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2006 (12) TMI 528
Issues involved: Appeal against order of CIT(A)-IV, Mumbai u/s 143(3) for assessment year 2001-02 regarding disallowance of loss on purchase and sale of units of mutual funds, and disallowance of interest and other expenditure.
Issue 1 - Disallowance of loss on purchase and sale of units of mutual funds:
The appeal was filed against the order confirming the disallowance of loss of &8377; 9,17,87,308 on purchase and sale of units of mutual funds. The assessee argued that the case was similar to a decision of ITAT, Mumbai Special Bench and a judgment of the Hon'ble Delhi High Court. The departmental representative cited a contrary decision by the Hon'ble High Court of Punjab and Haryana. The Tribunal noted the divergence of judicial opinion but decided in favor of the assessee based on the ITAT Special Bench decision and the judgment of the Hon'ble Delhi High Court. Consequently, the assessee's grounds of appeal were allowed, directing the assessing officer to allow the loss on sale of units of mutual funds to be set off against the other income of the assessee.
Issue 2 - Disallowance of interest and other expenditure:
Ground of appeal No.6 was against the disallowance of interest and other expenditure amounting to &8377; 1 lakh. However, during the hearing, this ground was not pressed and was consequently rejected.
Conclusion:
The appeal was partly allowed, with the disallowance of loss on sale of units of mutual funds being overturned in favor of the assessee based on the ITAT Special Bench decision and the judgment of the Hon'ble Delhi High Court. The disallowance of interest and other expenditure was rejected as the ground was not pressed during the hearing.
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2006 (12) TMI 527
Issues involved: Assessment order u/s 143(3) challenged for being set aside by CIT as erroneous and prejudicial to revenue.
Assessment of Share Capital:
- Assessee increased share capital by Rs. 14,91,000, but AO added only Rs. 4,00,000, leading to alleged concealed income of Rs. 10,91,000.
- CIT found discrepancies in share capital, questioning genuineness of investments and lack of inquiry by AO.
- CIT held assessment erroneous and prejudicial to revenue, directing fresh assessment.
- Assessee argued CIT did not independently examine submissions, citing various High Court judgments.
- Tribunal upheld CIT's decision, noting lack of inquiry by AO into share capital authenticity and upheld CIT's order.
Valuation of Closing Stock:
- Assessee declared closing stock at Rs. 11,82,000, but as per sec. 145A, value was Rs. 14,89,320, leading to alleged escaped taxable income of Rs. 3,07,320.
- CIT raised concerns over undervalued closing stock, questioning AO's assessment.
- Tribunal did not find any error in valuation of closing stock and upheld AO's decision on this issue.
Sale of Shares and Manufacturing Expenses:
- Assessee reflected profit of Rs. 2,36,09,293 on sale of shares without providing DeMat account, raising suspicions.
- AO accepted share profit without thorough inquiry, leading to concerns about genuineness.
- Tribunal found lack of inquiry by AO into share profit authenticity, supporting CIT's decision on this issue.
- Manufacturing expenses discrepancy also noted, but no error found in AO's assessment on this matter.
Electricity Charges and Contingent Liability:
- Assessee claimed electricity charges under 'contingent liability' and made provisions, but failed to explain the contingent liability.
- Tribunal found no material to dispute assessee's claim on electricity expenses or contingent liability, not upholding action u/s 263 on these grounds.
Conclusion:
- Tribunal partly allowed the appeal, upholding CIT's decision on issues related to share capital and share profit authenticity.
- No error found in AO's assessment regarding valuation of closing stock, manufacturing expenses, electricity charges, and contingent liability.
- Decision pronounced on 29 Dec. 2006.
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2006 (12) TMI 526
Issues involved: Appeal against CIT's order setting aside assessment made by A.O. u/s 143(3) for Assessment Year 2002-03.
Assessment of Loss from Sale of Shares:
- A.O. assessed loss from sale of shares by assessee.
- CIT raised concerns about shares being sold at a loss, shares not quoted in stock exchange, and relationship with sister concern.
- Assessee provided details to A.O. regarding loss from sale of shares, denied sister concern relationship.
- CIT found A.O.'s assessment erroneous, prejudicial to revenue, and set it aside.
- Assessee argued CIT did not independently review submissions, cited case laws, but appeal dismissed as CIT's decision upheld.
Commission Payments and Manufacturing Expenses:
- CIT questioned commission payments and manufacturing expenses claimed by assessee.
- Assessee explained commission payments were for raw material purchases and provided details to A.O.
- CIT found A.O. did not examine various issues during assessment, cancelled assessment.
- Assessee contended CIT did not apply own mind, cited case laws, but appeal dismissed as CIT's decision upheld.
Valuation of Finished Goods and Other Expenses:
- CIT noted discrepancies in valuation of finished goods, inclusion of taxes, and manufacturing expenses.
- Assessee clarified excise duty was included in closing stock valuation, sales tax not part of closing stock.
- CIT found A.O. failed to inquire into various aspects, leading to erroneous assessment.
- CIT's decision upheld as A.O. did not conduct necessary inquiries, resulting in prejudicial assessment to revenue.
Conclusion:
- CIT's decision to set aside A.O.'s assessment upheld due to lack of proper inquiries by A.O. on various issues raised.
- Assessee's arguments regarding submissions, case laws, and lack of independent review by CIT were dismissed.
- Appeal of the assessee against CIT's decision was ultimately dismissed.
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2006 (12) TMI 525
Issues Involved:
1. Whether Anganwadi workers hold a civil post.
2. Whether the Karnataka State Administrative Tribunal had jurisdiction to entertain the application u/s 15 of the Administrative Tribunals Act, 1985.
3. Whether Anganwadi workers are entitled to minimum wages and other employment benefits.
Summary:
Issue 1: Whether Anganwadi workers hold a civil post.
