in the manufacture of an intermediate product (limestone) that is further used for the final product (cement), the manufacturer is entitled to claim credit on the duty paid for the input. The Court concluded that since the explosives were used for manufacturing the intermediate product (limestone) which was then used for cement production, the petitioner was entitled to claim Modvat credit. Consequently, the High Court ruled in favor of the petitioner and against the Department based on the Apex Court's decision.
In summary, the High Court interpreted Section 35H of the Central Excise Act, 1944 regarding the necessity of calling for a reference to the High Court and ruled in favor of the petitioner regarding the eligibility for Modvat credit for the use of explosives in mines for cement production.
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2001 (12) TMI 81
Issues:
Challenge to order of search and seizure by Regional Textile Commissioner under Textile Notification, violation of citizen's rights under the Constitution, legal aspects of the matter under Textile (Control) Order, validity of search and seizure without foundation, application of legal principles for quashing criminal proceedings in Writ Court.
Analysis:
The High Court at Calcutta addressed a writ petition challenging a search and seizure order by the Regional Textile Commissioner, made under Textile Notification No. CER/(18)/88-CLB. The petitioner contended that the seized articles had already been released, rendering the criminal proceeding infructuous. The court noted the requirement of a foundation for search and seizure under the Textile (Control) Order, emphasizing the need for a valid basis for such actions. The judgment referenced legal precedents to highlight the importance of protecting citizens from ill-founded prosecution or harassment, stating that search and seizure without foundation not only violates rights but also vitiates any subsequent proceedings.
Further, the judgment delved into the legal principles for quashing criminal proceedings, citing the Bhajan Lal's case and setting out conditions for determining when a prosecution should be quashed. The court applied these principles to the case at hand, finding that the allegations were absurd and improbable, indicating potential malice. Consequently, the court quashed the search and seizure order, directing the petitioner to inform the Criminal Court for necessary action. The writ petition was disposed of with no order as to costs, and the parties were instructed to act on a certified copy of the judgment provided by the department within seven days.
In conclusion, the judgment scrutinized the legality and foundation of the search and seizure order, emphasizing the need for a valid basis for such actions. By applying established legal principles for quashing criminal proceedings, the court found the allegations in this case to be absurd and improbable, leading to the order for quashing the search and seizure. The detailed analysis highlighted the importance of upholding citizens' rights and ensuring that legal actions are based on solid grounds to prevent harassment or unjust prosecution.
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2001 (12) TMI 80
Issues Involved:
1. Quashing of notification No. 37/1/2001/DGAD dated 6th August 2001.
2. Compliance with Rule 6(2) of the Anti-dumping Duty Rules under the Customs Tariff Act, 1975.
3. Principles of natural justice.
4. Availability of alternative remedy under Section 9C of the Customs Tariff Act, 1975.
5. Scope of appeal regarding preliminary findings versus final findings.
Detailed Analysis:
1. Quashing of Notification No. 37/1/2001/DGAD:
The petitioners sought to quash the notification dated 6th August 2001, which imposed anti-dumping duties on imports of vitrified tiles from China and UAE. They argued that the notification and the preliminary findings leading to it were flawed due to non-compliance with procedural rules, particularly Rule 6(2) of the Anti-dumping Duty Rules.
2. Compliance with Rule 6(2) of the Anti-dumping Duty Rules:
The petitioners contended that no notice under Rule 6(2) was served upon them, which mandates forwarding a copy of the public notice to known exporters, the governments of exporting countries, and other interested parties. The court examined whether the designated authority complied with Rule 6(2). It was found that the embassies of the subject countries were informed, and notices were sent to exporters and complainants, but not directly to the importers (petitioners). The court concluded that Rule 6(2) does not require notice to be served on importers, only on exporters and other interested parties, which was adequately done.
3. Principles of Natural Justice:
The petitioners argued that the lack of direct notice to them constituted a violation of natural justice. The court, however, found that the principles of natural justice were upheld as the exporters, who were notified, had the responsibility to inform their importers. The court noted that the petitioners had access to the notice and participated in the proceedings, indicating no prejudice was caused.
