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2007 (1) TMI 616
Issues Involved:
1. Deceptive similarity between the marks 'Udta Panchhi' and 'Panchhi Chaap'.
2. Delay and laches as grounds to deny injunction.
3. Honest and concurrent user as a defense to infringement.
4. Maintainability of the suit for infringement based on 1974 registration.
5. Ownership of the registered mark by the Respondent.
6. Merits and prima facie facts.
7. Allegations of fraud and concealment of facts by the Respondent.
Issue-wise Detailed Analysis:
(A) Deceptive Similarity Between the Marks 'Udta Panchhi' and 'Panchhi Chaap':
The court examined whether the marks 'Udta Panchhi' and 'Panchhi Chaap' were deceptively similar. It was noted that consumer confusion is a significant factor, especially among illiterate and semi-literate consumers who purchase chewing tobacco. The court applied several tests, including visual and phonetic similarity, to determine if the marks could cause confusion. It concluded that the word "Panchhi" in both marks was prominent and likely to cause confusion due to its phonetic similarity and the use of a flying bird image in both marks. Therefore, the court held that deception or confusion was likely to arise.
(B) Delay and Laches as Grounds to Deny Injunction:
The court addressed whether the delay in filing the suit by the Respondent should deny them the injunction. The Respondent filed the suit in 1997, long after the Appellant's predecessor adopted the mark in 1982. The court reviewed various precedents and concluded that mere delay is not sufficient to defeat an injunction in cases of trademark infringement. The court emphasized that delay must be accompanied by acquiescence or consent to be a valid ground to deny injunction. The court found no evidence of acquiescence or consent by the Respondent and held that the delay did not bar the injunction.
(C) Honest and Concurrent User as a Defense to Infringement:
The Appellant argued that they were entitled to use the mark 'Udta Panchhi' based on honest and concurrent use under Section 12(3) of the Trade and Merchandise Marks Act, 1958. The court stated that the onus was on the Appellant to prove honest and concurrent use. It found that the Appellant's adoption of the mark in 1982 was not honest, as the Respondent had been using the mark 'Panchhi Chaap' since 1973 and had substantial sales. The court concluded that the Appellant's initial adoption was not honest and therefore, they could not benefit from the defense of honest and concurrent use.
(D) Maintainability of the Suit for Infringement Based on 1974 Registration:
The Appellant contended that the suit was not maintainable as the Respondent's registrations, except for one, were subsequent to the Appellant's use since 1982. The court referred to the Supreme Court's decision in Ramdev Food Products and held that deception could be in respect of any prominent feature of the registered trademark. The court concluded that the Respondent's suit for infringement was maintainable based on their 1974 registration.
(E) Ownership of the Registered Mark by the Respondent:
The Appellant argued that the Respondent, Shiva Tobacco Company, was not the same entity that registered the mark in 1974. The court found that the partnership firm had been reconstituted after the death of two partners, and the remaining partners continued the business without objection from the legal representatives of the deceased partners. The court held that the Respondent was the owner of the registered trademark.
(F) Merits and Prima Facie Facts:
The court reviewed the sales figures and marketing efforts of both parties. It found that the Respondent had substantial sales under the mark 'Panchhi Chaap' since 1973, while the Appellant's sales increased significantly only after 1989. The court concluded that the Respondent had a prima facie case for infringement and that the balance of convenience favored the Respondent. The court granted the Respondent an injunction but allowed the Appellant three months to comply and dispose of their pending stock.
(G) Allegations of Fraud and Concealment of Facts by the Respondent:
The Appellant alleged that the Respondent had concealed facts and made misrepresentations in the plaint. The court found that the Respondent had not gained anything by concealing facts and had acted fairly after the relevant facts were disclosed. The court concluded that the Respondent was not guilty of deliberate concealment or misrepresentation and was entitled to the injunction.
Conclusion:
The court dismissed the appeal, upheld the trial court's order granting an injunction to the Respondent, and allowed the Appellant three months to comply with the order. The court clarified that its observations were tentative and based on a prima facie view, and the trial court would dispose of the suit based on the evidence adduced by the parties.
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2007 (1) TMI 615
Issues Involved:
1. Proprietorship and use of the trademark "Whole Foods."
2. Allegations of passing off and trademark infringement.
3. The distinctiveness and secondary meaning of the trademark "Whole Foods."
4. Validity and implications of the ex-parte ad interim injunction.
Issue-wise Detailed Analysis:
Proprietorship and Use of the Trademark "Whole Foods":
The plaintiff, Mrs. Ishi Khosla, founded 'M/s. Whole Foods,' a sole proprietorship firm engaged in producing and retailing 'healthy and healing food products' in India since 2001. She claims extensive use of the trademark "Whole Foods" in trade, establishing it as indicative of her products. She applied for trademark registration on 27.7.2004. The plaintiff also claims ownership of the copyright in the artistic work of the trademark "Whole Foods" under Section 13 of the Copyright Act, 1957. The plaintiff's sales figures and extensive marketing efforts through various media were presented to establish the trademark's reputation and goodwill.