The Supreme Court examined whether Anganwadi workers hold a civil post by referring to the Integrated Child Development Service (ICDS) Programme, which is funded by the Central Government but implemented by the States. Anganwadi workers are appointed from local inhabitants and paid an honorarium, not a salary. The Court noted that Anganwadi workers do not carry out any function of the State, do not hold posts under a statute, and are not subject to recruitment rules applicable to State employees. The Court distinguished this case from others where posts were statutory and governed by specific rules. It concluded that Anganwadi workers do not hold civil posts as they are appointed under a scheme and not through a statutory process.
Issue 2: Whether the Karnataka State Administrative Tribunal had jurisdiction to entertain the application u/s 15 of the Administrative Tribunals Act, 1985.
The Tribunal had held that the application was maintainable, opining that Anganwadi workers, despite being paid an honorarium, hold civil posts. However, the Supreme Court disagreed, stating that the Tribunal had no jurisdiction to entertain the application. The Court emphasized that Anganwadi workers are not holders of civil posts and thus do not fall within the purview of the Tribunal's jurisdiction u/s 15 of the Act.
Issue 3: Whether Anganwadi workers are entitled to minimum wages and other employment benefits.
The respondents argued that Anganwadi workers should not be paid less than the minimum wages fixed by the State, as it would amount to beggary. The Court, however, stated that the Minimum Wages Act applies to workmen in specified industries and not to those working under a project like ICDS. The Court noted that the concept of minimum wage, living wage, or fair wage cannot be applied in this context. The Court also highlighted that Anganwadi workers are free to contest elections, which is not typically allowed for holders of civil posts.
Conclusion:
The Supreme Court concluded that Anganwadi workers do not hold civil posts and thus, the Karnataka State Administrative Tribunal had no jurisdiction to entertain the application. The appeals were allowed, and no costs were awarded.
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2006 (12) TMI 524
Issues involved: Challenge to demand of duty and penalty on unaccounted processed fabrics.
Summary:
The appellants contested the duty demand and penalty imposed on unaccounted processed fabrics. Out of the received grey fabrics, a portion was not shown in records as processed and cleared with duty payment, leading to a discrepancy. The department alleged clandestine removal of fabrics without duty payment.
Upon hearing both parties, the Tribunal found merit in the appellant's argument. It was noted that the burden of proving clandestine clearance was not met by the Revenue. The high shrinkage percentage alone could not establish clandestine clearance. The appellants attributed the shortages to fabric shrinkage during processing, which was not disproved by the department. Citing precedents, it was emphasized that evidence is crucial to establish clandestine clearance, which was lacking in this case.
In light of the above, the Tribunal set aside the impugned order, allowing the appeal of the appellants. The finding of clandestine removal and consequent duty demand were deemed unsustainable and hence overturned.
*(Pronounced in Court on 7-12-2006)*
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2006 (12) TMI 523
Issues involved:
The petition seeks the release of seized silver jewellery belonging to the petitioner u/s 132B(3) of the Income Tax Act, 1961. The main issue is the ownership of the jewellery seized in a search operation conducted in 1979 at the premises of late Shri Lachman Dass.
Judgment Details:
The petitioner claimed to be the legal heir of late Sh. Lachman Dass and asserted ownership of the jewellery seized by the Income Tax Department. However, the jewellery was released to Raj Mohinder Pal Verma, recognized as a legal heir under Section 159 of the Act. The petitioner challenged this decision through a writ petition.
The High Court declined to entertain the petition due to disputed questions of facts regarding property title, emphasizing that a writ petition is not the appropriate forum to determine ownership issues. Additionally, the Court noted the significant delay in filing the petition, as it was lodged in 2006 despite the seizure occurring in 1979 and multiple assessment orders being issued in the interim.
Citing precedents, the Court highlighted the importance of expeditiously seeking relief and the need to avoid entertaining stale claims. Referring to judgments by the Supreme Court, the High Court emphasized that delayed petitions hinder the court's efficiency and should be dismissed promptly. Consequently, the Court dismissed the writ petition, reasoning that adjudicating belated disputed facts was unwarranted in this case.
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2006 (12) TMI 522
The appeal was about imposing penalty under Section 76 of the Finance Act. The Commissioner (Appeals) ruled that the penalty cannot be imposed for a period before its introduction. The Tribunal upheld this decision as the penal provisions came into effect after the period in question. The appeal was rejected.
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2006 (12) TMI 521
Advertisement issued inviting 'Expression of Interest for development of C&EC' - highest bidder - validity of clause 2.4 of the Request for Proposal in which the Authority reserved the right to reject at any stage all or any of the bids without assigning any reason - Power of the Authority to cancel or reject the bids - whether the project would be financially viable if the method of calculation is changed - HELD THAT:- A power to deal with a contractual matter and a power of a statutory authority to exercise its statutory power in determining the rights and liabilities of the parties are distinct and different. Whereas reasons are required to be assigned in a case where civil or evil consequences may ensue, the same may not be necessary where it is contractual in nature, save and except in some cases, e.g., Star Enterprises [1990 (4) TMI 231 - SUPREME COURT].
We have noticed that power has not been exercised by the Executive Committee in rejecting the tender. The power has been exercised by the Authority in cancelling the tenders so as to enable it to have a re-look of the entire project. Some reasons may be required to be assigned for rejecting the bid, but in the instant case, in our opinion, no reason was required to be assigned as there has been a change in the policy decision. The news item appearing in the Economic Times is not of much significance. No affidavit has been affirmed as regards the correctness or otherwise of the said news item.
may be true that the Authorities at one point of time, as was disclosed in the Counter Affidavit, had thought of setting up a Convention center of their own and without any private participation, but only because there has been a deviation from the said stand would not, in our considered opinion, render the entire policy decision vitiated in law. It had set up its Evaluation Committee. The decision presumably has been reached by experts. The reasons as regards purported unsatisfactory performance of Appellants, take a back seat once having a re-look to the entire situation was thought of.