4. Availability of Alternative Remedy under Section 9C of the Customs Tariff Act, 1975:
The court emphasized that Section 9C provides an alternative remedy for appeal against determinations regarding anti-dumping duties. The court highlighted the provision for appeal to the Customs, Excise, and Gold (Control) Appellate Tribunal (CEGAT) and noted that the writ jurisdiction should not be invoked when such an alternative remedy is available. The court found that the petitioners had not exhausted this remedy and that the writ petition was premature.
5. Scope of Appeal Regarding Preliminary Findings versus Final Findings:
The petitioners argued that appeals could only be made against final determinations, not preliminary findings. The court disagreed, stating that both preliminary and final findings are subject to appeal under Section 9C. The court clarified that the statute's language does not differentiate between preliminary and final determinations for the purpose of appeal. The court also noted that the petitioners could seek review under Rule 23, which applies mutatis mutandis to both preliminary and final findings.
Conclusion:
The court dismissed the writ petition, stating that the petitioners should pursue the alternative remedy available under Section 9C of the Customs Tariff Act. The court laid down principles emphasizing the appropriateness of CEGAT for appeals and clarified the scope of preliminary and final findings under the anti-dumping rules. The court also vacated any interim orders and allowed the petitioners the liberty to appeal or seek review before CEGAT.
Principles Laid Down:
(a) CEGAT is the appropriate forum for appeals regarding anti-dumping determinations.
(b) Both preliminary and final determinations are appealable before CEGAT.
(c) Preliminary findings alone do not create a cause of action unless accepted and notified by the Central Government.
(d) Appeals and reviews under Section 9C are disjunctive but both lie before CEGAT.
(e) There is no legal vacuum requiring waiting for the Central Government's determination.
(f) Review under Rule 23 applies mutatis mutandis to final findings, and Section 9C covers preliminary findings.
(g) Writ jurisdiction should be sparingly used when an alternative remedy is available.
The court's decision underscores the importance of following procedural rules and exhausting alternative remedies before invoking writ jurisdiction.
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2001 (12) TMI 79
Issues Involved:
1. Whether the Customs authorities have the right to direct the petitioner's bank to freeze the bank account.
2. Whether the Customs authorities have the right to withhold payment of drawback on suspicion of irregularities in separate exports.
Summary:
Issue 1: Right to Freeze Bank Account
The petitioner challenged the Customs authorities' inaction in releasing the drawback against shipping bills for exports made in December 2000 and January 2001 and the seizure of the petitioner's bank account with United Bank of India. The petitioner argued that u/s 142 of the Customs Act, 1962, the respondent authority has no power to attach or seize the bank account without due process. The Customs authorities contended that the petitioner made bogus exports and misdeclared goods, leading to an investigation. The Court found that the Customs authorities could seize documents and things u/s 110(3) of the Customs Act if they are relevant to any proceeding under the Act. The Court concluded that the money in the petitioner's bank account, derived from wrongful drawback claims, belongs to the department and not the petitioner. Therefore, the seizure of the bank account was lawful.
Issue 2: Right to Withhold Drawback Payment
The petitioner argued that the Customs authorities have no right to withhold drawback payments if all conditions for claiming the drawback are met. The Customs authorities must process and dispose of each application on its own merit. The Court agreed that the Customs authorities have no jurisdiction to withhold drawback payments if all legal conditions are fulfilled. However, the authorities are entitled to conduct investigations to ensure no fraud is committed. The Court directed the Customs authorities to finalize the petitioner's drawback claim within 12 weeks, ensuring compliance with legal provisions.
Conclusion:
The Court upheld the Customs authorities' right to seize the petitioner's bank account due to wrongful drawback claims but directed them to process the drawback application within 12 weeks, ensuring all legal conditions are met. No order as to costs was made.