Allegations of Passing Off and Trademark Infringement:
The plaintiff alleges that the defendants adopted the identical trademark "Whole Foods" with similar packaging, leading to consumer confusion and constituting passing off and copyright infringement. The defendants contested, stating their trademark "DIET WHOLE FOODS" is different and the plaintiff's trademark "Whole Foods" is not registered. They argued that "Whole Foods" is a descriptive mark and common to trade, thus not protectable unless it acquired secondary significance, which they claimed it had not.
The Distinctiveness and Secondary Meaning of the Trademark "Whole Foods":
The court examined whether "Whole Foods" is a generic term and if it had acquired a secondary meaning. The court noted that while "Whole Foods" refers to unprocessed natural foods, the plaintiff's use of the term emphasized healthy and healing food products, processed with minimal additives. The plaintiff's unique concept and extensive efforts in promoting this idea through various media contributed to the trademark acquiring a secondary meaning associated with her products. The court held that the plaintiff's trademark had acquired distinctiveness and secondary meaning, making it protectable.
Validity and Implications of the Ex-Parte Ad Interim Injunction:
The court initially granted an ex-parte ad interim injunction against the defendants, restraining them from using the trademark "Whole Foods." The defendants sought vacation of this injunction, arguing that the plaintiff's trademark was not registered and the adoption of "DIET WHOLE FOODS" was not deceptive. The court found that the plaintiff had established prior use, distinctiveness, and reputation of the trademark "Whole Foods." The defendants' addition of the word "DIET" did not sufficiently distinguish their trademark from the plaintiff's, leading to potential consumer confusion. The court confirmed the ex-parte injunction, making it absolute till the disposal of the suit and dismissed the defendants' application for vacation of the injunction.
Conclusion:
The court concluded that the plaintiff had established a prima facie case of passing off, with the trademark "Whole Foods" acquiring distinctiveness and secondary meaning. The ex-parte ad interim injunction was confirmed, restraining the defendants from using the trademark "Whole Foods" or any deceptively similar mark. The defendants were allowed to modify their trademark to avoid confusion. The case was listed for further proceedings, including admission/denial of documents and framing of issues.
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2007 (1) TMI 614
Issues Involved:
1. Determination of whether the appellants are shareholders of the respondent company.
2. Consideration of the issue of limitation.
3. Examination of the validity and authenticity of the company's records and documents.
4. Evaluation of the conduct of the parties involved.
Issue-Wise Analysis:
1. Determination of Shareholding:
The Hon'ble Delhi High Court remanded the matter to the Company Law Board (CLB) to decide if the appellants are shareholders of the respondent company, M/s V.K. Kapoor and Associates Pvt. Ltd. The petitioners argued that the Annual Accounts and lists of shareholding filed with the Income Tax Department for the financial years 1987-88 to 1993-94 showed that they held 250 shares. These documents were signed by two directors, including respondent No. 2, Mr. V.K. Kapoor. The respondents did not dispute these signatures. The petitioners provided further evidence, including an affidavit from Shri Vijay Sehgal, another promoter-director, confirming the petitioners' shareholding. The respondents failed to produce any share certificates or allotment letters, and no contemporaneous returns regarding share allotments were filed with the Registrar of Companies (ROC). The CLB concluded that the petitioners were indeed shareholders based on the corroborative evidence and the lack of refutation from the respondents.
2. Issue of Limitation:
The respondents argued that the petition was barred by limitation, claiming that the matter from 1988 was raised only in 2003. However, the CLB found that the cause of action arose on 1.8.2000 when the respondents filed Annual Returns and other documents with the ROC under the Amnesty Scheme. The petitioners became aware of this on 27.12.2001. The petition was filed on 17.3.2003, within the prescribed period of limitation. The CLB emphasized that equity does not fix a specific time limit but considers the circumstances of each case. There was no negligence, inaction, or lack of bona fide imputable to the petitioners.
3. Validity and Authenticity of Records:
The petitioners argued that the Annual Returns filed by the company on 1.8.2000 were fraudulent, lacking the required signatures of two directors and containing altered shareholding lists. The balance sheets and auditors' reports for the period 1987-88 to 1993-94 also lacked signatures. The respondents' failure to produce the original Register of Members and the discrepancies between documents filed with the Income Tax Department and the ROC suggested fraud. The CLB found that the documents filed with the ROC were defective and had no evidentiary value, supporting the petitioners' case of altered records to remove their names.
4. Conduct of the Parties:
The respondents argued that the petitioners' conduct over the past 18 years was suspicious, claiming shareholding based on a list filed with the Income Tax Department in 1988. However, the CLB found that it was the respondents' conduct that required scrutiny. The respondents' failure to maintain statutory records and their submission of defective documents indicated malafide intentions. The CLB emphasized that the conduct of parties is a relevant factor in equitable proceedings under Sections 397/398 of the Companies Act. The respondents could not take advantage of their own wrongs.
