Tata Cummins plea rejected

LEGAL DIGEST

The Supreme Court last week dismissed the appeal of Tata Cummins Ltd against the judgment of the Jharkhand High Court, denying sales tax exemption to its unit producing diesel engines and components.

The company had moved the high court seeking a declaration claiming set-off of sales tax in terms of the Jharkhand Industrial Policy 2001.

When the unit was in Bihar, the company was getting sales tax benefit under the Bihar Industrial Policy 1995 for purchase of raw materials.

After the reorganisation of the state in 2000, the new state of Jharkhand announced its own industrial policy with new cut-off dates and a five-year period for availing of the benefit.

Tata Cummins was denied benefits under this policy. Its challenge to the government action was dismissed by the high court as well as the Supreme Court.

Cost of production of intermediate products

The Supreme Court last week ruled that while evaluating the cost of production of intermediate products which are captively consumed in the factories of an assessee, the expenses of the factory could not be added.

The judgment was delivered in the appeal Commissioner of Central Excise, Pune vs Cadbury India Ltd. The products assessed were milk crumbs, refined milk chocolates and four other products manufactured in the factory and not sold in the market.

The authorities applied Rule 6(b)(ii) of the Central Excise (Valuation) Rules and included the labour cost, direct expenses, factory expenses, insurance premium, advertising expenses and interest for the valuation. The tribunal as well as the Supreme Court declared that this valuation was wrong.

ESI's appeals dismissed

The Supreme Court has dismissed three appeals moved by the Employees State Insurance (ESI) Corporation against the Allahabad High Court orders barring the corporation from demanding ESI contributions from three distilleries.

The high court had declared that no deduction shall be made from the employer or the employees provided the employers pay medical allowance instead.

The companies were providing medical facilities on their own and the workers were satisfied with it. This was done for about 18 years under interim orders of the high court. After the final judgment, the ESI has now been allowed to call for contributions under the ESI Act.

AP Rural Development Act upheld

The Supreme Court last week upheld the constitutional validity of the Andhra Pradesh Rural Development Act. A large number of firms challenged the levy of cess under the Act in addition to the purchase or sales tax paid by them.

They argued that the state had no power to levy the cess. The state argued that it was in fact a fee and therefore it had the power to levy it. The Supreme Court upheld the view of the high court which had upheld the validity of the Act and dismissed the petition.