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2001 (12) TMI 78
Issues:
1. Compliance with ex-parte injunction order for release of goods.
2. Testing of goods for hazardous nature by separate agencies.
3. Interpretation of reports from testing agencies.
4. Compliance with Supreme Court order regarding hazardous waste.
5. Classification of goods as hazardous waste under Hazardous Waste Rules.
Comprehensive Analysis:
Issue 1:
The judgment revolves around the compliance with an ex-parte injunction order dated 31-8-2000, directing the release of goods covered by a specific bill after depositing customs duty and without demurrage charges. Additionally, defendants were directed to pay demurrage charges and were restrained from auctioning the consignment.
Issue 2:
To determine the hazardous nature of the goods, separate laboratory tests were conducted by three agencies - Central Revenue Control Laboratory, AES Testing & Research Laboratory, and Indian Institute of Technology. The reports indicated that the products did not meet standard specifications and contained contaminers, suggesting they were off specification products.
Issue 3:
The reports from the testing agencies highlighted various aspects of the goods. While AES Testing & Research Laboratories found contaminates within acceptable limits, Central Revenue Control Laboratory concluded that the samples did not meet standard requirements for fuel oil. Indian Institute of Technology reported high levels of polyaromatic hydrocarbon and physical characteristics indicating potential use as coolant.
Issue 4:
Defendants cited a Supreme Court order related to hazardous waste management, which directed authorities not to release or auction hazardous waste until further orders. The judgment emphasized that the defendants were not obligated to release goods deemed hazardous under the Supreme Court order.
Issue 5:
The interpretation of the Hazardous Waste (Management and Handling) Rules, 1989 was crucial in determining the classification of the goods. The rules categorized waste oil and off-specification products as hazardous waste, aligning with the defendants' treatment of the goods as hazardous waste due to being off specification and waste oil.
In conclusion, the judgment dismissed the application, highlighting that the defendants did not intentionally disobey the court orders and that the goods, classified as hazardous waste under relevant rules, should not be allowed in the market. The judgment emphasized the importance of expert data in determining hazardous nature and upheld the defendants' actions in withholding the release of goods deemed hazardous.
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2001 (12) TMI 77
The High Court of Delhi upheld the validity of Rule 3.11 in the Central Excise Manual, 2001-02, allowing CENVAT credit for purchases from first or second stage dealers. The court ruled that the administrative instruction did not contradict the rules and could be issued under Rule 31 of the Central Excise Rules, 2001. The application challenging the instruction was dismissed.
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2001 (12) TMI 76
The High Court of Bombay ruled in favor of the petitioners, quashing a show cause notice related to the import of 'polytetrafluoroethylene resin dispersion.' The court determined that the product falls under the Open General License as per Import-Export Policy 1985-88. The petition was allowed with no costs.
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2001 (12) TMI 75
Issues:
1. Quashing of orders dated September 14, 2001 and October 18, 2001 for waiver of pre-deposit.
2. Classification of 'Salinomycin 350 Mycelia' as a supplement to animal feed under Tariff Item 23.02 or as an antibiotic under Tariff Item 29.41.
3. Error in directing the petitioner to pay Rs. 1 crore under Section 35F of the Central Excise Act, 1944.
Analysis:
1. The petitioner sought to quash orders for waiver of pre-deposit. The Commissioner (Appeals) directed a deposit of Rs. 1 crore within 15 days due to a demand raised by the adjudicating Authority. The petitioner's request for review was declined. The Court considered if the authority erred in this direction, which was found in conformity with Section 35F. The Court upheld the order but directed the appeal's expeditious decision within three months of deposit, which the petitioner was to make within two weeks.
2. The petitioner claimed 'Salinomycin 350 Mycelia' as a food supplement under Tariff Item 23.02, while the respondents argued it falls under Tariff Item 29.41 as an antibiotic. Legal contentions were made by both sides regarding the correct classification. The Court did not delve into the merits of the case but focused on the authority's direction for payment under Section 35F, finding no undue hardship to the petitioner to warrant waiver of the deposit.