Conclusion:
The CLB concluded that the petitioners are shareholders of the respondent company and allowed Company Petition No. 69/2003. The petitioners were entitled to relief sought at items 1 and 2 of their petition. No order as to cost was made.
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2007 (1) TMI 613
Issues Involved:
1. Challenge to the order of issue of process under Section 138 of the Negotiable Instruments Act.
2. Applicability of Section 420 of the Indian Penal Code.
3. Consideration of resignation and liability of a director.
4. Applicability of Section 482 of the Criminal Procedure Code.
5. Delay in filing the revision application.
6. Vicarious liability of directors under Section 141 of the Negotiable Instruments Act.
Comprehensive, Issue-Wise Detailed Analysis:
1. Challenge to the Order of Issue of Process under Section 138 of the Negotiable Instruments Act:
The applications under Section 482 of the Criminal Procedure Code were directed against the common order passed by the 10th Ad hoc Additional Sessions Judge, Nagpur, which rejected the applicant's plea to recall the process issued against him for the offence under Section 138 of the Negotiable Instruments Act. The respondent had filed complaints alleging that the cheques issued by the accused company were dishonored, leading to the filing of complaints under Section 138 of the Act and Section 420 of the Indian Penal Code.
2. Applicability of Section 420 of the Indian Penal Code:
The complainant alleged that the directors, including the applicant, had issued cheques with the intention to cheat and defraud the complainant. The learned Magistrate issued the process after recording the verification statement of the complainant. The Sessions Judge found that the allegations in the complaint were sufficient to attract the offences under Section 138 of the Act and Section 420 of the Indian Penal Code.
3. Consideration of Resignation and Liability of a Director:
The applicant contended that he had resigned from the directorship of the company on 6-10-1997, prior to the issuance of the cheques. The Sessions Judge held that the factum of resignation needed to be considered at the time of trial. The applicant argued that the resignation was effective immediately upon its submission and that Form No. 32, which was accepted by the Registrar of Companies, was a mere formality.
4. Applicability of Section 482 of the Criminal Procedure Code:
The applicant sought to invoke the inherent powers of the High Court under Section 482 of the Criminal Procedure Code to quash the order of issue of process, arguing that he should not be required to face trial as there were no sufficient allegations against him. The respondent argued that the trial had already been delayed and that the applicant was responsible for the business of the company at the relevant time.
5. Delay in Filing the Revision Application:
The Sessions Judge noted that the applicant had not applied for condonation of delay in filing the revision application, which was barred by limitation. However, the Judge dismissed the applications on merits, not merely on the ground of limitation. The applicant argued that the delay was due to a change in the principle of law regarding the maintainability of an application under Section 482 of the Criminal Procedure Code.
6. Vicarious Liability of Directors under Section 141 of the Negotiable Instruments Act:
The High Court observed that the complaint did not specifically allege that the applicant was in active directorship or responsible for the conduct of the business of the company at the time of issuance of the cheques. The Court referred to several precedents, including the Supreme Court's judgment in S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla, which emphasized the necessity of specific averments in the complaint to establish vicarious liability under Section 141 of the Negotiable Instruments Act.
Conclusion:
The High Court concluded that there was no sufficient material on record to show that the applicant was responsible for the business of the company at the relevant time. The Court held that asking the applicant to face trial would be an abuse of the process of law. Consequently, the orders of issue of process against the applicant were quashed and set aside. The trial of the remaining accused was directed to be expedited. The Court also clarified that this order would not prevent the trial Court from taking cognizance of any offence noticed during the course of the trial under Section 319 of the Criminal Procedure Code.
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2007 (1) TMI 612
Maintainability Of Suit - Arbitration Agreement - businesses of export - predecessor-in-interest - non-payment of the amount under the two dishonoured cheques - application dismissed opining that no dispute existed between the parties for reference to an arbitration - HELD THAT:- Admittedly, the appellant’s claim is not confined to the question regarding non-payment of the amount under the two dishonoured cheques. Thus, there existed a dispute between the parties. Had the dispute between the parties been confined thereto only, the same had come to an end.
Appellant evidently has taken before us an inconsistent stand. If he was satisfied with the payment of the said demand drafts, he need not pursue the suit. It could have said so explicitly before the High Court. It cannot, therefore, be permitted to approbate and reprobate.
Section 8 of the 1996 Act is peremptory in nature. In a case where there exists an arbitration agreement, the court is under obligation to refer the parties to arbitration in terms of the arbitration agreement. Hindustan Petroleum Corpn. Ltd. v. Pinkcity Midway Petroleums [2003 (7) TMI 493 - SUPREME COURT] and Rashtriya Ispat Nigam Limited [2006 (8) TMI 515 - SUPREME COURT] No issue, therefore, would remain to be decided in a suit. Existence of arbitration agreement is not disputed. The High Court, therefore, in our opinion, was right in referring the dispute between the parties to arbitration.
