<b>Brief case:</b> Judges' dilemma in torts claims

A weekly selection of key court orders

Judges’ dilemma in torts claims

Evaluating human life in economic terms is a challenge faced by judges in claims of torts. This dilemma was reflected in the judgments delivered in recent weeks by the Supreme Court and the high courts. The Supreme Court enhanced the compensation for an accident victim nearly four times, rejecting the computation of loss of income adopted by the motor accident claims tribunal. In this case, Sandeep Khanuja vs Atul Dande, a 30-year-old chartered accountant lost 70 per cent of his earning capacity in a road accident. The tribunal awarded him Rs 5 lakh, the Chhattisgarh High Court raised it to Rs 6 lakh. On his further appeal, the Supreme Court fixed the amount at Rs 20 lakh. In another case, Oriental Insurance Co Vs Swapna Nayak, the court awarded Rs 3.75 crore for the death of an IT executive working in the US, who came to Odisha on a holiday. When an eight-year-old boy lost both his arms due to electrocution caused by negligence of the Himachal government, he was awarded Rs 1.25 crore in the case, HP Vs Naval Kumar. When a woman in a marriage party was electrocuted due to the negligence of the Madhya Pradesh electricity authorities, the compensation determined by the MP High Court last week was Rs 25,000 (Chairman Vs Kamla Bai). Last month the Calcutta High Court blamed the lawmakers for not correcting typing/arithmetic errors in a chart to calculate damages in the Motor Vehicles Act for over two decades, confounding the courts (National Insurance vs Mainak Ghosh).

SMEs’ demand for tax benefit denied 

Small-scale units situated in panchayats declared as industrial area cannot claim tax exemption merely because the area has been declared as such by the state government. There should be another notification under the Article 243(Q) of the Constitution, which mandates setting up of local authorities. In this case, MGR Industries Association Vs state of UP, members of the association demanded tax exemption as it was an industrial area as declared by the state government. But the government maintained that though the area has been declared as an industrial area under the UP Industrial Area Development Act, no notification having been issued as industrial township within the meaning of Article 243Q(1), the local authorities are entitled to realise tax and the units cannot claim exemption. The court cited earlier judgments relating to other state industrial laws which laid down the same principle. 

Fresh tender called due to delays

The Supreme Court has asked the Nagaland government to invite fresh tenders for building a 330-km-long road which could not be completed within reasonable time by the contractor. It started as a public interest litigation, titled Union of India vs Hetovi Kappo, seeking to complete the project which was stalled due to allegations against the contractor. The court stated that since the construction of the road, connecting a village to the national highway, has stopped and it would take nearly four years to complete it the government should retender the work.  

Repacking gas is not manufacture

The Supreme Court has dismissed the appeal of the Commissioner of Central Excise against Vadilal Gases Ltd, raising the question whether repacking and mixing of industrial gases amounts to manufacture, which attracts higher duty under the Tariff Act. According to the law, labelling or relabelling of containers and repacking from bulk packs to retail packs or the adoption of any other treatment to render the product marketable to the consumer, shall amount to 'manufacture’. In this case, the company received liquefied nitrogen and argon in bulk in cryogenic tankers. They are re-gassified and packed in smaller cylinders for retail sale. Some other gases are also repacked and labelled with details by the sister company which does the marketing. The court noted, after examining the process in this case, that there was no manufacture. 

It also cited a circular of the finance ministry clarifying that an activity such as simply transferring the material from one container to another container may not be categorised as manufacture, though it depends on the facts of the case.

Compensation for illegal acquisition

The Calcutta High Court last week asked the West Bengal government and the land acquisition collector to pay compensation and occupation charges to Punalur Paper Mills for occupying its premises in central Kolkata since 1998 through an illegal land acquisition. The premises were acquired in 1973 for the offices of Sugar Industries Development Corporation and the notification expired in 1998. Then by another notification in 2000, the premises were acquired while the corporation continued to hold the property. The mills challenged the acquisition invoking the urgency clause, while the government justified it and blamed the mills for not allowing it to measure the premises. It also raised objection to a sick company to approach the high court. Rejecting these arguments, the high court observed that no compensation was paid and there was no urgency when the premises were occupied for long years. 

The acquisition was “bad, illegal and without justification.” The government was directed to vacate the premises and hand it over to the company within two months.

Challenge to tobacco rule dismissed

The Patna High Court last week dismissed the petition of Prabhat Zarda Factory India challenging the Chewing Tobacco and Un-manufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules notified by the central government. According to the rule, the excise duty is determined not by the actual production but on the basis of the total manufacturing capacity of the unit. This rule along with heavy duty has affected the industry all over the country and it was against the right to trade. Rejecting the arguments, the high court stated: “The manufacturing speed is relevant for determining the production capacity of a factory. It is not unreasonable or arbitrary without any nexus of the objective to be achieved. The objective for compound levy is to avoid evasion of excise duty,” the court said.