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1999 (3) TMI 639

Issues Involved:
1. Validity of additions based on photocopies of hundies and related documents.
2. Taxability of interest on hundies.
3. Unexplained investment in undated original hundies.
4. Unaccounted investment in silver articles.
5. Unaccounted foreign currencies.

Summary:

1. Validity of Additions Based on Photocopies of Hundies and Related Documents:
The Assessing Officer conducted a search at the premises of the late Shri A. K. Patel, leading to the discovery of 34 hundies aggregating to Rs. 1,61,72,000. The search also uncovered documents indicating substantial unaccounted loans. The Assessing Officer concluded that the amount of Rs. 2,64,46,000 represented unaccounted principal and interest, adding it as income u/s 158BC(c) of the Income-tax Act. The Tribunal upheld the addition of Rs. 1,60,97,000, as it was corroborated by seized hundies and documents, rejecting the contention that no addition could be based on photocopies of hundies.

2. Taxability of Interest on Hundies:
The Tribunal held that the interest amount of Rs. 24,55,000, as reflected in Sheet No. 41, was taxable under the head "Business" since it represented interest on money lending. However, additional interest amounts of Rs. 28,97,000, Rs. 34,18,000, and Rs. 40,34,000, as well as Rs. 25,78,485 for the period 1-1-1996 to 15-7-1996, were deleted due to lack of corroborative evidence of receipt or accrual.

3. Unexplained Investment in Undated Original Hundies:
The search revealed original hundies aggregating to Rs. 10,50,000. The Assessing Officer included Rs. 2,00,000 as unexplained investment in undated hundies issued by M/s. Bhupendra Motors. The Tribunal sustained this addition, rejecting the appellant's claim that the party was untraceable, but deleted the interest addition of Rs. 24,75,072 due to lack of evidence.

4. Unaccounted Investment in Silver Articles:
During the search, silver articles weighing 102 kgs. were found, out of which 50.372 kgs. were disclosed in wealth-tax returns. The appellant explained that 11 kgs. were received as gifts. The Assessing Officer accepted only 5 kgs. as gifts and added Rs. 43,095 as unexplained investment. The Tribunal deleted this addition, accepting the appellant's explanation.

5. Unaccounted Foreign Currencies:
The search also uncovered foreign currencies valued at Rs. 15,000. The appellant claimed these were preserved as collector's items. The Tribunal accepted this explanation and deleted the addition.

Conclusion:
The Tribunal upheld additions totaling Rs. 1,62,97,000, comprising Rs. 1,36,42,000 for hundi loans, Rs. 24,55,000 for interest, and Rs. 2,00,000 for original hundies. The hundi loans were assessed under "Other sources" and the interest under "Business." The appeal was partly allowed.
1999 (3) TMI 638

The Supreme Court dismissed the appeal in the case with citation 1999 (3) TMI 638 - SC. Mrs. Sujata V. Manohar and R.C. Lahoti, JJ. were the judges on the case.
1999 (3) TMI 637

Issues:
1. Liability of a public limited company to pay purchase tax on industrial alcohol manufactured and consumed in its chemical unit.
2. Interpretation of the provisions of U.P. Sales of Motor Spirit, Diesel Oil and Alcohol Taxation Act, 1939.
3. Refund of purchase tax paid on industrial alcohol consumed in the manufacture of chemicals.

Issue 1: Liability to Pay Purchase Tax
The petitioner, a public limited company engaged in manufacturing sugar and chemicals, challenged the liability to pay purchase tax on industrial alcohol it manufactured and consumed in its chemical unit. The petitioner argued that the industrial alcohol was not sold but used solely for manufacturing chemicals. The respondents contended that purchase tax was applicable based on the license conditions. The Court referred to a previous case and held that no purchase tax could be levied on the transfer of alcohol within the integrated unit for captive consumption. The Supreme Court also upheld this decision, leading to the conclusion that the petitioner was not liable to pay purchase tax on the industrial alcohol consumed in its chemical unit.