Thus, there is no merit in this appeal which is dismissed accordingly with costs.
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2007 (1) TMI 611
Issues Involved:
1. Objection regarding multiple affidavits by the same witness.
2. Objection that the affidavit is a replication of the written statement.
3. Objection to the introduction of new documents without prior permission.
4. Objection to documents in foreign languages without translations.
5. Objection to the affidavit not being legalized or apostilled.
Summary:
1. Objection regarding multiple affidavits by the same witness:
The defendant objected to the presence of two affidavits by Mr. Christian London, claiming one filed on 2.2.2006 was not an affidavit. The court found this objection frivolous, stating, "a statement, which is not made on solemn affirmation and does not even purport to be as made on solemn affirmation, cannot be treated as an affidavit."
2. Objection that the affidavit is a replication of the written statement:
The defendant argued that the affidavit filed on 3.12.2005 was essentially a replication of the written statement. The court rejected this objection, stating, "It is for the witness to state, whatever he may choose to state and depose in his affidavit by way of examination-in-chief."
3. Objection to the introduction of new documents without prior permission:
The defendant objected to new documents filed with the affidavit on 3.12.2005, claiming no prior permission was sought. The court noted that no objections were raised since the filing of the affidavit and documents on 3.12.2005, and considered this conduct as a waiver of objections. The court allowed the plaintiff to produce the documents, stating, "No serious prejudice would be caused to the defendant by the production of any of these documents."
4. Objection to documents in foreign languages without translations:
The defendant objected to documents in foreign languages without translations. The court found this objection insufficient to halt cross-examination, stating, "the defendant could have raised its objection before the Local Commissioner with regard to the admissibility of the documents in other languages but could not have refused to cross-examine the witnesses."
5. Objection to the affidavit not being legalized or apostilled:
The defendant argued that the affidavit was not legalized or apostilled as required by law. The court rejected this objection, explaining that the affidavit notarized by a French Notary was sufficient and did not require further certification by an Indian Diplomatic or Consular Officer. The court cited various precedents supporting the validity of notarized documents from foreign countries.
Conclusion:
The court found all objections raised by the defendant to be without merit and aimed at delaying the trial. The defendant was given a final opportunity to cross-examine the witness, subject to the payment of Rs. 50,000 as costs. The court ordered the cross-examination to proceed before the Joint Registrar/Local Commissioner.
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2007 (1) TMI 610
The Delhi High Court admitted the case for consideration. The main question was whether the Assessee was entitled to deduction under Section 80 HHC of the Income Tax Act. The Export House Certificate had not been issued to the exporter. Paper books were to be filed as per High Court Rules.
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2007 (1) TMI 609
The Delhi High Court admitted the case and framed a substantial question of law regarding the taxability of a sum of Rs. 3,15,31,750 as a capital receipt.
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2007 (1) TMI 608
Issues Involved:
1. Allegations of oppression under Section 397 of the Companies Act, 1956.
2. Non-receipt of notices for Board and General Meetings.
3. Failure to provide Annual Accounts and business progress information.
4. Disputes over share allotment and valuation.
5. Claims of quasi-partnership and legitimate expectations.
6. Allegations of lack of probity and misconduct.
7. Maintainability of the petition under Section 397.
8. Allegations of deadlock in management.
9. Requests for division of company property or fair valuation of shares.
Detailed Analysis:
1. Allegations of Oppression under Section 397:
The petitioners claimed oppression by the respondents, arguing that they were not receiving notices for Board and General Meetings, and were excluded from the company's business activities. They sought the purchase of their shares by the respondents at a fair value or alternatively, the division of the company's property in proportion to their shareholding. The respondents countered that the petitioners' grievances were in their capacity as directors, not shareholders, and thus not maintainable under Section 397.
2. Non-receipt of Notices for Board and General Meetings:
The petitioners argued that despite depositing money for postal expenses, they did not receive notices for meetings. The respondents failed to provide proof of dispatch. The petitioners claimed this as an act of oppression. However, the respondents argued that the petitioners had not raised this issue earlier and that the petitioners' complaints were directorial, not shareholder-related.
3. Failure to Provide Annual Accounts and Business Progress Information:
The petitioners contended that they did not receive Annual Accounts or information about business progress. The respondents argued that copies of Annual Accounts were filed by the petitioners themselves and that the company followed common accounting practices. The respondents also claimed that the petitioners had access to all necessary information as directors.
4. Disputes Over Share Allotment and Valuation:
The petitioners alleged that the respondents offered equity shares on a rights basis without offering the same to them initially, intending to push them into a minority. The respondents countered that shares were allotted at par to the petitioners as a fair gesture. The petitioners sought a fair valuation of their shares, while the respondents argued that the petitioners' valuation methods were impracticable and not permissible.