3. The petitioner referenced a Supreme Court decision to support their position that excise duty was not leviable on the product, which had led to a waiver of pre-deposit in a previous order. The respondents contended that the duty was correctly levied and the order was in line with Section 35F. The Court clarified the criteria for dispensing with the deposit requirement under this section and upheld the authority's decision, emphasizing the lack of undue hardship to the petitioner. The Court directed the petitioner to deposit the amount, with a provision for refund if the appeal succeeded.
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2001 (12) TMI 74
Issues:
Liability for payment of imported goods sold in auction by International Airport Authority of India.
Analysis:
The judgment in this case revolves around the question of liability for the payment of imported goods sold in auction by the International Airport Authority of India. The petitioner had imported GS software, which was assessed at Rs. 67 lakhs, and paid Customs duty of Rs. 7,11,388. A dispute arose regarding the classification of the goods, leading to a demand for additional duty. The petitioner appealed to the CEGAT and later to the Supreme Court, which ruled in favor of the petitioner. However, during this time, the goods were handed over to the Airport Authority and subsequently sold in an auction.
The petitioner contended that the Customs authorities were primarily responsible for the return of the seized goods. The issue of assessing the value of the goods in July 1995 at Rs. 65 lakhs was raised. The Addl. Solicitor General argued that the petitioner could have cleared the goods by paying the differential duty, while the second respondent's counsel claimed that they were not a necessary party and that the Customs authorities were liable for the payment of the goods' value.
The court applied the doctrine of restitution and examined the relevant provisions of the Customs Act, 1962. It highlighted the obligations of the custodian of imported goods in a Customs area and the procedures for disposal of unclaimed goods. The court emphasized that the primary liability for the situation lay with the first respondent, who failed to inform the petitioner about the auction of the goods and neglected to handle the matter fairly.
The judgment concluded that the first respondent was primarily liable to pay the value of the goods to the petitioner, with interest. It directed the first respondent to pay Rs. 65 lakhs to the petitioner with 12% interest from August 1995. The first respondent could recover the amount from the second respondent as per the applicable laws. The court held that the petitioner was entitled to costs as well. The judgment clarified that the resolution of any conflicting interests between the respondents was not the court's concern, and the first respondent could not evade its liability by blaming the second respondent, who was merely a custodian.
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2001 (12) TMI 73
The Supreme Court allowed the civil appeal, set aside the order under appeal, and remanded the appeals to the Tribunal for fresh hearing and disposal. The Tribunal should have made a detailed study and analysis before deciding. The Tribunal could have called for more evidence if needed. No costs were awarded.
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2001 (12) TMI 71
Whether two learned judges of this court can disagree with a judgment of three learned judges of this court and whether, for that reason, they can refer the matter before them directly to a Bench of five judges?
Held that:- Judicial discipline and propriety demands that a Bench of two learned judges should follow a decision of a Bench of three learned judges. But if a Bench of two learned judges concludes that an earlier judgment of three learned judges is so very incorrect that in no circumstances can it be followed, the proper course for it to adopt is to refer the matter before it to a Bench of three learned judges setting out, as has been done here, the reasons why it could not agree with the earlier judgment. If, then, the Bench of three learned judges also comes to the conclusion that the earlier judgment of a Bench of three learned judges is incorrect, reference to a Bench of five learned judges is justified.
Thus are of the view that these matters could only have been referred to a Bench of three learned judges. We, accordingly, order that they shall be placed before a Bench of three learned judges. Having regard to the lapse of time, they shall be so placed in January, 2002.
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2001 (12) TMI 70
Issues Involved:
1. Fresh assessment of land held by previous owner under one-time tax scheme.
2. Tax liability on land or building as separate units upon transfer.
3. Consequence of change in ownership.
4. Authority for fresh levy on already taxed property.
5. Tax on rebuilt or enlarged buildings with one-time tax paid.
6. Constitutionality of sections 13 and 15 of the Act under Article 265.
Issue-wise Detailed Analysis:
1. Fresh Assessment Under One-Time Tax Scheme:
The court addressed whether fresh assessment is permissible when the previous owner had opted for the one-time tax scheme under section 3(1B) of the Rajasthan Land and Buildings Tax Act, 1984, and a certificate exempting the land from future tax liability was issued. The court concluded that fresh assessment is not permissible as it violates Article 265 of the Constitution, which mandates that no tax shall be levied or collected except by authority of law.
