Transfer of mining lease for financial consideration is not permissible. A lessee can either operate or surrender the licence or transfer it with the permission of the authority. But, a lessee firm cannot sell its rights by transfer of shares, the Supreme Court has stated in the judgment, State of Rajasthan vs Gotan Lime Stone Udyog Ltd. In this case, the partnership had a lease for lime stone mining. It turned itself into a company and sold its entire shareholding to another, instead of operating the mine. The authorities cancelled the licence alleging conspiracy and violation of the rules.
When the company moved the high court, it held that there was no violation of the rules. Quashing the high court ruling, the Supreme Court observed that the corporate veil can be lifted when public interest is involved. In the present case, the lessee achieved indirectly what could not be achieved directly by concealing the real nature of the transaction. The court underlined that "no lessee can trade in mining rights by adopting a device of forming a private limited company and transfer of entire shareholding only with a view to selling the mining rights for private profit as has happened in the present case…Even in the absence of a government policy and irrespective of exercise of power in the past, transfer of lease for private benefit without corresponding benefit to the public or the state exchequer is not permitted."
Conflict of debt laws resolved
Govt can withdraw tariff incentives
The government can withdraw tariff concessions promised or granted to industries since it is a privilege, not a right. The industries cannot ask for legal enforcement of tax exemptions as a matter of right, the Supreme Court stated while dismissing the appeal of Kothari Industrial Corporation against the Madras high court judgment in favour of the Tamil Nadu Electricity Board. The concessions were given in 1976 for a caustic soda unit and in 1982 they were not given, as a new tariff law had come into force and the unit reportedly made profit. The firm challenged the denial of benefit in the high court, which dismissed its petition. Its appeal was dismissed observing that "it is for the state to determine what should be the policy for grant/refusal of concessional power at different points of time, not courts."
Discretion must be used fairly
The Supreme Court has stated that though the customs tribunal has wide discretion in the matter of punishment if a customs clearing agent has violated the licence rules, it should be exercised appropriately.
When there is serious violation of the regulations, a light punishment would not be enough, the judgment in the appeal case, Commissioner of Customs vs KM Ganatra & Co said. In this case, the firm along with others was accused of submitting forged shipping bills though no physical export had taken place. After an inquiry, the commissioner cancelled its licence. On appeal, the tribunal took a lenient view and suspended the order limited to three years. The authorities' appeal was allowed by the apex court, which stated that the inquiry report, which formed "the plinth of the order of the commissioner, demonstrates that by virtue of the transfer of the licence in contravention of the regulations, on many an occasion, immense financial loss has been caused to the revenue. As the factual matrix would exposit, it is a serious violation. The misconduct reflects a chain of acts. In such a situation, we are disposed to think that the discretion exercised by the tribunal is inappropriate."
'Cheques are not ornamental'
The question whether cheques that bounced were issued in discharge of a debt/liability or it was only a security resurfaced in the Supreme Court in its judgment, Don Ayengia vs State of Assam. In this case, two parties agreed on building a multi-storied tower but later terminated the project. Don had given Rs 10 lakh to the other partner and he wanted it back. The partner issued a promissory note offering to pay the amount in a month. He also issued five cheques as 'security'. The payment was not made on time and the cheques were tendered to the bank, which rejected them due to 'insufficiency of funds'. Don prosecuted his partner and the trial court sentenced him to one year simple imprisonment and imposed compensation of Rs 12 lakh. On appeal, the district court changed the order to a fine of Rs 2,000 and payment of Rs 12 lakh. The Gauhati high court set aside all these orders maintaining that the payment was as security. Therefore, Don appealed to the Supreme Court. It allowed the appeal stating that the cheques were towards the debt. It said: "The cheques were not ornamental but meant to be presented if the amount was not paid within the extended period."
Interest on excess I-T payment upheld
The Calcutta High Court last week ruled that the Income Tax Appellate Tribunal was justified in granting interest to Birla Corporation on refund arising due to excess payment on self-assessment. It also stated the relevant provision, Section 244A of the Income Tax Act, did not bar payment of interest on such refunds. The court thus dismissed the appeal of the Commissioner of Income Tax against the judgment of the tribunal. The revenue authorities argued the law did not provide for interest.
Rejecting their contentions, the high court stated when an assessee out of abundant caution pays tax after self-assessment, on which claim is accepted, resulting in refund, the assessee should be entitled to interest. The provision was inserted in the Act as a measure of rationalisation to ensure that the assessee is compensated by the government for monies legitimately belonging to the assessee and wrongfully retained by it.