Issue 2: Interpretation of the Act
The Court analyzed the provisions of the U.P. Sales of Motor Spirit, Diesel Oil and Alcohol Taxation Act, 1939, specifically focusing on Section 3(1)(c) regarding the levy of purchase tax. It considered the ownership and integration of the distillery and chemical units within the petitioner's premises. The respondents argued for tax liability based on license conditions, while the petitioner contested the applicability of purchase tax on captively consumed industrial alcohol. Referring to legal precedents and the interpretation of relevant sections, the Court ruled in favor of the petitioner, emphasizing that no purchase tax could be imposed on industrial alcohol used within the integrated manufacturing process.

Issue 3: Refund of Purchase Tax
The petitioner sought a refund of the purchase tax paid on industrial alcohol consumed in the chemical unit. The respondents opposed the refund, citing concerns of unjust enrichment. The Court examined previous judgments on similar cases involving tax refunds on raw materials used in manufacturing. It referenced the principle of unjust enrichment and highlighted Supreme Court decisions supporting refunds in such scenarios. Relying on these precedents, the Court concluded that the petitioner was entitled to a refund of the purchase tax paid on the industrial alcohol manufactured and consumed within its integrated manufacturing process.

This detailed analysis of the judgment from the Allahabad High Court provides insights into the legal aspects surrounding the liability for purchase tax on industrial alcohol, the interpretation of relevant statutory provisions, and the entitlement to a refund of taxes paid on raw materials used in manufacturing processes.
1999 (3) TMI 636

Issues involved: Whether the value of clearance of medicine cleared by job workers should be clubbed with the value of clearance of medicine manufactured by the appellant for computing the aggregate value of clearance under Notification No. 175/86.

Summary:
The appellants availed SSI exemption under Notification No. 175/86 for manufacturing medicine and entered agreements with other manufacturers for producing medicines as loan licensees. The Collector confirmed a demand for Central Excise duty and imposed a penalty, alleging that the appellants were the manufacturers of goods produced by them as loan licensees. The appellants argued that they were merely traders and not manufacturers, citing various legal precedents supporting their stance.

The appellants contended that they did not exercise control or supervision over the manufacturers, emphasizing the absence of such a relationship. They argued that the demand for duty was time-barred as they had acted honestly and in good faith, relying on legal decisions to support their position.

The respondent argued that a loan licensee is also considered a manufacturer, citing legal precedents to support this claim. They contended that vital facts were suppressed by the appellants, justifying the demand for duty for an extended period.

The Tribunal considered the agreements between the appellants and the manufacturers, noting that the transactions were on a principal-to-principal basis without evidence of control or supervision by the appellants. Legal precedents were cited to establish that the actual manufacturer, not the brand name holder or supplier of raw materials, should be considered the manufacturer under Section 2(f) of the Central Excise Act. The Tribunal ruled in favor of the appellants, setting aside the impugned order and allowing the appeal on merit without addressing the time limit issue.
1999 (3) TMI 635

Right of audience - Validity of power of attorney to represent in court - Power of attorney holder has all powers to act on behalf of his principal - definition of "Pleader" u/s 2(q) of CrPC - Interpretation of Section 303 of CrPC - HELD THAT:- Section 2 of the Power of Attorney Act cannot override the specific provision of a statute which requires that a particular act should be done by a party in person. When the Code requires the appearance of an accused in a court it is no compliance with it if a power of attorney holder appears for him. It is a different thing that a party can be permitted to appear through counsel. Chapter XVI of the Code empowers the Magistrate to issue summons or warrant for the appearance of the accused. Section 205 of the Code empowers the Magistrate to dispense with the personal attendance of accused, and permit him to appear by his pleader if he sees reasons to do so.

Section 273 of the Code speaks of the powers of the court to record evidence in the presence of the pleader of the accused, in cases when personal attendance of the accused is dispensed with. But in no case can the appearance of the accused be made through a power of attorney holder. So the contention of the appellant based on the instrument of power of attorney is of no avail in this case.

Following the observations made in M. Krishnammal v. T. Balasubramania Pillai, though stated sixty years ago, would represent the correct legal position even now. Be that as it may, an agent cannot become a pleader for the party in criminal proceedings, unless the party secures permission from the court to appoint him to act in such proceedings. The respondent-couple have not even moved for such permission and hence no occasion has arisen so far to consider that aspect.

