Review of Customs on import of plans

LEGAL DIGEST

The Supreme Court last week asked Customs, Excise and Service Tax Appellate Tribunal (Cestat) to re-consider the question whether the import of drawings, designs, plans and such other documents, pursuant to agreements with foreign companies, would attract Customs duty.

There are conflicting decisions of the courts and Cegat about whether they can be classified as books, which are exempted, or goods. In the case of Commissioner of Customs vs Pearl Engineering Polymers, the Customs authorities had imposed a Rs 50-lakh fine on the chairman of the company, Rs 25 lakh on a director and Rs 1 crore on the company itself.

The company argued before the Supreme Court that drawings, designs and plans could be classified as printed books and, therefore, no penalty could be imposed on the company or directors for importing them from a German company with which it had a know-how arrangement. Cegat had accepted its contention, against which the authorities appealed to the Supreme Court.

Plea against Peerless move dismissed

The Supreme Court has dismissed the appeal of Bhagwati Developers against Peerless General Finance & Investment Company and ruled that Section 205 of the Companies Act allowed utilisation of reserve arising from revaluation of assets for issuing fully paid-up bonus shares.

Bhagwati Developers, one of the shareholders of Peerless, had filed a suit for a declaration that it was not entitled to issue bonus shares out revaluation reserve. The Calcutta High Court had ruled that the company was entitled to issue bonus shares out of revaluation reserve.

The Supreme Court dismissed the appeal of Bhagwati Developers after analysing the articles of association and provisions of the Companies Act.

Court rejects Kerala SEB's appeal

The Supreme Court last week dismissed the review petition of the Kerala State Electricity Board against Hitech Electrothermics & Hydropower Ltd. The state government had announced an incentive scheme for industries which started production before 1996.

The industry could not start production because the board did not give it electricity due to technical reasons. It started production only in 1998. Therefore, the board denied concessions. The high court dismissed the industry's petition.

On appeal, the Supreme Court held that the unit could not function because the board did not supply power. Therefore, the unit was entitled to the concession. The board moved a review petition. The Supreme Court heard it and confirmed its earlier judgment.

Consumer panel ruling overturned

If the LIC policy is backdated, the due date for the second payment will fall on that date and not when the first payment was paid. In this case, LIC vs Mani Ram, the first premium was paid on August 21, 1995 but the policy holder got the policy effected from April 28, 1995.

The insured person died in an accident on August 2, 1996. When the claim was made in the consumer forum, LIC insisted that the policy had lapsed as the second premium was due on April 28, 1996 and it was not paid even during the grace period of one month.

The claimant argued that it was due on August 21, 1996 as only then the premium would be due for the second year. The consumer forum and the consumer commissions accepted the latter view.

However, the Supreme Court set aside their orders and upheld the contention of the LIC. The LIC did not recover the payment already made to the claimant as it only wanted to settle the law on this point.