When the company moved the high court, it held that there was no violation of the rules. Quashing the high court ruling, the Supreme Court observed that the corporate veil can be lifted when public interest is involved. In the present case, the lessee achieved indirectly what could not be achieved directly by concealing the real nature of the transaction. The court underlined that "no lessee can trade in mining rights by adopting a device of forming a private limited company and transfer of entire shareholding only with a view to selling the mining rights for private profit as has happened in the present case…Even in the absence of a government policy and irrespective of exercise of power in the past, transfer of lease for private benefit without corresponding benefit to the public or the state exchequer is not permitted."
Conflict of debt laws resolved
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While dismissing the appeals of Madras Petrochemicals Ltd in a complex litigation involving three high courts and debt recovery tribunals, the Supreme Court has laid down five rules clarifying the interplay of laws on debt recovery. According to them, the Sick Industrial Companies Act (Sica) will continue to apply in the case of unsecured creditors seeking to recover their debts from a sick unit. This is because this Act overrides the provisions of the Recovery of Debts due to Banks & Financial Institutions Act. A secured creditor of a sick unit can invoke Securitisation Act (Sarfaesi) notwithstanding Sica. The court laid down guidelines when the secured creditors who have separate claims cannot agree on recovery from the sick unit.
Govt can withdraw tariff incentives
The government can withdraw tariff concessions promised or granted to industries since it is a privilege, not a right. The industries cannot ask for legal enforcement of tax exemptions as a matter of right, the Supreme Court stated while dismissing the appeal of Kothari Industrial Corporation against the Madras high court judgment in favour of the Tamil Nadu Electricity Board. The concessions were given in 1976 for a caustic soda unit and in 1982 they were not given, as a new tariff law had come into force and the unit reportedly made profit. The firm challenged the denial of benefit in the high court, which dismissed its petition. Its appeal was dismissed observing that "it is for the state to determine what should be the policy for grant/refusal of concessional power at different points of time, not courts."
Discretion must be used fairly
The Supreme Court has stated that though the customs tribunal has wide discretion in the matter of punishment if a customs clearing agent has violated the licence rules, it should be exercised appropriately.
When there is serious violation of the regulations, a light punishment would not be enough, the judgment in the appeal case, Commissioner of Customs vs KM Ganatra & Co said. In this case, the firm along with others was accused of submitting forged shipping bills though no physical export had taken place. After an inquiry, the commissioner cancelled its licence. On appeal, the tribunal took a lenient view and suspended the order limited to three years. The authorities' appeal was allowed by the apex court, which stated that the inquiry report, which formed "the plinth of the order of the commissioner, demonstrates that by virtue of the transfer of the licence in contravention of the regulations, on many an occasion, immense financial loss has been caused to the revenue. As the factual matrix would exposit, it is a serious violation. The misconduct reflects a chain of acts. In such a situation, we are disposed to think that the discretion exercised by the tribunal is inappropriate."
'Cheques are not ornamental'
The question whether cheques that bounced were issued in discharge of a debt/liability or it was only a security resurfaced in the Supreme Court in its judgment, Don Ayengia vs State of Assam. In this case, two parties agreed on building a multi-storied tower but later terminated the project. Don had given Rs 10 lakh to the other partner and he wanted it back. The partner issued a promissory note offering to pay the amount in a month. He also issued five cheques as 'security'. The payment was not made on time and the cheques were tendered to the bank, which rejected them due to 'insufficiency of funds'. Don prosecuted his partner and the trial court sentenced him to one year simple imprisonment and imposed compensation of Rs 12 lakh. On appeal, the district court changed the order to a fine of Rs 2,000 and payment of Rs 12 lakh. The Gauhati high court set aside all these orders maintaining that the payment was as security. Therefore, Don appealed to the Supreme Court. It allowed the appeal stating that the cheques were towards the debt. It said: "The cheques were not ornamental but meant to be presented if the amount was not paid within the extended period."
Interest on excess I-T payment upheld
The Calcutta High Court last week ruled that the Income Tax Appellate Tribunal was justified in granting interest to Birla Corporation on refund arising due to excess payment on self-assessment. It also stated the relevant provision, Section 244A of the Income Tax Act, did not bar payment of interest on such refunds. The court thus dismissed the appeal of the Commissioner of Income Tax against the judgment of the tribunal. The revenue authorities argued the law did not provide for interest.
Rejecting their contentions, the high court stated when an assessee out of abundant caution pays tax after self-assessment, on which claim is accepted, resulting in refund, the assessee should be entitled to interest. The provision was inserted in the Act as a measure of rationalisation to ensure that the assessee is compensated by the government for monies legitimately belonging to the assessee and wrongfully retained by it.