There is a mass of judgments on the question whether a state government can levy tax on works contracts which involve elements of both service and sale of goods. The power to impose service tax belongs to the Centre while the state can demand tax on goods used in the works. But separating the aspects of service and goods has been the intricate task of the Supreme Court for decades. In the latest case last week, the Karnataka government was third time lucky and the court upheld the state levy in its judgment in state of Karnataka vs Pro Lab.
The Sales Tax Act imposed a levy on processing and supply of photographs. That was challenged by the firm in the high court, which struck down the provision as it was held to be predominantly a service contract with negligible element of goods. The state amended the law, and even a constitutional amendment had taken place since the question was originally raised.
Still the state government was not successful in convincing the courts that it could imposed the levy. This time, the Supreme Court resolved the controversy by ruling that after the 46th amendment to the Constitution in 1982, Article 366 "empowered state legislature to enact a law taxing sale of goods". In this particular case, supply of photo goods could be separated from the rest of the contract and, therefore, the state levy was valid.
The Supreme Court last week set aside the judgment of the Kerala High Court and ordered the state government to hand over 10 cashew factories acquired by it to their owners. The court held that the legal provision in the Kerala Cashew Factories (Acquisition) Act enabling the take-over was unconstitutional. The judgment in S T Sadiq vs state of Kerala stated that the provision brought by an amendment sought to overcome some of the rulings of the Supreme Court.
The legislature can change the basis on which a decision is given by a court and thus change the law in general, which will affect a class of persons and events at large. It cannot, however, set aside an individual decision between two parties which affected their rights and liabilities. The legislature cannot exercise judicial power, the judgment said.
Guess work in calculating loss
When there is a breach of contract and neither party produces evidence of the actual amount of losses suffered by it, the court has to do some guesswork to arrive at the compensation figure. In the judgment delivered last week, the Supreme Court cut the gordian knot by awarding Delhi Development Authority half the amount it claimed against a contractor, Construction & Design Services.
The firm did not complete a public works project on time and therefore the contract was terminated and Rs 20 lakh in damages was demanded. The firm raised several objections and asserted that DDA did not suffer any loss. DDA contended that it had suffered a loss of over Rs 20 lakh. However, neither party produced hard evidence to substantiate its claim. The court stated that in such a situation, it has to do "guess work" and awarded half the amount claimed by DDA against its contractor.
More compensation than asked for
In a motor accident claim, the court can invoke the "fair and just" clause in the Motor Vehicles Act and award compensation higher than asked for, the Supreme Court stated last week in its judgment, Jitendra vs Kasam Daud. A 22-year-old woman, who was maintaining her family with embroidery work, was fatally run over by a tempo.
Her husband and relatives sought Rs 2.96 lakh from the motor vehicle accident tribunal. It granted Rs 2.24 lakh only. On appeal, the Gujarat High Court reduced the compensation to Rs 2.09 lakh. On further appeal, the Supreme Court enhanced the amount to Rs 6.47 lakh. The judgment stated that the courts below had failed to follow the principles laid down by it in computing compensation.
Power of attorney in cheque bounce
Any employee of a company cannot file a criminal complaint about a cheque that was dishonoured by a bank under the Negotiable Instruments Act. There must be proper authorisation and power of attorney in that behalf, the Supreme Court stated in a batch of appeals titled, A C Narayan vs state of Maharashtra. In one case from Andhra Pradesh, an employee of a company filed the complaint about bounced cheques for recovery of debts.
However, according to the company resolution, only the managing director or anyone designated could file complaint. Therefore, the complaint was rejected by the magistrate and it was upheld by the Supreme Court. In another case from Maharashtra, the magistrate started criminal process on the complaint of a person who claimed that she had power of attorney on behalf of several others.
The drawer of the cheques challenged the prosecution in the Bombay High Court which dismissed the objection. But on appeal, the Supreme Court found that the courts below had not examined the power of attorney nor its content. Therefore, the prosecution was quashed.
When property value zooms
If the value of a property involved in a suit goes up, an application can be made to correct the figure according to the current market value. In this case, Mount Mary Enterprises vs Jivratna Medi Treat Ltd, the Bombay High Court did not allow the buyer of the property to change the earlier price of Rs 14 lakh to Rs 1.20 crore. On appeal, the Supreme Court set aside the high court judgment and ruled that if the property was undervalued initially, it may be allowed to be corrected if it did not result in injustice to the other party and is done in good faith.
Workers win after three-decade wait
After three decades of litigation, the Supreme Court last week directed the industrial tribunal in Dhanbad to decide the claims of each of 150 workers for retrenchment compensation. They were employed by public sector Bharat Coking Coal Ltd through a contractor for building a washery in Sudamdih.
