The Supreme Court last week dismissed the appeal of Usha Rectifier Corporation challenging the levy of central excise on products which were used for research and development. The company manufactures electronic equipment. It bought components and assembled them for R & D. The company argued that there was no manufacture of any product which was marketable and therefore it was not liable to pay excise duty. It further contended that the equipment were used within the factory and it was not taken out of factory gates. The item was dismantled within the factory itself. Rejecting the argument, the Supreme Court ruled that “even if the equipment were used for captive consumption and within factory premises, considering that they were saleable and marketable, duty was payable on the goods.” Apart from capitalisation of the manufacturing process in the balance sheet, the company’s assertion that the equipment was meant to save foreign exchange by developing indigenous products, was an admission that the goods were marketable. Such products would be “deemed to have been removed from the factory premises for consumption,” the judgment said.
Service providers under licence from the Airports Authority of India (AAI) have to pay service tax and the liability is not that of AAI, the Supreme Court ruled last week in the case, Sparkway Enterprises vs Commissioner of Central Excise. AAI had entered into a licence agreement with the firm for collecting airport admission charges on behalf of AAI at Calicut airport. The Central Board of Excise and Customs had clarified in 2004 that services provided at airports have to pay service tax. When the authorities demanded service tax from the firm, it refused to pay arguing that it was not permitted to collect service tax from the public and the duty was on AAI. The latter was the principal service provider and the assessee firm was only a collecting agent. Rejecting the contention, the Supreme Court stated that according to the licence agreement, the firm was obliged to pay all rates and taxes.
The conclusion of the Tribunal to the effect that the assessee has failed to prove the source of the cash credits cannot be said to be perverse, giving rise to a substantial question of law. The Tribunal being a final fact finding authority, in the absence of demonstrated perversity in its finding, interference therewith by this Court is not warranted.
Section 44 of the KGST Act is very clear and it stipulates that it is only the dealer of tea on whom the assessment has been made and it is only he who can claim for refund of tax. In view of the clear and unambiguous position, the appellant cannot claim for refund of tax collected from the seller of tea. It is clearly provided in the principles of Interpretation of Statutes that when the meaning and the language of a statute is clear and unambiguous, nothing could be added to the language and the words of the statute.
Joint CIT v. Rolta India Ltd. (SC) -Can interest under sections 234B and 234C be levied where a company is assessed on the basis of book profits under section 115JB? On this issue, the Supreme Court observed that there is a specific provision in section 115JB(5) providing that all other provisions of the Income-tax Act, 1961 shall apply to every assessee, being a company, mentioned in that section. Section 115JB is a self-contained code pertaining to MAT, and by virtue of sub-section (5) thereof, the liability for payment of advance tax would be attracted. Therefore, if a company defaults in payment of advance tax in respect of tax payable under section 1 15JB, it would be liable to pay interest under sections 234B and 234C. Therefore, interest under sections 234B and 234C shall be payable on failure to pay advance tax in respect of tax payable under section 1 15JB.
The Supreme Court last week set aside the ruling of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) and quashed the levy of anti-dumping duty imposed under a notification dated April 27, 2005. The order was passed in the appeal case, Automative Tyre Manufacturers Association vs Designated Authority (DA). The association represented domestic tyre manufacturing units, who import nylon tyre cord fabric from various countries, including China, as one of their basic raw materials for manufacture of tyres. The tribunal had dismissed the appeals, preferred by the association, Apollo Tyres, J.K. Tyres and Ningbo Nylon of China and confirmed the levy of anti-dumping duty in terms of the notification. It held that taxing is a legislative function and therefore, the DA need not hear the parties before taking action. Overruling this view, the Supreme Court declared that the order passed by the DA “offended the basic principle of natural justice. Therefore, the notification having been issued on the basis of the findings of the DA, who failed to follow the principles of natural justice, cannot be sustained.”
Supreme Court upholding the order of the Delhi High Court, denied reduction from book profit, for the purpose of Section 115JB (Section) of the Indian Tax Law, of the amount withdrawn from revaluation reserve. This is for the reason that such reserve was not added back to the net profit in the year of creation of revaluation reserve (year of creation), in terms of the requirement of the Section.
The Supreme Court stated last week that the debt recovery proceedings of Industrial Reconstruction Bank of India (IRBI) may be continued against a defaulting company by its successor, Industrial Investment Bank of India Ltd (IIBIL). The new institution was brought into being by the Industrial Reconstruction Bank (Repeal) Act in 1997. In this case, IIBIL vs Jain Cables Ltd, a loan was granted to the company. The latter did not meet the loan obligations and therefore, the creditor moved the Rajasthan high court. It held that the petition was not maintainable because it was moved under the repealed law. IIBIL therefore appealed to the Supreme Court. It overruled the high court. It stated that the provisions of the 1997 Act made it clear that any cause of action which arose before 1997 and pursued by IRBI could be continued and enforced by IIBIL. The case could be pursued as if the 1997 Act had not been enacted, the judgement said.
The compensation for land acquired should be based on the fair market value received for similar land in the neighbourhood, but not sold in auction, the Supreme Court has asserted in the case, Karnataka Housing Board vs Land Acquisition Officer. This, said the court, was because auction sales stood on a different footing. In auction, there is an element of competition, triggered by “human ego, and desire to do better than other competitors.” This leads to high prices. On the other hand, when the auction is by banks, financial institutions or courts, “there is an element of distress, a cloud regarding title, and a chance of litigation.” These factors depress the price. Therefore, auction price should not be the criterion for calculating compensation for acquired land, the court said.
This appeal, by special leave, at the instance of the Revenueis directed against the judgment and order dated 27th June, 2001 delivered by the High Court of Gujarat at Ahmedabad in Income Tax Reference No. 44 of 1986. By the impugned judgment, the High Court has answered the following questions