The appeal is accordingly dismissed.
1999 (3) TMI 634

Supreme Court dismissed the appeal in the case of Sujata V. Manohar and R.C. Lahoti, JJ. (1999 (3) TMI 634 - SC).
1999 (3) TMI 633

Issues:
- Appeal against the order of the Kerala High Court confirming the decision of the Foreign Exchange Regulations Appellate Board regarding a penalty proceeding under the Foreign Exchange Regulation Act, 1947 for violation of a specific section.
- Interpretation of Section 4(1) of the Act in the context of acquiring foreign exchange without proper authorization.
- Consideration of provisions of Section 19J of the Act and Section 110 of the Evidence Act in determining the violation of Section 4(1) of the Act.

Issue 1:
The case involved an appeal against the Kerala High Court's decision, which upheld the Foreign Exchange Regulations Appellate Board's ruling in a penalty proceeding under the Foreign Exchange Regulation Act, 1947. The respondent was found in possession of foreign exchange in a car intercepted by Customs Authorities, leading to a penalty of Rs. 50,000 and confiscation of the amount. The Board set aside the penalty but affirmed the confiscation. The High Court upheld the Board's decision, stating that the prosecution failed to establish a violation of Section 4(1) of the Act.

Issue 2:
The main contention raised was whether the respondent had violated Section 4(1) of the Act, which prohibits acquiring foreign exchange without authorization. The argument presented was that the respondent's possession of the foreign exchange indicated a violation, supported by the respondent's conflicting explanations. However, the Court analyzed the provision, emphasizing that "acquire" must involve more than mere possession and that there was no evidence to suggest the respondent knowingly acquired the foreign exchange. The Court found the respondent's explanation plausible and rejected the argument of culpability.

Issue 3:
The appeal also raised the issue of considering Section 19J of the Act and Section 110 of the Evidence Act in determining the violation of Section 4(1) of the Act. The Court held that even applying these provisions, there was insufficient evidence to prove that the respondent had acquired the foreign exchange in violation of Section 4(1). The Court concluded that the prosecution failed to establish the respondent's culpability, leading to the dismissal of the appeal and a direction to refund the penalty amount if deposited.

In conclusion, the Supreme Court dismissed the appeal, emphasizing the importance of proving actual acquisition of foreign exchange to establish a violation of Section 4(1) of the Act. The judgment highlighted the necessity of concrete evidence and rejected the argument based on mere possession without clear intent or knowledge.
1999 (3) TMI 632

The High Court of Delhi upheld the charge of conspiracy to illegally acquire and possess 83.770 kg of heroin under the NDPS Act. The accused's petition challenging the charge was dismissed as there was strong suspicion of involvement based on evidence. The court found no grounds to set aside the charge.
1999 (3) TMI 631

Issues Involved:
1. Non-maintainability of the writ petition.
2. Error in equating the State Government with a private person.
3. Disentitlement to claim a share in penal interest and levies.
4. Applicability of Pricing Committee decisions to the respondent.
5. Interpretation of "royalty" and related claims.

Summary:

1. Non-maintainability of the writ petition:
The appellant argued that the writ petition was not maintainable as the respondent should have availed the alternative remedy of filing a civil suit for recovery of money or rendition of accounts. The Supreme Court acknowledged the substance in this argument but chose not to dismiss the writ petition solely on this ground due to the lapse of time and potential miscarriage of justice.

2. Error in equating the State Government with a private person:
The High Court had erred in equating the respondent with the Government of Himachal Pradesh, thereby granting him reliefs such as interest on delayed payments, damages for illicit felling, and other penalties. The Supreme Court found that the High Court wrongly assumed jurisdiction under Article 226 by applying the right to livelihood under Article 21 too broadly.

3. Disentitlement to claim a share in penal interest and levies:
The respondent's claim for additional amounts such as interest on delayed payments, interest on interest, and penalties was not justified. The Supreme Court held that these claims were attributes of the sovereign rights of the State and could not be claimed by a private individual unless specifically authorized by law.

4. Applicability of Pricing Committee decisions to the respondent:
The Pricing Committee was not a quasi-judicial tribunal and its decisions were not binding on the State for the purpose of the writ petitioner. The Committee was constituted to settle matters between the Government and the Forest Corporation and did not have statutory authority to adjudicate claims of third parties like the respondent.