It is not a case where the Court is called upon to exercise its equity jurisdiction. It is also not a case where ex facie the policy decision can be held to be contrary to any statute or against a public policy. A policy decision may be subjected to change from time to time. Only because a change is effected, the same by itself does not render a policy decision to be illegal or otherwise vitiated in law.
However, if the Court in a given situation is not in a position to allow a bid to take place before, it may not still venture to strike down an Act in the name of public interest, although, no such public interest exists. Appellant stated before us that he is ready and willing to take a part of the contract, viz., construction of the C&EC and pay the same amount as has been done by Reliance Industries Ltd. and in addition it would pay 2.5% of its annual turnover from the Convention center from the 21st year, as was initially offered.
Appellant did not participate in the second bid. The tender process is complete. Before us only a higher bid has been given. We do not intend to enter into the intricacies of the question. Appellants could have submitted its bids pursuant to the new tender and new conditions, even without prejudice to its rights and contentions in this appeal. The stipulations made in 2002 tender could have been repeated by it so as to demonstrate before the experts comprising members of the Executive Committee that its bid was the highest. If, in view of the change in the policy decision, the Authority does not intend to become a partner in the profit making and opt for having the entire bid amount at one go instead of waiting for 20 years, we do not find any fault therewith.
We, therefore, are of the opinion that it is not a case where we should interfere with the judgment of the High Court. It, however, would not mean that the Authority or the Executive Committee would not be entitled to take note of the offer of Appellant. It may do so. It would not further mean that if the terms of new tender are violative of the provisions of the master plan, the same would not be suitably dealt with. We merely place on record that we have not gone into the said questions, although raised before us by the learned Counsel for the appellant, simply on the ground that no such plea had been taken before the High Court. In the absence of any plea that the policy decision adopted by the Authority would be violative of the provisions of the Act or any master plan, the same cannot be entertained The question, however, is left open.
Thus, there is no merit in these appeals, which are accordingly dismissed.
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2006 (12) TMI 520
Issues involved: Denial of Cenvat credit for inputs and capital goods used for generating electricity outside the factory premises.
The appellant challenged the Order-in-Original (OIA) denying Cenvat credit for inputs and capital goods used for generating electricity outside the factory premises. The denial was based on the premise that the generation of power occurred outside the factory, rendering the appellant ineligible for credit as per Board Circular No. 637/28/02 CE dated 8.5.02, which stipulates that credit can only be granted if inputs or capital goods are used within the factory premises. The appellant relied on the Supreme Court judgment in Vikram Cement vs CCE Indore (2006 (194) ELT 3 (SC)), along with decisions by the bench in Diamond Cements vs CCE Bhopal (2004 (169) ELT 34 (Tri-Del) and SRF Ltd., vs CCE Chennai (2005 (191) ELT 887), to argue that the use of electricity generated outside the factory but utilized in the production of final goods in another factory satisfies the requirements of Rule 2(g) of the Cenvat Credit rules. The appellant sought the benefit of credit based on these arguments.
The learned DR sought to distinguish the judgments cited by the appellant.
Upon careful consideration, the Member Judicial noted that the issue had been settled by the Apex Court in the Vikram Cements case, where credit was upheld for inputs and capital goods used outside the factory in a power project located outside but supplying power to the assessee's factory. This scenario was also addressed in the SRF case and the Diamond Cements case. Following the ratio of these judgments, the impugned order was set aside, and the appeal was allowed with any consequential relief deemed necessary.
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2006 (12) TMI 519
Appointment on a contractual basis - Applicability of a policy decision of the State - Scheme of regularization of services of the employees - legal right - policy decision adopted in terms of Article 162 of the Constitution of India - irregular and illegal appointments - HELD THAT:- In the instant case, the High Court did not issue a writ of mandamus on arriving at a finding that the respondents had a legal right in relation to their claim for regularization, which it was obligated to do. It proceeded to issue the directions only on the basis of the purported policy decision adopted by the State. It failed to notice that a policy decision cannot be adopted by means of a circular letter and, as noticed hereinbefore, even a policy decision adopted in terms of Article 162 of the Constitution of India in that behalf would be void. Any departmental letter or executive instruction cannot prevail over statutory rule and constitutional provisions. Any appointment, thus, made without following the procedure would be ultra vires.
This Court, recently in Indian Drugs & Pharmaceuticals Ltd. v. Workman, Indian Drugs & Pharmaceuticals Ltd.[2006 (11) TMI 655 - SUPREME COURT], opined that rules of recruitment cannot be relaxed and the Courts/Tribunals cannot direct regularization of temporary appointees de hors the rules, nor can it direct continuation of service of a temporary employee (whether called a casual, ad hoc or daily rate employee) or payment of regular salaries to them.
It was faintly suggested that as the respondents are qualified to hold the posts and they had been continuously working for a long time, this Court may not interfere with the impugned judgment. On the face of a catena of decisions of this Court, we cannot accept the said submission.
An endeavor was made also to submit that the respondents were employed on daily rated basis and their services were transferred to the Corporation. No such case was made out and in any event, as and when the respondents themselves agreed to be appointed on a contractual basis by the appellant-Board, at this juncture they cannot be heard to say that the purported transfer of their services by the State of Punjab to the appellant- Board was illegal. Even no such case has been made out in the special leave petition.
Thus, the impugned judgment cannot be sustained. They are set aside accordingly. Appeals are allowed.
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2006 (12) TMI 518
Issues involved: Service tax liability on packaging activity; Imposition of penalty u/s 78 of the Finance Act, 1994.