5. Claims of Quasi-partnership and Legitimate Expectations:
The petitioners argued that the company operated as a quasi-partnership, with mutual trust and equal shareholding initially, and that legitimate expectations were violated. The respondents denied the quasi-partnership nature, stating that essential elements such as equal shareholding and family arrangements were missing.
6. Allegations of Lack of Probity and Misconduct:
The petitioners accused the respondents of coercion, lack of consultation, and misrepresentation. The respondents denied these allegations, arguing that the petitioners had acted against the company's interests by writing to the Pune Municipal Corporation and objecting to construction plans.
7. Maintainability of the Petition under Section 397:
The respondents raised a preliminary objection regarding the maintainability of the petition under Section 397, arguing that the petitioners' grievances were directorial and not shareholder-related. They also contended that the petition was beyond the limitation period. The CLB found the petition maintainable, rejecting the limitation argument but ultimately concluded that the petitioners failed to make a case under Section 397.
8. Allegations of Deadlock in Management:
The petitioners claimed a deadlock in management, arguing that mutual trust and confidence were lost. The respondents countered that there was no deadlock, as other directors were managing the company as usual. The CLB found no evidence of a deadlock.
9. Requests for Division of Company Property or Fair Valuation of Shares:
The petitioners sought the division of the company's property or fair valuation of their shares. The respondents argued that such division was impracticable and not permissible, as the company's properties were separate from shareholders' assets. The CLB agreed with the respondents, finding the petitioners' demands impracticable and impermissible.
Conclusion:
The CLB concluded that the petitioners failed to make out a case under Section 397 of the Companies Act, 1956. The petitioners' grievances were found to be directorial rather than shareholder-related. The CLB directed that the petitioners move out of the company by receiving a fair valuation of their shares, to be done by an independent valuer appointed by consensus in the next Board Meeting. All interim orders were vacated, and the petition was disposed of with no order as to costs.
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2007 (1) TMI 607
Issues involved:
The issues involved in the judgment are:
1. Allowance of interest payable on borrowings diverted for non-business purposes to sister-concern.
2. Appreciation of evidence and distinction of cases relied upon by the assessee.
Issue 1:
The Appellate Tribunal considered the Department's appeal against the order passed by the CIT(A) for the assessment year 2001-02. The AO had disallowed interest payable on borrowings diverted for non-business purposes to a sister-concern. The AO observed that a significant portion of secured loans had been diverted for non-business purposes, based on which the disallowance was made. The assessee contended that the amount was paid for business purposes and provided explanations and supporting documents from previous assessment years. The AO, however, opined that the borrowed funds were diverted for non-business purposes, relying on a judgment of the Kerala High Court. The CIT(A) deleted the addition, and the Department appealed.
Issue 2:
The Tribunal analyzed the contentions of both parties. The Department argued that the borrowed funds were diverted interest-free for non-business purposes, justifying the AO's addition. The Department distinguished the current year from the previous assessment year, emphasizing the lack of a business purpose in the current year. On the other hand, the assessee's counsel supported the CIT(A)'s decision, highlighting that the advance was not interest-free and asserting that no disallowance should be made when no nexus is established between borrowed funds and interest-free advances. The Tribunal examined the facts and legal precedents cited by both parties. Ultimately, the Tribunal upheld the CIT(A)'s decision, emphasizing the lack of nexus between the borrowed funds and interest-free advances, and rejected the Department's appeal.
This judgment highlights the importance of establishing a clear nexus between borrowed funds and their utilization, especially when disallowing expenses based on diverted funds for non-business purposes. The Tribunal's decision underscores the need for thorough examination of facts and legal precedents to determine the appropriateness of such disallowances.
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2007 (1) TMI 606
The Supreme Court remitted the case to the Commissioner of Central Excise, Chennai for fresh disposal in accordance with law based on a previous judgment. The appeals were allowed, and both parties can submit additional documents.
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2007 (1) TMI 605
Issues involved: Whether the appellants are entitled to claim the refund of accumulated Cenvat credit by way of cash in respect of the inputs against the exported goods.
Summary:
Issue 1: Refund of accumulated Cenvat credit
The appellants filed refund claims under Rule 5 of the Cenvat Credit Rules, 2002, citing inability to utilize accumulated credit due to low clearance for home consumption compared to clearance to EOU without duty payment. The adjudicating authority rejected the claims, noting non-fulfillment of Rule 5 and export clearances without duty payment. The Commissioner (Appeals) upheld the rejection, emphasizing the appellants' failure to justify non-utilization of credit and the ongoing nature of home clearances. The appellants argued impossibility of credit utilization and cited precedents supporting refund in cash. The Tribunal found in favor of the appellants, citing relevant judgments and ruling that refund must be granted when credit cannot be adjusted due to duty-free exports.