5. Interpretation of "royalty" and related claims:
The term "royalty" as used in the context of the Pricing Committee's decisions did not include additional charges such as extension fees, interest, or penalties. The Supreme Court clarified that these items were not covered by the term "royalty" and were recoverable only based on contract or statutory provisions.

Conclusion:
The Supreme Court allowed the appeal, setting aside the High Court's judgment and dismissing the writ petition. The respondent was ordered to refund all sums received under the High Court's judgment and interim orders, with interest if not refunded within three months. The respondent was also directed to pay costs of Rs. 5,000.
1999 (3) TMI 630

Issues involved:
The issues involved in this case are the unauthorized possession of multiple passports, possession of a firearm in a notified area, and the application of relevant sections of the Passport Act and the Terrorist and Disruptive Activities (Prevention) Act (TADAA).

Unauthorized Possession of Passports:
The appellant was found in possession of passports issued by both Indian and Pakistani authorities. The Designated Court convicted him under Section 12 of the Passport Act for unauthorized possession of a Pakistani passport while holding another Indian passport under a different name. The court found that the appellant contravened Section 3 of the Passports Act by obtaining a passport under false information. However, the Supreme Court held that since the appellant was not attempting to depart from India, the charge under Section 12 of the Passports Act was unsustainable.

Possession of Firearm in a Notified Area:
The appellant was also charged under Section 5 of the TADAA for possessing a revolver with live cartridges in a notified area. The prosecution argued that the possession of such arms within the notified area attracts the offence under Section 5 of the TADAA. The Supreme Court noted that possession of such arms would be punishable under Section 25 of the Arms Act, but the more serious offence under Section 5 of the TADAA applies when the possession is within a notified area. The court referred to the statutory presumption under Section 21 of the TADAA, which presumes possession for terrorist or disruptive acts. As the appellant did not rebut this presumption, the court confirmed his conviction under Section 5 of the TADAA.

Conclusion:
The Supreme Court partly allowed the appeal by setting aside the conviction under Section 12 of the Passports Act due to lack of evidence of attempting to depart from India. However, the court confirmed the conviction and sentence under Section 5 of the TADAA for possessing a firearm in a notified area, as the statutory presumption of possession for terrorist or disruptive acts was not rebutted by the appellant.
1999 (3) TMI 629

Supreme Court dismissed the appeal as withdrawn. Case citation: 1999 (3) TMI 629 - SC. Judges: Sujata V. Manohar and R.C. Lahoti.
1999 (3) TMI 628

Issues Involved:
1. Jurisdiction of the Kerala Bar Council to conduct elections after the expiry of its term.
2. Validity of the extension of the term of the Kerala Bar Council by the Bar Council of India (BCI).
3. Compliance with procedural requirements u/s 8 and 8A of the Advocates Act, 1961.
4. Application of Rule 6 of the Bar Council of India Rules.

Summary:

1. Jurisdiction of the Kerala Bar Council to Conduct Elections:
The Kerala Bar Council's term expired on 27th January 1997. It conducted elections during an extended period granted by the BCI. The validity of these elections was challenged on the grounds that the Kerala Bar Council had ceased to have jurisdiction to conduct elections after the expiry of its term.

2. Validity of Extension by BCI:
The BCI circulated a resolution for extending the term of the Kerala Bar Council by six months on 13th January 1997. The resolution was confirmed in a meeting on 8th February 1997. The appellants contended that the extension should have been granted before 27th January 1997, and the BCI's resolution on 8th February 1997 could not retrospectively extend the term from 27th January 1997.

3. Compliance with Procedural Requirements u/s 8 and 8A:
Sections 8 and 8A of the Advocates Act, 1961, provide that the term of office of an elected member of a State Bar Council is five years, extendable by six months if elections are not held before the expiry of the term. If the term expires without elections, the BCI must constitute a Special Committee to conduct elections. The Kerala Bar Council failed to hold elections within its original term, and the BCI's extension was not granted before the term expired.