The judgment by the Appellate Tribunal CESTAT, Kolkata dealt with the service tax liability of an appellant company for packaging refractory bricks obtained from M/s. Tata Refractories, which the department classified as 'Cargo Handling Services' subject to service tax. The lower adjudicating authority confirmed the service tax amount of Rs. 21,16,226 and imposed a penalty of Rs. 10,000. This decision was upheld by the Commissioner (Appeals) on 30-9-2004. The appellant had approached the Tribunal against this confirmation, and the Tribunal had stayed the operation of the Commissioner's order. However, the jurisdictional Commissioner, u/s 84 of the Finance Act, 1984, reviewed the penalty imposed and increased it to Rs. 21,16,226, equal to the service tax amount, as per section 78 of the Finance Act, 1994. The appellant's counsel argued for a stay on the penalty amount demanded in the impugned order, citing the Tribunal's earlier Stay Order requiring a pre-deposit of service tax and a penalty of Rs. 10,000.
Upon careful consideration, the Tribunal decided to waive the pre-deposit of penalty in the impugned order until the disposal of the appeal.
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2006 (12) TMI 517
Issues involved:
The issue involved in this case is the service tax liability on the appellants for On Line information as Data Base Access and retrieval services, specifically regarding the payment of service tax on one-time charges collected from customers.
Service Tax Liability and Penalties:
The appellants had registered as providers of the services in question and were paying service tax on amounts collected from customers, but had not paid tax on one-time charges. After being notified by the Revenue, the appellants paid the tax and interest. The Revenue issued a show cause notice for penalties under Sections 76 and 78 of the Finance Act, 1994. The adjudicating authority and the Commissioner (Appeals) upheld the penalties. The appellants did not dispute the tax and interest liability but challenged the imposition of penalties, citing a friendly scheme for service tax introduced by the Government of India. The Tribunal found that the appellants had paid the tax and interest before the scheme's deadline, similar to a previous case, and ruled in favor of the appellants, setting aside the penalties.
Decision and Precedents:
The Tribunal upheld the tax and interest liability but set aside the penalties under Sections 76 and 78, citing precedents where penalties were waived for timely payment of tax under a friendly scheme. The Tribunal found that the appellants were covered by the scheme and were not liable for penalties. The decision was based on the appellants' compliance with the tax payment requirements before the scheme's deadline. The Tribunal dismissed the appeals, following the precedent set in previous cases. The impugned order imposing penalties was set aside, and the appeal was allowed with consequential relief.
Conclusion:
The Tribunal ruled in favor of the appellants, setting aside the penalties imposed under Sections 76 and 78 of the Finance Act, 1994, due to the appellants' compliance with the tax payment requirements before the deadline set by the friendly scheme. The decision was based on the appellants' timely payment of tax and interest, aligning with the provisions of the scheme.
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2006 (12) TMI 516
Supply of coal to coke ovens - Import of coal and opening of private coal mines and to provide pragmatic and transparent system of distribution of coal - Validity and/or legality of a scheme framed by the Coal India Limited for sale of coal by Electronic Auction (E-Auction) - ultra vires Article 14 of the Constitution of India - HELD THAT:- Only MSTC and MJCPL and the companies who are conducting the E-Auction, would have access to the details of the bids submitted by the bidders. No eligibility criteria having been fixed, any person including traders can participate and bid in the E- Auction. Highest price and highest quantity are the only factors for sale/allocation of coal to a bidder in terms of the said scheme; as E-Auction results in traders buying large quantities of coal. Consequently, the manufacturers of hard coke and smokeless coal as also other small units have to buy coal at prohibitive rates from traders . The methodology for allocation of coal to a bidder of E-Auction is, thus, inequitable, irrational and fortuitous.
We have noticed that having regard to the intervention of the Central Government, the coal companies deviated from the said scheme and considered even the non-core sector consumers to be a separate class; as they not only became entitled to take part in the E- Auction along with traders but also were sought to be assured of supply of coal having regard to their own requirements as regard both quality and quantity subject, of course, to their paying the price at the average weighted price. The stand taken by the coal companies before the Calcutta High Court as also before this Court assumes significance only in that context. However, now it appears that the coal companies have given a complete go- bye to the original scheme of E-Auction inasmuch as not only the traders or the non-core sector consumers but also core sector consumers had also been allowed to participate therein. A consumer of coal falling in any category as also a person who intends to purchase coal for his personal use would, therefore, be entitled to take part in E-Auction.
Whereas the consumers in the core sector would not only be entitled to allotment of coal at a price fixed by the coal companies but also would be entitled to take part in E-auction. The non-core sector consumers although as linked consumers form a separate and distinct class vis-à-vis the traders, they would not be entitled to the benefit of obtaining coal at a fixed price. The question as regards the discrimination between two categories of consumer assumes some importance.
The effect is that today, while the core sector (92%) on its own and non-core non-linked SSI/Tiny units (through the NCCF/other agencies) (1%) are being supplied coal at a fixed price, on the other hand, the non-core linked SSI/Tiny units (4%) are being subjected to differential treatment without any rational classification by supplying the coal to the latter on the price to be ascertained by the trader-controlled process of E-Auction and thereby putting the petitioner-units at par with the trader. The scheme of E- Auction is, therefore, ultra vires Article 14 of the Constitution of India.
Conclusion - With a view to evolve a viable policy, a committee should be constituted by the Union of India with the Secretary of Coal being the Chairman. In such a committee, a technical expert in coal should also be associated as most of the projects involve consumers of coal, particularly manufacturers of hard coke and smokeless fuel. In our opinion, it may not be difficult to find out, having regard to the technologies used therein as regards the ratio of the input vis-à-vis the output, with a balance and 10% margin. On the basis of such finding alone, apart from the requirements of five years, supply should form the basis of MPQ. We may, however, hasten to add that the Central Government in collaboration with the coal companies would be at liberty to evolve a policy which would meet the requirements of public interest vis-à-vis the interest of consumers of coal. They would be entitled to lay down such norms as may be found fit and proper. They would be entitled to fix appropriate norms therefore. In the event, any industrial unit is found to violate the norms, it should be stringently dealt with.