Issue 2: Application of legal precedents
The appellants relied on judgments related to deemed credit under specific notifications and similarities between different rules. They also referenced a recent case emphasizing the right to refund under Rule 5, regardless of the reason for non-adjustment. The Tribunal agreed with the appellants, stating that authorities erred in denying the refund claim, as the credit could not be adjusted for duty-free exports. The decision was based on the clear wording of Rule 5 and the inability to adjust credit in such circumstances. The Tribunal allowed the appeals and set aside the previous orders, providing consequential relief to the appellants.
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2007 (1) TMI 604
Issues:
1. Duty payable minus encashed bank guarantee.
2. Grant of Modvat credit to the assessee.
3. Confiscation of machinery embedded in the earth.
Analysis:
1. The assessee imported machinery under the EPCG Scheme but failed to fulfill the export obligation, leading to penalties under the Customs Act. The Tribunal accepted the contention that duty payable should be reduced by the amount encashed from the bank guarantee. This decision was upheld without further discussion.
2. The assessee's second contention was regarding the grant of Modvat credit. The Tribunal ruled that if entitled, the benefit could be extended post payment of the duty. This conclusion was deemed correct, with no arising legal question.
3. The third contention raised was about the confiscation of machinery embedded in the earth. Reference was made to Section 111(o) of the Customs Act and a Circular by the Central Board of Excise and Customs. The Circular stated that machinery attached to the earth could be considered goods if dismantled without substantial damage. As there was no evidence showing the machinery couldn't be dismantled without damage, the Tribunal's decision was upheld, concluding that no substantial legal question arose for consideration.
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2007 (1) TMI 603
Issues involved: Interpretation of recovery of tax arrears from personal assets of a director of a private limited company.
The judgment by the High Court of Allahabad addressed the issue of recovery of tax arrears from the personal assets of a director of a private limited company. The petitioner, a director of M/s Bhagirathi Iron & Steel Private Limited, challenged a Circular issued by the Commissioner, Trade Tax, U.P. Lucknow dated 15.09.1998. The central question was whether the tax liabilities of the private limited company could be enforced against the personal assets of the director.
The Court referred to previous cases, including G.C. Mehrotra vs. Deputy Collector (Collection) Sales Tax and Bheekhu Ram Jain vs. State of U.P., where it was established that recovery cannot be made from the personal assets of directors. The Circular dated 15.09.1998 was quashed in a previous judgment dated 9.8.2000 in the case of Bheekhu Ram Jain vs. State of U.P. The Court reiterated the principle that tax arrears of a company should not be recovered from the personal assets of its directors.
In the final decision, the Court directed the respondents not to recover the tax arrears and outstanding dues of the company from the personal assets of the petitioner. However, the respondents were permitted to recover the arrears of trade tax due against the company from the assets or property of M/s Bhagirathi Iron & Steel Private Limited and from directors who possess the company's assets.
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2007 (1) TMI 602
Issues involved: Alleged recovery of trade tax dues against a company, liability of directors for outstanding dues, validity of circular issued by trade tax commissioner.
Alleged recovery of trade tax dues against a company: The petitioner, a former director of a company, submitted his resignation in 1975 and did not acquire any assets of the company. The recovery sought by the respondents pertains to the assessment years 1972-73 to 1976-77. The petitioner argued that the circular issued by the trade tax commissioner is contrary to Section 8 of the U.P. Trade Tax Act and cited relevant case laws to support his claim.
Liability of directors for outstanding dues: The court acknowledged that the petitioner resigned as a director in 1975 and did not possess any assets of the company. It was established that directors cannot be held accountable for outstanding dues of a company if they do not hold its assets. Precedents were cited where it was held that trade tax arrears of a limited company cannot be recovered from former directors.
Validity of circular issued by trade tax commissioner: The court found that the circular and notice in question, which targeted the petitioner, were in violation of the Trade Tax Act. The principle of law was reiterated that recovery from personal assets of a director is impermissible unless specifically provided by law, which was not the case under the U.P. Trade Tax Act.
Conclusion: The writ petition was allowed, and the circular issued by the trade tax commissioner was quashed. However, the respondents were permitted to pursue recovery against the company for the outstanding dues. No costs were awarded in the matter.
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2007 (1) TMI 600
... ...
... ... ..... Rajesh K. Sharma, Adv., Ms. Shalu Sharma,Adv. O R D E R The Special Leave Petition is dismissed.
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2007 (1) TMI 599
Issues Involved:
1. Disallowance of short-term capital loss on sales of units of JM Mutual Fund.
2. Levy of interest u/s 234B.
Summary:
Issue 1: Disallowance of Short-Term Capital Loss
The assessee, engaged in the export of onion and a partner in multiple firms, reported short-term capital gain on the sale of shares. The Assessing Officer (AO) deemed the transaction with JM Mutual Fund as a sham, aimed at evading taxes by claiming a short-term capital loss of Rs. 30,49,194/- to offset the capital gains. The AO noted that the assessee purchased units cum-dividend and sold them ex-dividend within four days, resulting in a tax-free dividend of Rs. 29,03,326/- and a claimed capital loss. The AO disallowed the loss, terming it a "colourable device."