4. Application of Rule 6 of the Bar Council of India Rules:
Rule 6 allows urgent action by circulation of papers to members, requiring majority approval and subsequent confirmation. The BCI circulated the resolution on 13th January 1997 but received only four approvals by 27th January 1997, insufficient for majority action. The resolution adopted on 8th February 1997 was not a confirmation of any action taken under Rule 6, as no action was taken based on majority opinion before the expiry of the term.

Judgment:
The Supreme Court held that the Kerala Bar Council's term could not be retrospectively extended by the BCI's resolution on 8th February 1997. The Kerala Bar Council had no jurisdiction to conduct elections after 27th January 1997. The elections conducted were declared null and void. The BCI was directed to appoint a Special Committee u/s 8A within two weeks to hold fresh elections within four months. The appeal was allowed, and the High Court's judgment was set aside. No order as to costs.
1999 (3) TMI 627

The Supreme Court dismissed the appeal in the case with citation 1999 (3) TMI 627 - SC. Judges were Sujata V. Manohar and R.C. Lahoti.
1999 (3) TMI 626

Issues involved:
The interpretation of reservation in relation to the number of posts comprising in the cadre u/s R K Sabharwal's case, and the application of the prospectivity principle to promotions made prior to the judgment.

Interpretation of Reservation:
The appeals arose from a tribunal order questioning the selection and promotion of the appellant to the post of Superintendent of Customs in a vacancy reserved for Scheduled Castes. The contention was whether reservation should be based on the number of posts in the cadre, not vacancies. The Constitution Bench in R K Sabharwal's case clarified that reservation is in relation to the cadre strength. The tribunal applied this ruling, directing a recalculation of entitlements and maintenance of quotas based on cadre strength.

Application of Prospectivity Principle:
The appellant argued that the prospectivity of the Sabharwal's case should not apply to their promotion as it was made before the judgment. The tribunal held that since the promotion was after the petition, it was not covered by prospectivity. However, the Supreme Court disagreed, stating that prospectivity aims to avoid disturbing settled issues and prevent unnecessary litigation. Actions taken before a judgment contrary to the law are validated. As both the DPC decision and the promotion were before the Sabharwal's case, the tribunal erred in applying it. Therefore, the appeals were allowed, setting aside the tribunal's orders.

Separate Judgement:
In view of the judgment in CA Nos.10658-59/96, the appeal also succeeded and was allowed.
1999 (3) TMI 625

Whether departmental proceedings and proceedings in a criminal case launched on the basis of the same set of facts can be continued simultaneously?
Held that:- Since the facts and the evidence in both the proceedings, namely, the departmental proceedings and the criminal case were the same without there being any iota of difference, the distinction, which is usually drawn as between the departmental proceedings and the criminal case on the basis of approach and burden of proof, would not be applicable to the instant case.
Since in the instant case the appellant was not provided any Subsistence Allowance during the period of suspension and the adjournment prayed for by him on account of his illness, duly supported by medical certificates, was refused resulting in ex-parte proceedings against him, we are of the opinion that the appellant has been punished in total violation of the principles of natural justice and he was literally not afforded any opportunity of hearing. Moreover, as pleaded by the appellant before the High Court as also before us that on account of his penury occasioned by non-payment of Subsistence Allowance, he could not undertake a journey to attend the disciplinary proceedings, the findings recorded by the Inquiry Officer at such proceedings, which were held ex-parte, stand vitiated.
The appeal is allowed, the impugned judgment passed by the Division Bench of the High Court is set aside and that of the learned Single Judge, in so far as it purports to allow the Writ Petition, is upheld.
1999 (3) TMI 624

Issues Involved:
1. Whether section 4 of the Value Added Tax Act 1994 and article 4 of the Sixth Council Directive (77/388/E.E.C.) make certain activities carried out by the Institute of Chartered Accountants in England and Wales chargeable to VAT.
2. If the activities are chargeable to VAT, whether the Institute is a body governed by public law and engages in these activities as a public authority, thereby not being considered a taxable person for these activities.

Issue-wise Detailed Analysis:

Issue 1: VAT Chargeability of Activities
The primary question is whether the activities carried out by the Institute of Chartered Accountants in England and Wales are subject to VAT under section 4 of the Value Added Tax Act 1994 and article 4 of the Sixth Council Directive (77/388/E.E.C.). According to the Directive, "the supply of goods or services effected for consideration by a taxable person acting as such" is subject to VAT. The Act states that "VAT shall be charged on any supply of goods or services made in the United Kingdom where it is a taxable supply made by a taxable person in the course or furtherance of any business carried on by him."