Hard coke plants are also coal mines within the meaning of Colliery Control Order, 2000. Hard coke is coal within the meaning of the provisions thereof. The Central Government, therefore, may think it fit to widen the definition of coal so as to include the smokeless coal in exercise of its power under the Essential Commodities Act. We may notice in ONGC (supra), this Court has held that slurries are a part of coal and is governed by the provisions of the Mines and Minerals (Regulation and Development) Act. Such being the wider definition of coal, we fail to see any reason as to why proper measure cannot be taken by the Union of India to have a complete control there over. Any strict mechanism to find out the genuine consumers would go a long way in taking preventive measures and dealing with coal by unscrupulous persons for unauthorized purposes. Those who do so, should be dealt with stringently but the same would not mean that the genuine consumers should suffer for want of coal.
We are of the opinion that it may not be difficult to find out as to who the genuine consumers are. So far as owners of the hard coke ovens are concerned, they are members of the association and their identity can easily be verified. However, discussions made hereinbefore should not be taken to lay down a law that the Central Government and for that matter the coal companies cannot change their policy decision. They evidently can; but therefore there should be a public interest as contra distinguished from a mere profit motive. Any change in the policy decision for cogent and valid reasons is acceptable in law; but such a change must take place only when it is necessary, and upon undertaking of an exercise of separating the genuine consumers of coal from the rest. If the coal companies intend to take any measure they may be free to do so. But the same must satisfy the requirements of constitutional as also the statutory schemes; even in relation to an existing scheme e.g. Open Sales Schemes, indisputably the coal companies would be at liberty to formulate the new policy which would meet the changed situation. E-advertisement or E-tender would be welcome but then therefore a greater transparency should be maintained.
Thus, Civil Appeal being devoid of any merits are dismissed. Civil Appeal arising out of S.L.P. (Civil) is allowed and the impugned judgment of the Madhya Pradesh High Court is set aside. No separate order is required to be passed on Civil Appeal arising out of the judgment and order of the Calcutta High Court as the said case would also be governed by this judgment. All other appeals, writ petition and transferred cases are disposed of with the aforementioned observations and directions.
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2006 (12) TMI 515
Issues Involved:
1. Challenge to the grant of lease to Nava Bharat Ferro Alloys Ltd.
2. Denial of lease to GMR Technologies & Industries Limited.
3. Recommendation of the State Government to grant lease to Orissa Mining Corporation Limited (OMC).
4. Interpretation of Sections 11 and 17A of the Mines and Minerals (Regulation and Development) Act, 1957.
5. Compliance with Rule 59 of the Mineral Concession Rules, 1960.
Detailed Analysis:
1. Challenge to the Grant of Lease to Nava Bharat Ferro Alloys Ltd.
The primary contention revolves around the legality of the State Government's recommendation to grant a lease of 84.881 hectares to Nava Bharat Ferro Alloys Ltd. (Nava Bharat). The Orissa High Court had dismissed the challenge by ICCL against this recommendation. The Supreme Court found that the decision to grant the lease to Nava Bharat was not justified, legal, or proper because the State Government did not exercise its power under sub-section (5) of Section 11 of the Mines and Minerals (Regulation and Development) Act, 1957. The Court noted that Nava Bharat was a subsequent entrant and that no special reasons were recorded justifying such an out-of-turn grant. The Central Government had also pointed out the violation of Rule 59 of the Mineral Concession Rules, 1960. Consequently, the Supreme Court set aside the proposed grant to Nava Bharat.
2. Denial of Lease to GMR Technologies & Industries Limited
GMR Technologies & Industries Limited (GMR) had challenged the decision of the State Government to grant a lease to OMC instead of to GMR. The Supreme Court observed that the decision to grant the lease to OMC was based on the State Government's exercise of power under Section 17A(2) of the Mines and Minerals (Regulation and Development) Act, 1957. The Court held that the State Government's decision to recommend the lease to OMC was within its statutory power and could not be invalidated by prior proceedings or directions of the Court.
3. Recommendation of the State Government to Grant Lease to OMC
The State Government's recommendation to grant a lease of the remaining 436.295 hectares to OMC was challenged on the grounds that it was contrary to the prior directions of the Court and the recommendations of the Dash Committee (later Chahar Committee). The Supreme Court held that the power under Section 17A(2) is an independent power and not related to the power under Section 11. The Court found that the State Government's decision to seek the approval of the Central Government for leasing the area to OMC was valid and within its statutory power. The Court directed the State Government to make a fresh request to the Central Government with all relevant details for consideration under Section 17A(2).
4. Interpretation of Sections 11 and 17A of the Mines and Minerals (Regulation and Development) Act, 1957
The Supreme Court provided an in-depth interpretation of Sections 11 and 17A of the Mines and Minerals (Regulation and Development) Act, 1957. Section 11 deals with the preferential right of applicants for mining leases, while Section 17A pertains to the reservation of areas for conservation and exploitation by government entities. The Court emphasized that the power under Section 17A(2) is independent and can be exercised by the State Government with the Central Government's approval, irrespective of the preferences under Section 11.
5. Compliance with Rule 59 of the Mineral Concession Rules, 1960
The Supreme Court noted that the State Government's recommendation for the grant of a lease to Nava Bharat was vitiated by non-compliance with Rule 59 of the Mineral Concession Rules, 1960. The Central Government had pointed out this violation, and the subsequent actions by the State Government's Steel and Mines Department were not consistent with the Rules of Business framed under Article 166 of the Constitution of India.
