Apex court criticises Cegat

LEGAL DIGEST

The Supreme Court has criticised Customs Excise and Gold Appellate Tribunal (Cegat) for departing from its own earlier rulings and granting excise benefits to two companies, which make rubber seats for motor vehicles.

The observations were made in the judgment in the Collector of Central Excise vs Matador Foam & Sapna Foam Udyog Ltd case. The court said judicial discipline required that the tribunal followed its own judgments.

If a Bench could not agree with the precedents of co-ordinate Benches, it should be referred to a larger Bench. This principle was not followed in these cases. The dispute was with regard to the excise tariff item on rubber seats.

The appellate authorities demanded that they be classified under 94.01 whereas the companies insisted that the correct classification was under 40.08. Cegat allowed the companies' appeals.

The authorities moved the apex court. It overruled the Cegat judgment, pointing out the tribunal's own earlier judgments. It said seats were listed in Chapter 90 and there was no scope for doubt on this point.

Andhra High Court order set aside

The Supreme Court has overruled the Andhra Pradesh High Court and held that raw materials, transportation charges and agent's commission paid by a company should altogether be calculated in the turnover for the state sales tax.

The apex court thus allowed the appeal in the State of AP vs AP Paper Mills case. The question was whether the transportation charges and agent's commission could be counted as turnover under Section 6-A of the State Sales Act.

The company bought hard wood as raw material from unregistered dealers through agents. It paid contract rates, which included the cost of raw materials, transportation charges and the commission. In its tax returns, the company showed only the cost of the raw materials.

The tax authorities issued a showcause notice on this omission. In the appeals, the tribunal and the high court gave rulings in favour of the company. But the Supreme Court set aside those judgments and asserted that the disputed items should be included in the turnover.

Apex court order in Upper Ganges case

The Supreme Court has set aside the jugment of the Allahabad High Court, which had allowed interest at the rate of 10 per cent to Upper Ganges Sugar & Industries Ltd in a dispute over calculation of rebate for sugar.

The company claimed rebate by calculating excess on excess production. The assistant collector maintained that the rebate could be claimed only on excess of average production.

The tribunal allowed part of the claim. Later, the company demanded interest on the sum granted for the period when it was withheld. Though it was rejected by the authorities, the high court allowed it.

On further appeal, the Supreme Court agreed with the government and said the company was not entitled to interest on the amount. The money was not withheld unjustifiably.

Therefore, the principle of equity would not apply. In the absence of any provision in the contract or law, interest could not have been granted by the high court, the judgment said.

SC order on circuit breakers

The Supreme Court has set aside the Cegat order in the Commissioner of Central Excise vs Eswaran & Sons Engineers Ltd case. The question was whether the minimum oil circuit breakers should be classified under the sub-heading 8,535 or 8,537 of the Central Excise Tariff Act.

Four showcause notices were sent to the company demanding the differential duty. The company argued that switch gears always came under 8,535 as it was an equipment to protect electrical circuits.

The authorities maintained that this product performed other functions also. The dispute went to Cegat, which found in favour of the company. The authorities successfully appealed to the Supreme Court.