On appeal, the CIT(A) upheld the AO's decision. The Tribunal, after considering submissions from both parties, agreed with the AO and CIT(A), citing the transaction as a "colourable device" and not genuine. The Tribunal referenced the Supreme Court's principles in McDowell, 154 ITR 148 (SC), and the Punjab and Haryana High Court's decision in Vineet Jain v. CIT, (2006) 205 CTR (PandH) 92, which supported the view that such dividend-stripping transactions were not genuine. The Tribunal emphasized that the transaction lacked elements of business or investment and confirmed the disallowance of the short-term capital loss.
Issue 2: Levy of Interest u/s 234B
The Tribunal did not provide separate detailed reasoning for the levy of interest u/s 234B amounting to Rs. 4,79,301/-. However, by dismissing the appeal and confirming the CIT(A)'s order, the Tribunal implicitly upheld the levy of interest u/s 234B as justified based on the disallowance of the short-term capital loss.
Conclusion:
The appeal filed by the assessee was dismissed. The Tribunal confirmed the CIT(A)'s order, disallowing the short-term capital loss and upholding the levy of interest u/s 234B. The Tribunal found the transaction to be a sham and not genuine, aligning with the principles laid down by higher judicial authorities.
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2007 (1) TMI 598
Issues involved: Assessment of income as salary income or business income, lack of consistency in orders passed by the Assessing Officer.
Assessment of income as salary income or business income: The judgment pertains to a batch of 17 appeals filed by the Revenue concerning the assessment of income for various assessment years. The Assessing Officer initially assessed the income of the Assessee, Mr. Sudhir Chaudhary, as salary income for the years 1979-80 to 1987-88, and as business income for the years 1988-89 to 1997-98. The Commissioner of Income Tax (Appeals) upheld the salary income assessment, but the Tribunal reversed it, determining the income should be assessed as salary income. A similar situation arose for subsequent years, with inconsistent assessments between salary and business income for different years. The High Court noted the lack of consistency in the Assessing Officer's orders and emphasized the importance of following a consistent pattern unless warranted otherwise. The Court observed that the flip-flop in assessments not only caused harassment to the Assessee but also increased the workload of the Court unnecessarily.
Principle of consistency in assessments: The Court emphasized the principle of consistency in assessments and criticized the Revenue for not maintaining a consistent approach in the orders passed by the Assessing Officer. The Court highlighted the need for a consistent pattern in assessments based on the facts of the case. Despite the varying assessments made by the Assessing Officer over different assessment years, the Court noted that the Assessing Officer and the Commissioner of Income Tax (Appeals) had recently taken the view that the Assessee's income should be classified as salary income rather than business income. Consequently, the Court found that the appeal did not raise any substantial question of law warranting consideration and dismissed the appeal.
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2007 (1) TMI 597
Issues Involved:
1. Maintainability of the company petition.
2. Estoppel from filing a fresh petition.
3. Application of Order 23 Rule 1 of the Code of Civil Procedure (CPC).
Summary:
Issue 1: Maintainability of the Company Petition
The petitioner filed a company petition u/s 397 and 398 of the Companies Act, 1956, alleging acts of oppression and mismanagement in the affairs of the Company. The Company challenged the maintainability of this petition, but the Board concluded that the petition is maintainable. The Company appealed, and the High Court of Kerala upheld the Board's decision, remanding the matter to consider whether the petitioner is estopped from filing the petition due to the withdrawal of a previous petition without reserving the right to file afresh.
Issue 2: Estoppel from Filing a Fresh Petition
The Company argued that the petitioner had previously filed a similar petition through his brother, which was withdrawn without liberty to file a fresh petition on the same grounds. Therefore, the current petition should not be entertained. The petitioner contended that the withdrawal of the first petition did not preclude him from filing a new one, citing the Supreme Court's decision in Sarguja Transport Service v. State Transport Appellate Tribunal, which allows for the institution of a fresh petition if the previous one was withdrawn without adjudication on merits.
Issue 3: Application of Order 23 Rule 1 of the CPC
The Board examined whether the principles of Order 23 Rule 1 of the CPC apply to the present case. Order 23 Rule 1 allows withdrawal of a suit with or without liberty to file afresh. The Board noted that the first petition was withdrawn on technical grounds before registration and without adjudication on merits. Therefore, the principles of Order 23 Rule 1 do not preclude the petitioner from filing a fresh petition. The Board also highlighted that the respondent did not raise objections based on Order 23 Rule 1 in the subsequent petition (C.P. No. 18 of 2003), implying a waiver of this defense.