Conclusion:
The Supreme Court set aside the decisions of the Orissa High Court, upheld the State Government's power to seek approval under Section 17A(2) of the Act, and invalidated the proposed grant to Nava Bharat. The Court directed the State Government to make a fresh request to the Central Government for approval under Section 17A(2) and for the Central Government to take a decision based on all relevant details. The appeals of the State of Orissa and OMC were allowed, while those of ICCL and GMR were allowed to the extent of setting aside the grant to Nava Bharat. The parties were directed to bear their own costs.
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2006 (12) TMI 514
Disqualification from being members of the Assembly - Challenge the legality of orders passed by the Speaker of Haryana Legislative Assembly ('the Assembly') - sole member constituting the legislature party of a political party - personal malafides - disqualification as provided in paragraph 2(2) of the Tenth Schedule of the Constitution of India - deprive from right to vote - violation of principles of natural justice - HELD THAT:- We are of the view that to determine whether an independent member has joined a political party the test is not whether he has fulfilled the formalities for joining a political party. The test is whether he has given up his independent character on which he was elected by the electorate. A mere expression of outside support would not lead to an implication of a member joining a political party. At the same time, non- fulfillment of formalities with a view to defeat the intent of paragraph 2(2) is also of no consequence. The question of fact that a member has given up his independent character and joined, for all intent and purposes, a political party though not formally so as to incur disqualification provided in paragraph 2(2) is to be determined on appreciation of the material on record.
Applying this test here, it cannot be held that the Speaker committed any illegality in coming to the conclusion that the petitioners had joined the Indian National Congress. The conclusions reached by the Speaker cannot be held to be unreasonable, assuming that two views were possible.
On the facts of the present case, the Speaker was justified in coming to the conclusion that there was no split in the original political party of the petitioner Jagjit Singh. Likewise, in Writ Petition 292/2004, the Speaker on consideration of relevant material placed before him came to the conclusion that there was no split as contemplated by paragraph 3 of the Tenth Schedule. The finding of the Speaker cannot be faulted. In fact, letter of the petitioner dated 17th June sent to the Speaker itself shows that what was claimed was that the Haryana unit of the Republican Party of India effected a split in the original party on 21st December, 2003. The finding that the claim of split was made as an afterthought to escape disqualification under paragraph 2(1)(a) of the Tenth Schedule cannot be held to be unreasonable or perverse. The Speaker was justified in coming to the conclusion that despite various opportunities, no valid proof or evidence was placed on record by the petitioner to show that indeed a split had taken place in the original political party, i.e., Republican Party of India on 21st December, 2003.
It is a matter of great anguish that the mode of substituted service had to be resorted to, to serve elected members of a Legislative Assembly.
The object of the Tenth Schedule is to discourage defection. Paragraph 3 intended to protect a larger group which, as a result of split in a political party which had set up the candidates, walks off from that party and does not treat it as defection for the purposes of paragraph 2 of the Tenth Schedule. The intention of the Parliament was to curb defection by a small number of members. That intention is clear from paragraph 3 which does not protect a single member legislature party. It may be noted that by Constitution (Ninty-first Amendment) Act, 2003, paragraph 3 has been omitted from the Tenth Schedule.
The Speaker has not filed any reply. It is true that the aforesaid averments have remained unrebutted. The contention is that adverse inference should be drawn against the Speaker and the impugned orders set aside on the ground of malafides of the Speaker.
Ordinarily, the adverse inference can be drawn in respect of allegations not traversed, but there is no general rule that adverse inference must always be drawn, whatever the facts and circumstances may be. The facts and circumstances of the present case have already been noticed as to how the petitioners have been avoiding to appear before the Speaker; how the proceedings were being delayed and long adjournments sought on ground such as non-availability of senior advocates because of court vacations. In the light of these peculiar facts and circumstances, a telephone call like the one alleged can mean that further adjournment as sought for by the petitioners is possible if they do not vote in the Rajya Sabha election on 28th June, 2004. On facts, we are unable to draw adverse inference and accept the plea of malafides.
Undoubtedly, in our constitutional scheme, the Speaker enjoys a pivotal position. The position of the Speaker is and has been held by people of outstanding ability and impartiality. Without meaning any disrespect for any particular Speaker in the country, but only going by some of events of the recent past, certain questions have been raised about the confidence in the matter of impartiality on some issues having political overtones which are decided by the Speaker in his capacity as a Tribunal. It has been urged that if not checked, it may ultimately affect the high office of the Speaker. Our attention has been drawn to the recommendations made by the National Commission to review the working of the Constitution recommending that the power to decide on the question as to disqualification on ground of defection should vest in the Election Commission instead of the Speaker of the House concerned.
Whether to vest such power in the Speaker or Election Commission or any other institution is not for us to decide. It is only for the Parliament to decide. We have noted this aspect so that the Parliament, if deemed appropriate, may examine it, bestow its wise consideration to the aforesaid views expressed also having regard to the experience of last number of years and thereafter take such recourse as it may deem necessary under the circumstances.
As a result of the aforesaid discussions, we find no merit in the writ petitions. Writ Petition are, accordingly, dismissed.
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2006 (12) TMI 513
Issues Involved:
1. Applicability of Section 25N of the Industrial Disputes Act, 1947.
2. Definition of 'Factory' and 'Manufacturing Process' under the Factories Act, 1948.
3. Non-maintainability of the writ petition due to the availability of alternative remedies.
4. Delay and laches in filing the writ petition.
Detailed Analysis:
1. Applicability of Section 25N of the Industrial Disputes Act, 1947:
The primary question was whether the provisions of Section 25N of the Industrial Disputes Act, 1947, are applicable to the appellant-Corporation. The High Court observed that the appropriate Government had framed the Industrial Disputes (Uttar Pradesh) Rules, 1976, making Section 25N applicable in the State of Uttar Pradesh. The High Court held that the Forest Corporation is an industrial establishment within the definition of Section 25L of the Industrial Disputes Act, and since the retrenchment was made without complying with Section 25N, the retrenchment order was void. The Supreme Court upheld this view, confirming that non-compliance with Section 25N renders the retrenchment order illegal and non est.