The work was over in 1980. Their demand to be absorbed in the company was rejected, leading to an industrial dispute. Their pleas were rejected by the tribunal. However, the issue of compensation was not settled all these years. The Supreme Court ended the dispute by asking the tribunal to decide the entitlements within six months make payment accordingly.
The Sales Tax Act imposed a levy on processing and supply of photographs. That was challenged by the firm in the high court, which struck down the provision as it was held to be predominantly a service contract with negligible element of goods. The state amended the law, and even a constitutional amendment had taken place since the question was originally raised.
Still the state government was not successful in convincing the courts that it could imposed the levy. This time, the Supreme Court resolved the controversy by ruling that after the 46th amendment to the Constitution in 1982, Article 366 "empowered state legislature to enact a law taxing sale of goods". In this particular case, supply of photo goods could be separated from the rest of the contract and, therefore, the state levy was valid.
More From This Section
Cashew unit acquisition quashed
The Supreme Court last week set aside the judgment of the Kerala High Court and ordered the state government to hand over 10 cashew factories acquired by it to their owners. The court held that the legal provision in the Kerala Cashew Factories (Acquisition) Act enabling the take-over was unconstitutional. The judgment in S T Sadiq vs state of Kerala stated that the provision brought by an amendment sought to overcome some of the rulings of the Supreme Court.
The legislature can change the basis on which a decision is given by a court and thus change the law in general, which will affect a class of persons and events at large. It cannot, however, set aside an individual decision between two parties which affected their rights and liabilities. The legislature cannot exercise judicial power, the judgment said.
Guess work in calculating loss
When there is a breach of contract and neither party produces evidence of the actual amount of losses suffered by it, the court has to do some guesswork to arrive at the compensation figure. In the judgment delivered last week, the Supreme Court cut the gordian knot by awarding Delhi Development Authority half the amount it claimed against a contractor, Construction & Design Services.
The firm did not complete a public works project on time and therefore the contract was terminated and Rs 20 lakh in damages was demanded. The firm raised several objections and asserted that DDA did not suffer any loss. DDA contended that it had suffered a loss of over Rs 20 lakh. However, neither party produced hard evidence to substantiate its claim. The court stated that in such a situation, it has to do "guess work" and awarded half the amount claimed by DDA against its contractor.
More compensation than asked for
In a motor accident claim, the court can invoke the "fair and just" clause in the Motor Vehicles Act and award compensation higher than asked for, the Supreme Court stated last week in its judgment, Jitendra vs Kasam Daud. A 22-year-old woman, who was maintaining her family with embroidery work, was fatally run over by a tempo.
Her husband and relatives sought Rs 2.96 lakh from the motor vehicle accident tribunal. It granted Rs 2.24 lakh only. On appeal, the Gujarat High Court reduced the compensation to Rs 2.09 lakh. On further appeal, the Supreme Court enhanced the amount to Rs 6.47 lakh. The judgment stated that the courts below had failed to follow the principles laid down by it in computing compensation.
Power of attorney in cheque bounce
Any employee of a company cannot file a criminal complaint about a cheque that was dishonoured by a bank under the Negotiable Instruments Act. There must be proper authorisation and power of attorney in that behalf, the Supreme Court stated in a batch of appeals titled, A C Narayan vs state of Maharashtra. In one case from Andhra Pradesh, an employee of a company filed the complaint about bounced cheques for recovery of debts.
However, according to the company resolution, only the managing director or anyone designated could file complaint. Therefore, the complaint was rejected by the magistrate and it was upheld by the Supreme Court. In another case from Maharashtra, the magistrate started criminal process on the complaint of a person who claimed that she had power of attorney on behalf of several others.
The drawer of the cheques challenged the prosecution in the Bombay High Court which dismissed the objection. But on appeal, the Supreme Court found that the courts below had not examined the power of attorney nor its content. Therefore, the prosecution was quashed.
When property value zooms
If the value of a property involved in a suit goes up, an application can be made to correct the figure according to the current market value. In this case, Mount Mary Enterprises vs Jivratna Medi Treat Ltd, the Bombay High Court did not allow the buyer of the property to change the earlier price of Rs 14 lakh to Rs 1.20 crore. On appeal, the Supreme Court set aside the high court judgment and ruled that if the property was undervalued initially, it may be allowed to be corrected if it did not result in injustice to the other party and is done in good faith.
Workers win after three-decade wait
After three decades of litigation, the Supreme Court last week directed the industrial tribunal in Dhanbad to decide the claims of each of 150 workers for retrenchment compensation. They were employed by public sector Bharat Coking Coal Ltd through a contractor for building a washery in Sudamdih.
The work was over in 1980. Their demand to be absorbed in the company was rejected, leading to an industrial dispute. Their pleas were rejected by the tribunal. However, the issue of compensation was not settled all these years. The Supreme Court ended the dispute by asking the tribunal to decide the entitlements within six months make payment accordingly.