SC's stand on dishonoured cheque

LEGAL DIGEST

The Supreme Court has tightened the rule against the drawers of cheques, which are dishonoured for want of sufficient balance in the bank account. They cannot avoid service of notice by the payee by making themselves scarce, according to the judgment, C C Alavi Haji vs Palapetty Muhammed.

It explained: "Any drawer who claims that he did not receive the notice sent by post, can, within 15 days of receipt of summons from the court make payment of the cheque amount and submit to the court that he had made payment and therefore the complaint under Section 138 of the Negotiable Instruments Act is liable to be rejected. A person who does not pay within 15 days cannot obviously contend that there was no proper service of notice by ignoring the statutory presumption under the General Clauses Act and the Evidence Act."

Once the payee dispatches the notice by registered post with correct address of the drawer of the cheque, the requirement of notice under the above Acts stands complied with and it could be presumed that the drawer got notice. Otherwise, unscrupulous elements would dodge notice and make it impossible for the authorities to prosecute them.

SC defines 'manufacture'

The question whether plants and machinery assembled at site amounted to manufacture and therefore attracted excise duty arose in three appeals before the Supreme Court in the case, Commissioner of Central Excise vs Cethar Vessels Ltd.

In one case, the firm erected a boiler by assembling various components and parts. In another, it was the erection related to membrane cell technology. The third related to a solvent extraction plant. The revenue authorities maintained that fabrication of such plants out of duty-paid, bought-out items amounted to manufacture of a new marketable commodity and therefore excise duty was payable.

However, the firms moved the Customs, Excise & Gold (Control) Appellate Tribunal, which ruled that these plants were basically systems comprising various components and were thus in the nature of systems and were not machines as a whole. Therefore, they were not excisable.

The Supreme Court stated that the law on this point has been laid down by it in the Virdi Brothers case in 2006 and it should be followed. Therefore, the court remitted the disputes to the tribunal for determining the issues on the facts of each case.

I-T appellate tribunal order set aside

The Supreme Court has set aside the order of the income tax appellate tribunal in the case, Commissioner of Income Tax vs Hindustan Zinc Ltd. In this case, the government company was a producer of zinc concentrate, which was used captively.

In 1997, the material got accumulated and it could not be consumed. Since it could not be domestically consumed, it was exported at the London Metallic Exchange price.

The assessing officer maintained that there was no export in the financial year concerned and the decrease shown in the inventory was not in accordance with the accounting policy of the firm. Therefore, an addition was made to the income of the firm. The tribunal and the high court did not approve of it. Their decisions were reversed by the Supreme Court.