2. Definition of 'Factory' and 'Manufacturing Process' under the Factories Act, 1948:
The appellant-Corporation argued that it does not fall within the definition of a factory as no manufacturing process is carried out. However, the High Court held that the activities of cutting trees and converting them into logs constitute a manufacturing process under Section 2(k) of the Factories Act. The Supreme Court agreed, stating that the process of cutting by axe and changing the shape by saw falls within the definition of 'making' and 'altering' under the Factories Act. The Court cited several judgments to support the view that the activities carried out by the Corporation meet the requirements of a manufacturing process, thus making it an industrial establishment under Section 25L of the Industrial Disputes Act.
3. Non-maintainability of the writ petition due to the availability of alternative remedies:
The appellant-Corporation contended that the writ petitions were not maintainable as the respondents had not availed the alternative remedies provided under the Industrial Disputes Act. The Supreme Court observed that many of the workmen had not approached the Tribunal and directly filed writ petitions in the High Court. The Court held that the High Court should not have entertained the writ petitions without the workmen first availing the alternative remedies. The Court emphasized that writ petitions under Article 226 should not be entertained when statutory remedies are available unless exceptional circumstances are made out.
4. Delay and laches in filing the writ petition:
The appellant-Corporation argued that the writ petitions were filed after a delay of 8-10 years and should have been dismissed on the grounds of laches. The Supreme Court agreed, stating that the High Court was not justified in entertaining the writ petitions filed after such a long delay. The Court referred to previous judgments highlighting that the procedural laws like estoppel, waiver, and acquiescence are applicable to industrial proceedings and that the High Court should not deviate from the general view of requiring exhaustion of alternative remedies.
Conclusion:
The Supreme Court held that the provisions of Section 25N of the Industrial Disputes Act, 1947, are applicable to the appellant-Corporation, and non-compliance with these provisions makes the retrenchment orders illegal. The Court also confirmed that the appellant-Corporation is an industrial establishment within the meaning of Section 25L of the Industrial Disputes Act. However, the Court dismissed the writ petitions of those workmen who had not availed the alternative remedies and had filed the petitions after a significant delay. The appeals of the Corporation were partly allowed, and the workmen who had approached the Tribunal were granted relief of reinstatement with full back-wages and continuity of service.
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2006 (12) TMI 512
Issues:
The issue involves the levy of Education Cess on basic customs duty debited in DEPB Scrip for clearance of goods under Duty Entitlement Pass Book (DEPB) scheme.
Summary:
The appeal arose from Order-in-Appeal confirming the levy of Education Cess on duty-free goods cleared under DEPB scheme. The Revenue contended that goods exempted from basic customs duty are not exempt from Education Cess.
The appellant argued that a similar issue was considered by the Mumbai Bench, where it was held that no Education Cess is leviable on fully exempted DEPB imports. The appellant relied on a Board Circular and the provisions of Finance Act, 2004 to support their case.
The JDR reiterated the departmental view supporting the levy of Education Cess on the goods.
After careful consideration, the Tribunal referred to the Mumbai Bench's decision in the case of CCE vs. Reliance Industries Ltd., where it was held that Education Cess is not leviable on exempted DEPB imports. Following this precedent, the impugned order was set aside, and the appeal was allowed with consequential relief.
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2006 (12) TMI 511
Abkari Act ('the Act') - Manufacture or sale of liquor - including country liquor - Validity or otherwise of Rule 9(2) of the Rules and/or applicability of Section 57(a) of the Act - sample of toddy found to be exceeded 8.1% - renewal of his licnece in terms of Section 57 - HELD THAT:- Rule 9(2) of the said Rules, in our opinion, should be given a plain meaning. It should be read in its entirety. It is in two parts. The intention of the legislature must be gathered having regard to the expressions used therein. Rule 9(2) read in its entirety, states the context that thereby what is essentially sought to be prevented is adulteration of toddy. It is aimed at prevention of adulteration. The penal provision contained in first part not only directs that all toddy kept or offered for sale should be of good quality and unadulterated but also provides that nothing shall be added to it to increase its intoxicating power or for any other purpose. If the second part prescribing the contents of the ethyl alcohol in toddy is read in the context of the first part vis-`-vis Section 57(a) of the Act, it would be evident that prohibition is aimed at adulteration by addition of any foreign substance to increase its intoxicating power or for any other purpose.
Validity of Rule 9(2), therefore, can be saved if the said provision is read in its entirety and rule of harmonious construction is resorted to. If, however, Rule 9(2) is sought to be invoked even for the purpose of initiating a prosecution as against a licensee even he does not add any foreign substance to it, the same, in our opinion, would render the same ultra vires, as would appear from the discussions made hereinafter.
It is not in dispute that there does not exist any mechanical devise to measure the contents of ethyl alcohol present in toddy. It also stands admitted that contents of ethyl alcohol in toddy would depend upon various factors including weather, season or pot in which it is kept etc. Judicial notice can be taken of the fact that each village would not have a chemical laboratory where the process of analysis of ethyl alcohol can be carried out. For example, if a sample is taken in a village, by the time sample is sent for and is analyzed, the volume of ethyl alcohol may increase. Although we are informed that some chemical is mixed when a sample is taken, no material has been placed in that behalf.
The validity or otherwise of Rule 9.2 must be considered from this point of view.
