Notices to ITC illegal

LEGAL DIGEST

The Supreme Court held last week that the show-cause notices issued by the Commissioner of Central Excise, Mumbai, to ITC Ltd for amounts totalling Rs 91 crore were illegal as they were sent before the completion of the assessment proceedings. The court thus dismissed the appeal of the commissioner against the ruling of CEGAT which was in favour of ITC.

The question involved was whether completion of assessment proceedings was essential for issuance of such notices under Section 11-A of the Central Excise Act. The revenue authorities maintained that the notices issued prior to the finalisation of the provisional assessment were valid as a provisional assessment was also an order of assessment.

ITC, on the other hand, argued that Section 11-A was a penal provision and therefore, the procedures laid down must be strictly complied with. It can be invoked only when a duty has not been levied or paid or has been short-levied or short-paid. Such proceeding cannot be initiated without completing the assessment proceedings. This contention was accepted by the Supreme Court.

HC told to study validity

The Supreme Court has asked the Punjab and Haryana High Court to consider the legal validity of the new condition introduced by the Haryana Electricity Distribution Corporation under the Electricity (Supply) Act.

According to the condition, if a consumer company had defaulted in payment of energy charges, the buyer of the company has to clear the arrears before getting reconnection.

In this case, LLC Steel Pvt Ltd fell into arrears to the tune of Rs 64 lakh. It had mortgaged the undertaking to the state financial corporation. The latter took over the firm and sold it to Paramount Polymers Pvt Ltd. The electricity company asked the new company to clear the arrears as it had bought the old one on "as is where is" basis.

The new company moved the high court. It delivered a judgement without considering the validity of the new clause. However, the company was given conditional supply of energy.

Since the high court had not considered the validity of the condition, the Supreme Court remanded the case to the high court. Meanwhile, the apex court gave protection to the company for its energy needs, on the condition that it paid certain amount to the corporation till the issue was decided.

IMFL dealer's licence

The Supreme Court has dismissed the appeal of the Commissioner of Central Excise against the judgement of the Rajasthan High Court over the cancellation of licence of an IMFL dealer.

Manoj Ali was the highest bidder in the tender and he was granted the licence. He occupied the premises of the previous licensee. The liquor inspector surveyed the godown and found unauthorised stock. The licensee stated that they belonged to the previous licensee.

This was not believed and his licence was cancelled and the security worth Rs 4 crore was forfeited even before he started his business. The board of revenue and the high court held that this was illegal.

The revenue authorities appealed to the Supreme Court which cast doubts on the integrity of the inspector.

Directing the authorities to refund the entire security amount with interest, the Supreme Court said that initiation of a proceeding for cancellation of a licence leads to serious consequences and the officers' conduct should be above board.

"Forfeiture of security amount should not be held to be a logical conclusion on cancellation of licence. Licence should not be cancelled only because there has been some technical violation on the part of the licensee," the judgement emphasised.

Order modified

The Supreme Court has modified the order of the Calcutta High Court in the dispute between Everest Industries and the Board of Trustees for the Port of Calcutta. The company had taken land from the port trust for 30 years. It was renewable after 10 years with a hiked rent of 50 per cent.

However, after the alteration in the rent schedule, the rent was allegedly increased by more than 5,200 per cent and the company was also asked to pay a huge amount by way of premium and security.

The company challenged it in the high court arguing that the demand was arbitrary and violative of Article 14 of the Constitution. The single judge bench of the high court dismissed it.

On appeal, the division bench asked it to pay the enhanced rent till the issues are decided. It paid 80 per cent and complied with most of the directions of the high court.

In view of this, the Supreme Court stated that instead of bank guarantee for the rest of the amount, adequate security to the satisfaction of the registrar of the high court would be sufficient. The amount will be adjusted after the final decision of the high court.

TDSAT order upheld

The Supreme Court last week upheld an order of the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) and dismissed the appeal of Radio Mid Day West (India) Ltd for a single frequency across the country.

The tribunal had dismissed the petition of the FM channel, called Radio One, against the government's decision to change the frequency allocated to it in Mumbai.

The reason was that there should be a minimum difference in frequencies between two channels. The Supreme Court also rejected Radio One's plea for more time to switch over to the new frequency of 94.3 Mhz from the existing 92.5 Mhz.