Apex court strikes down Cegat order

LEGAL DIGEST

The Supreme Court last week struck down the Cegat order granting Customs benefits to Maestro Motors Ltd, earlier known as Sipani Automobiles Ltd. It had collaboration agreement with Rover of the UK for manufacture of Montego cars.

They imported 217 sets of cars consisting of body assembly, complete with accessories. In effect, they were importing the entire car in completely knocked down condition. The authorities classified the goods as cars and denied the benefits under Notification No 72/93 as it gave benefits only to parts and components.

Cegat, however, allowed the appeal of the company and held that it was entitled to the benefits. The Collector of Customs moved the Supreme Court.

It ruled that the imported goods would be eligible for the benefit only if they were components or parts. In this case, the pack as a whole is a car. In such a case, even the components would not be entitled to the exemption, the judgment said.

SC remits Maruti case

The Supreme Court last week remitted the case regarding the completely knocked down kits (CKD) Maruti Udyog Ltd had imported from its collaborator Suzuki Motor Company in the early days of the company.

The Customs authorities had held that the imported components being complete cars in CKD packs, had the character of the finished products.

However, Cegat ruled that the company was entitled to certain benefits under government notification. They are available to import of fuel efficient cars of an engine capacity not exceeding 1000 cubic cm.

The collector of central excise has to issue a certificate stating that the components were actually used in the manufacture of such cars. The Supreme Court remitted the matter to Cegat to verify whether such certificates had been produced by the company and to decide accordingly.

Reconsider order, Madras HC asked

The Supreme Court last week directed the Madras High Court to examine afresh the latter's judgment in the Bannari Amman Sugar Ltd vs Commercial Tax Officer case regarding withdrawal of benefits given to the company in the matter of purchase tax.

The government had discontinued the purchase tax exemption in case of mills, which exceeded the ceiling of Rs 300 lakh during the period of five years and the order was made retrospective. Two mills challenged this before the Tamil Nadu Taxation Special Tribunal.

It held that on the application of the principles of promissory estoppel and legitimate expectation, the withdrawal of the benefit was not legal. The state moved the high court, which held that the withdrawal of benefits was in order.

The mills appealed to the Supreme Court. It stated that the application of the two principles should be reconsidered by the high court. It also noted that the high court had relied on files produced by the state government to justify the change in policy. The mills did not get opportunity to present its side of the picture.

Kores India's appeal dismissed

The Supreme Court last week dismissed the appeal of Kores India Ltd against the assessment of excise duty on typewriter ribbons. The Customs, Excise and (Gold) Control Appellate Tribunal, southern Bench in Chennai, had upheld the demand for duty.

On the other hand, the New Delhi Bench of the tribunal held that duty was not payable, on the same set of facts. The company moved the Supreme Court against the order against it, arguing that while cutting the jumbo rolls of ribbons (210 metres) into small rolls (5 metres) for consumers, there was only processing and no manufacture.

The jumbo rolls had already suffered excise duty once. The Supreme Court rejected the argument and said the jumbo rolls and the small ones were different products and not interchangeable. In fact, the company had a separate unit to manufacture the spool version of the ribbons, the court said.