Toddy ferments automatically after sun rise. If it is permitted to be sold within a timeframe after toddy is tapped, reasonableness can be inferred; but at what point of time precisely ethyl alcohol content would exceed 8.1% in a toddy is not known. It will bear repetition to state that the same would depend upon several factors including the climate. It is reasonable to expect that the State would frame rules in consonance with equity and good conscience. A rule may not be worked out if it imposes a condition which, unless some other guidelines are issued, would become impossible to be performed. We must remind ourselves that the consequences of a single violation may be disastrous. If the contention of the State is correct, it would not only result in penal consequences, but would also lead to non-renewal of the licence. The licensee, thus, for all intent and purport looses his right to carry on business. Carrying on trade of liquor may not be a fundamental right, but it is a contractual right given to him in terms of the provisions of a statute. The terms and conditions are governed by statute. The violation thereof would lead to penal consequences. Interpretation of statute in the aforementioned situation rests on the principle of reasonableness, equity as well as good conscience.
A person may be held to be guilty even if the contents of ethyl alcohol exceed 8.1% marginally. He must, therefore, be in a position to know as to what extent he can go and to what extent he cannot. The matter cannot, thus, be left to an act of nature. A penal provision must be definite. Unless the statutory intention otherwise provides, existence of mens rea must be read into a penal statute. It must be a deliberate act and not an unintentional one, unless the statute says so explicitly or by necessary implication. The Act or the Rules do not say either. It is in that sense vague or unreasonable.
Once, thus, it is found to be ex facie unreasonable and unworkable, the court would not hesitate to strike down the said rule. We do so.
Hence, we hold that Rule 9(2) to be unworkable being vague in nature, unless read in the manner as suggested supra.
It is not in dispute that whereas if an offence is committed u/s 56 of the Act, renewal of licence is permissible; but in a case where a licensee faces a prosecution u/s 57, renewal of licence would be denied to him. Consequences of attracting the provisions of Section 57, thus, must also be judged from the said angle.
Thus, Civil Appeals arising out of Special Leave Petition (Civil) filed by the State of Kerala are dismissed and Civil Appeals arising out of Special Leave Petition (Civil) are allowed.
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2006 (12) TMI 509
Issues involved: Appeal against Service Tax levied on receipt of technical assistance under Technical Know-how Agreement for manufacture of telephone equipment.
Summary:
Issue 1: Liability for Service Tax on receipt of technical assistance
The appeal arose from the confirmation of Service Tax on the appellant for receiving technical assistance under a Technical Know-how Agreement. The appellant argued that they cannot be levied with Service Tax for paying royalty as there was no provision in the Finance Act for the relevant period. The Tribunal noted that the amendment imposing Service Tax on technical know-how services came into effect from 16-8-2002, while the period in this case pertained to 1-4-2001 to 30-9-2001. The stay application was allowed based on this plea.
Issue 2: Classification of technical know-how services
The appellant's counsel referred to various rulings to support their argument that transferring technical know-how falls under consulting engineering services and not under 'Scientific and Technical Consultancy Services'. They cited precedents such as CCE v. Rubco Sales International and CCE v. Sun Metal & Alloys Ltd. to establish that the appellant does not fall under the category of 'Consulting Engineer'. The Tribunal, after considering the arguments and precedents, set aside the impugned order and allowed the appeal, stating that the appellant is not liable to pay Service Tax under the mentioned categories.
Conclusion:
The Tribunal ruled in favor of the appellant, holding that the receipt of technical know-how services was not liable for Service Tax during the relevant period. The appellant was found not to fall under the categories of 'Consulting Engineer' or 'Scientific and Technical Consultancy Services' based on the cited judgments, and the impugned order was set aside with consequential relief, if any.
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2006 (12) TMI 508
Tax liability arising out of the investments in Zero Coupon Bonds - scheme of deemed income - Book profit u/s 115JA - inadequacy of total income computed - difference between book value and acquisition price - HELD THAT:- The CBDT by its circular opined that interest on zero coupon bonds is not an interest in strict sense as it encompasses over certain period of time. The circular issued by CBDT are binding upon the authorities working under it. Similar view has been adopted by Hon’ble Supreme Court in the case of UCO Bank v. CIT [1999 (5) TMI 3 - SUPREME COURT], in the case of CCE v. Dhiren Chemical Industries [2001 (12) TMI 3 - SUPREME COURT] and in the case of Commissioner of Customs v. Indian Oil Corpn. Ltd.[2004 (2) TMI 66 - SUPREME COURT]. The entry by way of crediting the profit and loss account in respect of interest on zero coupon bonds is of notional credit and not in respect of interest accruing during the year. The bonds are maturing over long period of time and the entire income by way of difference between acquisition price and redemption price do not accrue to the assessee during the financial year.
Thus, though the assessee has credited the income, the same is not strictly in accordance with Part II and Part III of Schedule VI to the Companies Act, 1956. Hon’ble Supreme Court in the case of Apollo Tyres Ltd. v. CIT[2002 (5) TMI 5 - SUPREME COURT] held that the Assessing Officer has no power to rework the book profit if the profits are computed in accordance with Part II and Part III of Schedule VI to the Companies Act, 1956. In the case of CIT v. Veekaylal Investment Co. (P.) Ltd. [2001 (2) TMI 117 - BOMBAY HIGH COURT] held that if the profit is not computed in accordance with Part II and Part III of Schedule VI to the Companies Act, 1956, the Assessing Officer has power to recompute such book profits. Thus, it can be held that if the Assessing Officer can amend the book profit if it is not in accordance with Part II and Part III of Schedule VI to the Companies Act, 1956, likewise, the assessee also can recompute the book profit for the purpose of section 115JA.
Since in the present case, the entire income by way of interest on zero coupon bond has not accrued during the year, the same cannot be considered as "to disclose the result of working of the company during the financial year" as provided under Part II and Part III of Schedule VI to the Companies Act, 1956. We accordingly hold that the notional income by way of interest on zero coupon bonds has to be excluded while computing book profits as per section115JA of the Act.
In the result, the appeal is partly allowed.
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