The Institute performs three key functions under statutory regulations:
1. Financial Services Act 1986: The Institute is recognized as a professional body authorized to issue certificates for investment business, ensuring high standards of integrity.
2. Companies Act 1989: The Institute is recognized as a supervisory body for company auditors, ensuring that only fit and proper persons are appointed and monitored.
3. Insolvency Act 1986: The Institute is recognized as a professional body with the authority to grant, review, or terminate licenses for insolvency practitioners.

The Institute charges fees for these regulatory activities, which are aimed at breaking even over time. The Tribunal and subsequent courts held that these activities are not chargeable to VAT as they are regulatory functions carried out for the protection of the public, not economic activities.

Issue 2: Public Authority and Taxable Person Status
If the activities were chargeable to VAT, the next question is whether the Institute is a body governed by public law and engages in these activities as a public authority. According to article 4(5) of the Directive, "State, regional and local government authorities and other bodies governed by public law shall not be considered taxable persons in respect of the activities or transactions in which they engage as public authorities."

The Institute's activities under the three statutes are regulatory functions performed on behalf of the State to ensure public protection. The European Court of Justice has clarified that not all activities involving the supply of services for consideration qualify as economic activities. Activities must have an "economic character." In this case, the Institute's functions are regulatory, not commercial or trading activities, and thus do not qualify as economic activities.

Conclusion:
The House of Lords concluded that the Institute's regulatory functions are not economic activities and do not fall within the scope of VAT chargeability. The Institute's activities are performed on behalf of the State for public protection and do not constitute a business or economic activity. Consequently, the appeal was dismissed, and the Institute is not considered a taxable person for these activities.

Judgment:
The appeal was unanimously dismissed by the House of Lords, affirming that the Institute's activities are not subject to VAT and are not economic in nature. The decision emphasized the regulatory and public protection nature of the Institute's functions, aligning with previous rulings and interpretations of the Directive and the Act.
1999 (3) TMI 623

Issues Involved:
1. Application of Regulation 34(1)(b) of the Value Added Tax (General) Regulations 1985.
2. Interpretation of section 29(1) of the Value Added Tax Act 1983.
3. Determination of the time of supply under Regulation 23(1).
4. Attribution of input tax to taxable supplies.
5. Impact of VAT group registration on the supply of services.

Issue-wise Detailed Analysis:

1. Application of Regulation 34(1)(b) of the Value Added Tax (General) Regulations 1985:
The primary issue was whether Svenska had "used or appropriated for use" the supplies received in making exempt supplies after the London branch joined the VAT group. The court analyzed Regulation 34(1)(b), which applies when a taxable person has been credited with input tax attributed to an intended taxable supply but later uses it for an exempt supply. The court concluded that the supplies received by Svenska were used in making exempt supplies to the customers of the London branch after it joined the VAT group, thus satisfying the conditions of Regulation 34(1)(b).

2. Interpretation of section 29(1) of the Value Added Tax Act 1983:
Section 29(1) was crucial in determining that any business carried on by a member of the VAT group should be treated as carried on by the representative member. The court held that after the London branch joined the VAT group, the supplies provided by Svenska to the London branch were to be disregarded, and any supplies made by the London branch were to be treated as made by Svenska. This interpretation was pivotal in concluding that Svenska had used the supplies in making exempt supplies.

3. Determination of the time of supply under Regulation 23(1):
Regulation 23(1) provides that continuous supplies of services are treated as supplied at the earlier of the time when payment is received or a tax invoice is issued. Svenska did not issue an invoice or receive payment until after the London branch joined the VAT group. Therefore, the court held that no supplies were treated as made for VAT purposes between 1987 and 1 August 1991, and the supplies were only treated as made when the invoice was issued in 1992.

