Pride Foramer's appeal upheld

LEGAL DIGEST

The Supreme Court last week dismissed four appeals of the Commissioner Customs of Mumbai against the judgment of the Customs, Excise & Service Tax Tribunal (CESTAT) rejecting its demand of duty against Pride Foramer, owners of oil well drilling rigs and drill ships.

The foreign company had entered into an agreement with ONGC for leasing a jack-up rig for oil exploitation off the Indian coast. When it entered the territorial waters, the value of the rig was declared as $17,628,690.

After an investigation by the Customs Department, the commissioner held that the value was in fact $32.78 million. He ordered the confiscation of the rig, imposed a fine and penalty in view of alleged suppression of facts and misdeclaration of value.

However, on appeal by the company, the tribunal held that the computation done by the commissioner was not correct and set aside the duty and penalty. The Customs Department came on appeal to the Supreme Court, which upheld the tribunal's view.

'It's a register, not a computer'

The Supreme Court last week set aside the judgment of the Bombay High Court in the State of Maharashtra vs Bradma of India Ltd case and ruled that the electronic cash registers the company manufactured was liable to a higher sales tax in the state.

The dispute was whether the machine was a mere electronic cash register or whether it was a computer as it had many additional features like stock analysis and item-wise analysis.

The revenue authorities maintained that it was a cash register. This view was accepted by the Sales Tax Department. However, the high court held that the machine should be classified as "computer and component parts". The state government appealed to the Supreme Court which agreed with the revenue authorities.

Bhuna Mills case sent to tax tribunal

The Supreme Court has remitted to the Income Tax Appellate Tribunal, Delhi, a dispute over deduction of interest on payment of debts for assessment of income tax in Bhuna Cooperative Sugar Mills vs Commissioner of Income Tax.

The company had showed losses during the two relevant years and declared Rs 1.5 crore as interest accrued on dues to its creditors. The amount had been debited from the profit and loss account.

The tax authorities disallowed the deduction. The firm asserted that it was entitled to deduction of interest payable on loans taken by it from bodies other than the financial institutions as provided under Section 43B(d) of the IT Act.

Since the appellate authorities and the Punjab and Haryana High Court rejected this view, the Supreme Court asked the tribunal to review the factual details and decide the issue once again.

Irregular regularisation

When a worker is appointed for a particular scheme, he does not derive any legal right to be regularised in the service after the project has been completed, the Supreme Court has held in the Dhampur Sugar Mills Ltd vs Bhola Singh case.

The completion of 240 days of continuous service in a year may not by itself be a ground for directing regularisation under the Industrial Disputes Act.

In this case, a large number of persons were recruited as trainees and apprentices in a Uttar Pradesh government scheme. After the completion of the project, their services were terminated. A dispute arose over the issue and the labour court upheld their termination.

On appeal, the Allahabad High Court held that the termination amounted to unfair trade practice. The Supreme Court overruled the high court view and ruled that the termination of services became co-terminus with the scheme and the workers cannot be ordered to be reinstated.