2. Tax Liability on Land or Building as Separate Units:
The court examined whether the tax under the Act is on land or building or both separately as units and whether transfer of such property incurs further tax liability. It was determined that the tax is indeed on land or building as separate units, and once the property has been taxed, further tax liability does not arise merely due to transfer of ownership.
3. Consequence of Change in Ownership:
The court considered whether a change in ownership affects tax liability. It was held that the change in ownership is inconsequential under the Act as the tax is on the property itself, not on the owner. Sections 13(1)(b) and 15(b) of the Act, which imply tax liability due to change in ownership, were declared ultra vires the Constitution.
4. Authority for Fresh Levy on Already Taxed Property:
The court analyzed whether section 3, the main charging section, authorizes fresh levy on property already subjected to tax. It was concluded that section 3 does not authorize such fresh levy. The court emphasized that clause (c) of section 3(1B) only subjects the assessee to pay tax on rebuilt or enlarged buildings, not on transferred properties.
5. Tax on Rebuilt or Enlarged Buildings:
The court clarified that clause (c) of section 3(1B) subjects the assessee to pay tax only on rebuilt or enlarged buildings where one-time tax has been paid. The provision does not cover properties transferred to new owners.
6. Constitutionality of Sections 13 and 15 Under Article 265:
The court scrutinized sections 13 and 15 of the Act for their constitutionality under Article 265. It was held that these sections are violative of Article 265 as they impose tax liability on the owner rather than the property, which is beyond the legislative competence of the State Legislature under entry 49, List II of the Seventh Schedule. Consequently, sections 13(1)(b) and 15(b) were declared ultra vires the Constitution.
Conclusion:
The court allowed the writ petition, quashing the impugned assessment orders and demand notices. It declared that no fresh proceedings can be carried out on land and buildings once assessed and opted for one-time tax. Sections 13(1)(b) and 15(b) were struck down as unconstitutional. The order of the Rajasthan Taxation Tribunal dated December 8, 1997, was set aside.
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2001 (12) TMI 69
Issues Involved:
1. Deductibility of interest paid u/s 139(8) of the Income-tax Act, 1961 under sections 80V and 37(1) of the Act.
2. Allowability of deduction u/s 32(1)(iii) for payment made towards technical know-how.
Issue 1:
The court held that interest paid u/s 139(8) for delay in filing the return is not deductible as "business expenditure" under section 37 of the Income-tax Act, based on the decision in Bharat Commerce and Industries Ltd. v. CIT [1998] 230 ITR 733. Therefore, the interest paid is not allowed as a deduction under sections 80V and 37(1) of the Act.
Issue 2:
Regarding the deduction claimed under section 32(1)(iii) for payment made towards technical know-how, the court analyzed the definition of "plant" under section 43(3) of the Act, which includes drawings, designs, and other literature. The court referred to the case of Scientific Engineering House P. Ltd. v. CIT [1986] 157 ITR 86, which clarified that such documents constitute "plant" eligible for depreciation u/s 32(1)(iii).
The court emphasized that when assets are discarded without any amount payable, the written down value becomes the actual cost of the asset. As the assessee had not claimed any depreciation for the asset, the cost of acquisition itself was considered as the written down value. The court cited the case of CIT v. Mahendra Mills [2000] 243 ITR 56, which highlighted that depreciation cannot be granted if not claimed, reinforcing the position that the cost of acquisition can be the written down value in such cases.
The court rejected the argument to consider a subsequent amendment, stating that a law coming into effect in the future cannot be applied retroactively. The court highlighted that the amendment, which aimed to remove doubts about depreciation deductions, should be considered only after it takes effect. The court reiterated that depreciation cannot be granted if not claimed, emphasizing that a privilege of claiming depreciation cannot be turned into an obligation.
