Salaries of excise officials

LEGAL DIGEST

The Supreme Court last week allowed the appeal of Gupta Modern Breweries and ruled that the state could not demand from the distilleries payment of salaries of excise personnel posted at the factory.

The excise commissioner of Jammu and Kashmir had made such a demand from the distillery. The latter moved the high court against the demand, but its petition was dismissed.

However, the Supreme Court set aside the high court judgement and stated: "Imposition of tax or fee on citizens for services that the state renders to itself and not to the tax payers is clearly impermissible, arbitrary and unjustifiable."

It further held that in this case, the levy was a tax which required legislative sanction and it was not a fee as argued by the state.

Puffs as 'prasadam'

The Supreme Court last week stated that puffs prepared from cereals could not be classified as 'prasadam' for excise purposes. It asked the excise tribunal to reconsider the case of Adhunik Food Products Ltd, which produces 'puffs' from cereals, like wheat and soya nuts.

The department had issued a show-cause notice demanding Rs 2.31 crore as duty for five years for misdeclaration of the products. It declared the product as 'prasad'.

The department stated that the product was sold under the brand name Bonton, as breakfast cereals high in protein and low in cholesterol, to five-star hospitals and public schools.

When the company challenged this assessment before the tribunal, the latter delivered a judgement which did not deal with the main legal issues. Therefore, the Supreme Court remanded the matter after pointing out the main issues to be decided by the tribunal.

Sale of ornaments by banks

Banks and other financial institutions selling pledged ornaments would come under the definition of "business" and they would be considered as dealers under the Andhra Pradesh General Sales Tax Act, the Supreme Court has held in the Govt of AP vs Corporation Bank case.

The commercial tax officer issued a demand notice to the bank for tax on turnover of auction sale of jewelry. The bank challenged it in the high court arguing that sales tax was not applicable to banking transactions.

According to the 1957 state law, as amended in 1996, the meaning of "dealer" was amended to include banks, financial institutions, insurance companies and the like.

Therefore, there was no doubt about the position of the financial institutions now. However, the court granted relief to the bank as the sale took place before the amendment to the law.