Iron and steel structures manufactured and captively used for the installation of a sugar manufacturing factory cannot be called capital goods to avail of exemption in excise duty, the Supreme Court ruled last week in the case, Saraswati Sugar Mills vs Commissioner of Central Excise, Delhi. This mill wanted to modernise its plant. Certain items which are accepted as capital goods required the support of structural support for their installation. So the mill manufactured iron and steel items for its own purpose. The mill then claimed excise exemption for the latter items claiming that they were capital goods for captive consumption. It was not allowed by the authorities and the tribunal, leading to the appeal. The Supreme Court, after analysing the function of the iron and steel structures, concluded that they were not components of the machinery used in the installation of the sugar plant nor were they essential to run the main plant.
Service tax on SIM cards
The Supreme Court last week dismissed the appeal of Idea Mobile Communications Ltd against the ruling of the Kerala high court on the question whether the value of SIM cards sold by the company to their mobile subscribers is to be included in taxable service under the Finance Act, 1994, which provided for levy of service tax on telecommunication service, or whether it is taxable as sale of goods under the Sales Tax Act. The high court had held that service tax is payable inasmuch as SIM card has no intrinsic sale value and it is supplied to the customers for providing mobile service to them. Upholding the high court view, the Supreme Court explained that the value of SIM cards formed part of the activation charges as no activation is possible without a valid functioning of SIM card and the value of the taxable service is calculated on the gross total amount received by the operator from the subscribers. The court also ruled that sales tax was not applicable, as accepted by the revenue authorities.
SC upholds ban on carrying luggage
Transport operators in Maharashtra and Karnataka lost their appeal in the Supreme Court last week, when it upheld the ban on carrying luggage on top of tourist vehicles. The Bombay high court had earlier ruled that tourist vehicles must provide luggage space at the rear or side of the vehicles under the Central Motor Vehicles Rules. The transporters challenged this rule and demanded an end to search of the vehicles and levy of compound fee from them for carrying luggage on top of the vehicles. Their arguments were rejected in the case, VRL Logistics Ltd vs State of Maharashtra.
SC corrects calculation of compensation in road death
The Supreme Court has set aside the ruling of the Allahabad high court which had reduced the compensation awarded to the widow of a person who died in a road accident. The motor accident claims tribunal had granted Rs 24 lakh as compensation for the accidental death of a bank manager. However, the insurance company appealed to the high court. It reduced the amount considering that if he had lived, he would have had to pay income tax at the rate of 30 per cent. The widow appealed to the Supreme Court arguing that the prospective income tax should not have been calculated to reduce the compensation amount and the tribunal did not take into account the future prospects of her husband who was only 46 years old at the time of his death. The Supreme Court stated that according to its earlier rulings, income tax should be considered while calculating the compensation. But future prospects should also have been considered. The tribunal did not consider either the future prospects or the income tax deductions. The high court took into account only the income tax deductions. Both were wrong. The Supreme Court, while setting aside the high court judgment in the case, Ranjana Prakash vs Divisional Manger, restored the original amount awarded by the tribunal considering both factors, offsetting one against the other.
Wrangle over Philips trademark
A division bench of the Delhi high court last week dismissed the appeal of Kunj Aluminium Ltd which had a trade mark dispute over the word ‘Philips’ with another manufacturer, Koninklijke Phillips Electricity NV. Kunj named its pressure cooker Philips, which was objected to by the other company before the Registrar of Trade Marks, pointing out that it was selling electric goods with Philips trade mark. The registrar rejected the objection. The aggrieved company moved the Intellectual Property Appellate Board, which ruled that Kunj could not use the same mark as the products are sold in the same shops and the consumer would mistake the product of one company for that of the other. Against this, Kunj appealed to the high court. Dismissing it, the high court stated that a “common ordinary buyer with the usual imperfect memory would conceivably be misled into believing,when he sees a pressure cooker with the trademark Philips, asbeing the product of the same company which sells Philips bulbs, electric toasters, electric ovens etc.”