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2001 (12) TMI 68
Issues Involved:
1. Interpretation of section 234A of the Income-tax Act, 1961.
2. Whether interest u/s 234A is compensatory or penal in nature.
3. Applicability of the doctrine of purposive construction to section 234A.
4. Relevance of payment of tax before the due date in relation to interest u/s 234A.
Summary:
1. Interpretation of section 234A of the Income-tax Act, 1961:
The court was tasked with interpreting section 234A, which mandates the payment of interest for defaults in furnishing the return of income. The petitioners filed their return late but had paid the taxes due before the due date. The Commissioner upheld the levy of interest u/s 234A, leading the petitioners to file a writ petition under Article 226/227 of the Constitution.
2. Whether interest u/s 234A is compensatory or penal in nature:
The court examined whether the interest charged u/s 234A was compensatory or penal. It referred to several precedents, including CIT v. M. Chandra Sekhar and Central Provinces Manganese Ore Co. Ltd. v. CIT, which clarified that interest is levied by way of compensation for the delay in payment of taxes, not as a penalty. The court emphasized that interest is charged to compensate the Revenue for the loss due to the delay in tax payment.
3. Applicability of the doctrine of purposive construction to section 234A:
The court applied the doctrine of purposive construction, aiming to fulfill the legislative intent behind section 234A. It noted that the provision was intended to ensure timely filing of returns and payment of taxes, thereby compensating the Revenue for any delay. The court highlighted that a literal interpretation of section 234A, without considering the payment of taxes before the due date, would defeat the provision's purpose.
4. Relevance of payment of tax before the due date in relation to interest u/s 234A:
The court concluded that if taxes are paid before the due date, even if the return is filed late, the Revenue does not suffer any monetary loss. Therefore, interest u/s 234A should not be charged in such cases. The court emphasized that the statute should not be construed to act in terrorem and that the legislative intent was to levy interest only where there is a delay in both filing the return and paying the taxes.
Conclusion:
The court allowed the writ petition to the extent that interest u/s 234A should not be levied if the taxes were paid before the due date of filing the return, thereby aligning with the compensatory nature of the interest provision. No costs were ordered.
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2001 (12) TMI 67
Issues:
1. Whether the Income-tax Department can recover amounts from a company in liquidation without the court's permission as per the Companies Act.
2. Whether an order under the Income-tax Act issued before the winding-up order is enforceable against a debtor of the company in liquidation.
Analysis:
Issue 1:
The court considered the case law precedent set by the Federal Court in Governor-General in Council v. Shiromani Sugar Mills Ltd. The Federal Court held that any proceedings by revenue authorities seeking to recover dues from a company in liquidation must obtain court leave. The court applied this principle to the present case, where the Income-tax Department sought to recover amounts under section 226(3) of the Income-tax Act. The court emphasized that such proceedings essentially target the company in liquidation and, therefore, fall under the purview of the Companies Act, requiring prior court approval. The court highlighted the purpose behind this requirement, emphasizing the need for court control to ensure fair distribution of assets among creditors.
Issue 2:
Regarding the enforceability of an order under section 226(3) of the Income-tax Act issued before the winding-up order, the court held that the timing of the order does not affect its efficacy. The court pointed out that section 446 of the Companies Act prohibits legal proceedings against a company in liquidation without court permission. The court further referenced section 537 of the Companies Act, which voids any actions like attachment or distress against the company's assets without court approval. The court concluded that the respondent's argument was untenable, especially considering the counter plea acknowledging liability. Consequently, the court directed the respondent to pay the due amount with interest, granting a two-month period for payment, failing which the official liquidator could take appropriate legal steps for recovery.
In summary, the judgment clarified that the Income-tax Department must obtain court leave to recover dues from a company in liquidation, as per the Companies Act provisions. It also affirmed that orders under the Income-tax Act are subject to the Companies Act regulations, emphasizing the need for court control in such matters to ensure fair treatment of creditors. The court's decision mandated the respondent to pay the outstanding amount with interest within a specified timeframe, highlighting the legal obligations in cases of companies in liquidation.
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