The Board concluded that the petitioner is not estopped from filing the present petition and directed the respondent to file a counter by 12.02.2007, with a rejoinder by 28.02.2007. The matter was scheduled for hearing on 07.03.2007.
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2007 (1) TMI 596
Maintainability Of Petition - Validity of scaling system adopted by the Commission - recruitment to the posts of Civil Judge (Junior Division) - 'scaled marks' in the written (Main) examination and the marks awarded in the interview - valuation of the answer- scripts by 'scaled marks' - meritorious students being ignored, and less meritorious students being awarded higher marks and selected - violating the fundamental rights of the candidates - HELD THAT:- When the issue is re-examined and a view is taken different from the one taken earlier, a new ratio is laid down. When the ratio decidendi of the earlier decision undergoes such change, the final order of the earlier decision as applicable to the parties to the earlier decision, is in no way altered or disturbed. Therefore, the contention that a writ petition under Article 32 is barred or not maintainable with reference to an issue which is the subject-matter of an earlier decision, is rejected.
It is no doubt true that Judicial Service Rules govern the recruitment to Judicial Service, having been made in exercise of power under Article 234, in consultation with both the commission and the High Court. It also provides what examinations should be conducted and the maximum marks for each subject in the examination. But the Judicial Service Rules entrust the function of conducting examinations to the Commission. The Judicial Service Rules do not prescribe the manner and procedure for holding the examination and valuation of answer-scripts and award of the final marks and declaration of the results.
Therefore, it is for the Commission to regulate the manner in which it will conduct the examination and value the answer scripts, subject, however, to the provisions of the Judicial Service Rules. If the Commission has made Rules to regulate the procedure and conduct of the examination, they will naturally apply to any examination conducted by it for recruitment to any service, including the judicial service. But where the Judicial Service Rules make a specific provision in regard to any aspect of examination, such provision will prevail, and the provision of PSC Procedure Rules, to the extent it is inconsistent with the Judicial Service Rules, will be inapplicable. Further, if both the Rules have made provision in regard to a particular matter, the PSC Procedure Rules will yield to the Judicial Service Rules.
We cannot accept the contention of the petitioner that the words "marks awarded" or "marks obtained in the written papers" refers only to the actual marks awarded by the examiner. 'Valuation' is a process which does not end on marks being awarded by an Examiner. Award of marks by the Examiner is only one stage of the process of valuation. Moderation when employed by the examining authority, becomes part of the process of valuation and the marks awarded on moderation become the final marks of the candidate. In fact Rule 20(3) specifically refers to the 'marks finally awarded to each candidate in the written examination', thereby implying that the marks awarded by the examiner can be altered by moderation.
Rule 20 of Judicial Service Rules requires the Commission to call for interview such number of candidates, who in its opinion have secured the minimum marks fixed by it. Because of application of scaling system by the Commission, it has not been possible for the Commission to fix such minimum marks either for individual subjects or for the aggregate. In the absence of minimum marks, several candidates who secured less than 30% in a subject have been selected.
Thus scaling system adopted by the Commission, contravenes Rule 20(1) also.
The material placed does not disclose that the Commission or its expert committee have kept these factors in view in determining the system of scaling. We have already demonstrated the anomalies/absurdities arising from the scaling system used. The Commission will have to identify a suitable system of evaluation, if necessary by appointing another Committee of Experts. Till such new system is in place, the Commission may follow the moderation system set out with appropriate modifications.
The selected candidates have also been appointed and functioning as Judicial Officers. Further as noticed, the scaling system adopted by the Commission has led to irrational and arbitrary results only in cases falling at the ends of the spectrum, and by and large did not affect the major portion of the selection.
We, therefore, direct that our decision holding that the scaling system adopted by the Commission is unsuited in regard to Civil Judge (Junior Division) Examination and directing moderation, will be prospective in its application and will not affect the selections and appointments already made in pursuance of the 2003 Examination.
So far as the petitioners are concerned, we deem it proper to issue the following directions to do complete justice on the facts of the case : a) If the aggregate of raw marks in the written examination and the marks in the interview of any petitioner is less than that of the last selected candidate in the respective category, he will not be entitled to any relief (for example, the petitioners in WP(C) belonging to the Category 'BC' have secured raw marks of 361 and 377 respectively in the written examinations, whereas the last five of the selected candidates in that category have secured raw marks of 390, 391, 397, 438 and 428 respectively. Even after adding the interview marks, the marks of the petitioners in W.P. [C] is less than the marks of the selected candidates).
b) Where the aggregate of raw marks in the written examination and the interview marks of any petitioner, is more than the aggregate of the raw marks in the written examination and interview marks of the last selected candidate in his category, he shall be considered for appointment in the respective category by counting his appointment against future vacancies. This relief will be available only to such of the petitioners who have approached this Court and the High Court before 31st August, 2005.
The petitions are allowed in part accordingly.
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