4. Attribution of input tax to taxable supplies:
Under sections 14 and 15 of the Act, Svenska was entitled to credit for input tax on inward supplies against output tax on taxable supplies. The court found that the input tax credited to Svenska was initially attributed to an intended taxable supply to the London branch. However, after the London branch joined the VAT group, the supplies were used in making exempt supplies, triggering the application of Regulation 34(1)(b).

5. Impact of VAT group registration on the supply of services:
The change in VAT group status altered the accounting treatment of supplies between Svenska and the London branch. The court agreed with the commissioners that the supplies provided by Svenska to the London branch before it joined the VAT group were to be treated as used in making exempt supplies after the group registration. This change in accounting provisions led to the conclusion that Svenska had used the supplies in making exempt supplies, thus requiring an adjustment under Regulation 34(1)(b).

Conclusion:
The court dismissed the appeal, holding that Svenska had used the supplies received in making exempt supplies after the London branch joined the VAT group. The court's interpretation of Regulation 34(1)(b), section 29(1), and Regulation 23(1) led to the conclusion that the input tax credited to Svenska was subject to adjustment. The appeal was dismissed with costs.
1999 (3) TMI 622

Issues Involved:

1. Classification of goods as "notified goods" or goods specified in Part-A of Schedule IV to the West Bengal Sales Tax Act, 1994.
2. Correctness of the valuation of the seized goods.
3. Applicability of sections 68, 70, and 71 of the West Bengal Sales Tax Act, 1994.
4. Imposition of penalty at the maximum rate of 25%.

Issue-wise Detailed Analysis:

1. Classification of Goods:
The primary issue was whether the goods described as "chunkey chat candy," "mehendi powder," "chicken masala powder," and "sambar masala powder" were notified goods or goods specified in Part-A of Schedule IV to the West Bengal Sales Tax Act, 1994. The tribunal determined that "chunkey chat candy" falls within Sl. No. 46 of Part A of Schedule IV, which covers all varieties of lozenge and similar articles of food. "Mehendi powder" falls under Sl. No. 54 of Part A of Schedule IV, as it is used for hair conditioning and as a cosmetic. Regarding "chicken masala powder" and "sambar masala powder," the tribunal concluded that these items, being predominantly powdered spices, fall within the scope of notified goods or specified goods under Part A of Schedule IV. The tribunal rejected the applicant's argument that the presence of salt and preservatives would exclude these items from being classified as specified goods.

2. Correctness of the Valuation of the Seized Goods:
The applicant challenged the valuation of the seized goods, arguing that the valuation should have been based on trade price rather than the maximum retail price (MRP). The tribunal found that the valuation was conducted according to MRP, with a 10% deduction, which aligns with the provisions of rule 227 of the West Bengal Sales Tax Rules, 1995. The tribunal upheld the valuation determined by the authorities, noting that the applicant failed to produce reliable documents to support their claim of a lower trade price. The tribunal also dismissed the applicant's contention regarding the valuation of air-conditioner machines, as the applicant did not raise this issue before the authorities below and failed to provide credible evidence.

3. Applicability of Sections 68, 70, and 71:
The applicant argued that sections 68, 70, and 71 of the 1994 Act were not applicable unless the respondents could establish an intention to evade tax. The tribunal, however, did not find merit in this argument, citing settled legal principles that legislative entries should be read broadly to include all subsidiary and ancillary matters. The tribunal referred to the Supreme Court's observations in Sardar Baldev Singh v. Commissioner of Income-tax and Sodhi Transport Co. v. State of U.P., which support the view that laws preventing tax evasion are within legislative competence and do not contravene constitutional provisions.

4. Imposition of Penalty:
The applicant contended that the penalty imposed at the maximum rate of 25% of the estimated value was arbitrary. The tribunal noted that the penalty was imposed in accordance with the provisions of the 1994 Act and the 1995 Rules, considering the degree of infraction of law. The tribunal found no reason to interfere with the penalty imposed, as the applicant did not press this point during the hearing and failed to provide substantial arguments against the imposition of the maximum penalty.

