Joint application for trade tax benefits

LEGAL DIGEST

The Supreme Court has ruled that a company with multiple units can make a joint application for all of them for the trade tax benefits, if they are available.

The trade tax tribunal in Uttar Pradesh had held that the company should make separate application for each unit. The company, Dhampur Sugar Mills Ltd, moved the Allahabad High Court against that decision.

The high court held in favour of the company. The state commissioner of trade tax appealed to the Supreme Court, which held in favour of the company.

According to the state, the notification of 1997 granted tax exemptions only to individual units, which made a fixed capital investment of Rs 50 crore or more in expansion, modernisation or diversification or backward integration.

It stressed that the units could not be clubbed for demanding the benefit. Rejecting this view, the Supreme Court interpreted the notification liberally and ruled that separate applications were not necessary.

A company, which had invested Rs 50 crore, should not be denied the benefit merely because the money was not spent on a single unit, the judgment emphasised.

The Supreme Court, while hearing the appeal of Parle Biscuits Ltd against an order of the Patna High Court, has asked the deputy commissioner of sales tax, Bihar, to examine the packing material used by the biscuits company to see whether it was eligible for lower central sales tax.

As against the concessional rate of 4 per cent for cardboard box, it had been charged 10 per cent on purchase of packing boxes. The company had asked for inclusion of all kinds of packing materials for exemption, but the authorities rejected the prayer for including packing materials made out of paper, such as cartons, corrugated boxes and the like.

The company moved the high court against the denial of benefit, without success. Hence the appeal. The Supreme Court said there could not be "universal application of any rigid standard for determining the question and has to be decided on the factual background of each case."

Therefore, the court asked the deputy commissioner to examine the packing material used by Parle and find out whether it fitted in with the definition of "carton" taking into account the product, which was packed.

Allowing the application of Maharashtra Distilleries Ltd, the Supreme Court has asked the Aurangabad Municipal Corporation to refund the octroi collected from the company with interest in 24 instalments. In an earlier judgment, the court had asked the corporation to refund Rs 3 crore.

But due to a technical error, the amount was not paid. The company moved the court again for the enforcement of the order. The corporation said the company had passed on the burden to the customers and, therefore, the refund would amount to unjust enrichment.

The court then asked the company to show that the burden had not been passed on to the customers. This was done with auditor's reports. This was accepted by the court and the authorities were ordered to repay the amount.

The Supreme Court has dismissed Tata Iron & Steel Company Ltd's (Tisco) appeal against the Patna High Court ruling, which had held that the Tata Main Hospital at Jamshedpur was an establishment under the Bihar Shops and Establishments Act.

The hospital was set up in 1908 for providing medical facilities to the Tata group companies employees. It also treated others for a nominal fee.

The labour authorities asked the management to register the hospital under the above Act. The hospital resisted it, arguing that it was a charitable institution and not a commercial establishment. The high court and the Supreme Court ruled against the company.

The Supreme Court said the company was doing business by charging the public. "We fail to understand how this activity of the hospital can be treated to be a charity," the judgment said.