Emkay, Plyking denied excise exemptions

LEGAL DIGEST

The Supreme Court has set aside the ruling of Cegat and denied excise exemptions given to small-scale units to two companies, which used the logo of a big manufacturer of the same product.

Emkay Investment Ltd and Plyking Ltd, which manufacture plywood, used the brand/logo "Merino" along with the brand name "Pelican" on their products. The authorities denied the excise benefit to the two companies as they were using the logo "Merino" belonging to a big manufacturer.

They also confiscated the goods of the two companies. When the dispute was taken to Cegat, it gave a ruling in favour of the two companies. The Commissioner of Central Excise, Kolkata, moved the Supreme Court. The apex court ruled that the two companies were not entitled to the benefit as they used the logo of the big unit.

Sarabhai Chemicals wins appeal in apex court

Sarabhai Chemicals has won its appeal in the Supreme Court against the action taken by the authorities for excise evasion. But it was because of the negligence of the authorities. The company was selling bulk drugs to manufacturers of cigarettes, soaps, ceramics and rubber and claiming excise exemption given to bulk drugs.

Though the authorities were aware of the company's practice, it took too long to take action. Therefore, the action was "time-barred". The apex court said a substance like sorbitol solution might have several uses other than in drugs and pharmaceuticals.

It became eligible for exemption from excise only when it was actually actually in the manufacture of drugs or medicines. By diverting them to non-pharmaceutical use, the company lost the benefit of exemption.

The excise department, however, was negligent in dealing with the problem though the gate passes and monthly returns indicated the names of the consignees, which were non-pharmaceutical companies. The court said though the authorities could have taken action within the prescribed time, they let the time go by.

Inspection fee on money-lenders justified

The Supreme Court has dismissed the appeals of the money-lenders of Maharashtra challenging the imposition of inspection fee for the renewal of their licences (Sona Chandi vs State of Maharashtra).

They had argued that the government was not giving anything in return for the fee, and therefore it amounted to a tax, which it was not competent to charge. The court rejected this contention and upheld the new Section 9-A of the Bombay Money Lenders Act.

The judgment emphasised that the fee charged was regulatory in nature, meant to control and supervise the functioning of the money-lending business. It was intended to protect debtors like peasants, tenants and agricultural labour and salaried workers.

While the staff looking after this business has increased, the revenue from the licence fee and inspection fee has not been commensurate. Therefore, the court justified the imposition of the inspection fee.

India Agencies' appeal dismissed

The Supreme Court has dismissed the appeal of India Agencies, Bangalore, against the Karnataka High Court judgment approving the denial of concessional rate of central sales tax by the authorities to the company.

The company had lost C-Forms and filed only duplicate forms while claiming the concessional rate. The authorities, therefore, rejected the application. This was approved by the high court.

The company moved the Supreme Court. The court said the purpose of prescribing the original form was that there should not be suppression of any inter-state sales by the selling dealer.

It was not a mere formality or technicality. It was meant to prevent misuse of forms, fraud and collusion to evade payment of tax. Such a rule should be given a strict interpretation.

Though the rule may cause hardship to an honest dealer who genuinely lost the original forms, the court cannot do anything about it. It is for the legislature to soften the rigour of the provision, the judgment underlined.