Conclusion:
The tribunal dismissed the application, upholding the seizure, valuation, and penalty imposed by the authorities. The tribunal found that the goods in question were correctly classified as notified goods or specified goods under the 1994 Act, the valuation was conducted in accordance with the law, and the imposition of the penalty was justified. The tribunal also noted that the applicant failed to produce credible evidence to support their claims and did not press certain points during the hearing. Consequently, the application was dismissed with no order as to costs.
1999 (3) TMI 621

Issues Involved:
1. Applicability of Section 5(7) of the Kerala General Sales Tax Act to the purchasing dealer.
2. Compliance with conditions for concessional tax rate under Section 5(7).
3. Legality and quantum of penalty imposed under Section 45A(1)(g) of the KGST Act.

Issue-wise Detailed Analysis:

1. Applicability of Section 5(7) of the KGST Act to the Purchasing Dealer:
The petitioner argued that Section 5(7) of the KGST Act is not applicable to the purchasing dealer as the liability to pay tax is on the selling dealer. Consequently, they contended that penalty under Section 45A(1)(g) could not be imposed on them. The court rejected this argument, stating that the penalty can be imposed on any person under Section 45A, not just the selling dealer. The court referenced the case of Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam v. Bharat Refineries Limited, emphasizing that the purchasing dealer's declaration, which resulted in lesser tax collection, can attract penalty.

2. Compliance with Conditions for Concessional Tax Rate under Section 5(7):
The petitioner claimed compliance with the conditions for the concessional tax rate, arguing that the finished products were manufactured within the State and were for sale, without a requirement to sell only within Kerala. However, the court highlighted that the first proviso to Section 5(7) mandates that the finished products must be liable to tax under the KGST Act or the Central Sales Tax Act. Since a significant portion of the finished goods was transferred outside Kerala without paying tax, the court found that the petitioner violated the declaration, thus not entitled to the concessional rate.

3. Legality and Quantum of Penalty Imposed under Section 45A(1)(g):
The petitioner contended that the imposition of penalty was illegal as there was no deliberate intention to evade tax, and any violation was technical. They also argued that the penalty should not be at the maximum rate. The court referred to the Supreme Court decision in Hindustan Steel Ltd. v. State of Orissa, which states that penalties should not be imposed for technical defaults without deliberate intention. However, the court found that the petitioner's declaration was false, leading to revenue loss, and there was no bona fide mistake. The court noted that the Board of Revenue had considered the petitioner's arguments and the gravity of the offense, and found no grounds to interfere with the imposition of the maximum penalty.

Conclusion:
The court dismissed the original petition, upholding the imposition of penalty under Section 45A(1)(g) for the false declaration and violation of the conditions under Section 5(7) of the KGST Act. The court found no lack of jurisdiction or perversity in the findings and confirmed that the orders were passed with proper application of mind.
1999 (3) TMI 620

Issues Involved:
The issues involved in the judgment are the validity of the notice sent under Section 138 of the Negotiable Instruments Act, the authority of the High Court to quash a complaint under Section 482 of the Criminal Procedure Code, and the proper addressee of the notice in cases of dishonoured cheques.

Validity of Notice under Section 138:
The appellant filed a complaint under Section 138 of the Negotiable Instruments Act after six cheques issued in their favor were dishonored by the respondent. The High Court quashed the complaint on the basis that the notice was addressed to A. Chinnaswami, the Managing Director of the company, and not to the company itself. However, the Supreme Court held that the notice addressed to the signatory of the dishonored cheques was valid under Section 138, and the High Court erred in quashing the complaint on this ground.

Authority of High Court to Quash Complaint:
The respondent had moved an application before the Magistrate to recall the process issued against them, which was unsuccessful. Subsequently, a petition under Section 482 of the Criminal Procedure Code was filed in the High Court. The High Court quashed the complaint based on the reasoning that the notice was not properly addressed. The Supreme Court disagreed with this decision, stating that the High Court had erred in allowing the petition under Section 482 and in quashing the complaint, as the notice was validly issued to the signatory of the dishonored cheques.

Proper Addressee of Notice:
The High Court concluded that the notice under Section 138 was sent to A. Chinnaswami at his office address, but this did not constitute notice to the company itself. However, the Supreme Court clarified that since the proceedings were initiated against A. Chinnaswami, the Managing Director who signed the dishonored cheques, the notice addressed to him was appropriate. The Supreme Court set aside the High Court's order and directed the Judicial Magistrate to proceed with the case in accordance with the law.