SC upholds re-agents classification

LEGAL DIGEST

Span Diagnostics Ltd and M/s J Mitra & Co have succeeded in their appeals against the orders of the Customs appellate tribunal, as the Supreme Court has upheld their classification of several blood grouping re-agents and lab re-agents.

J Mitra argued that six items under monoclonal antibodies should be under Heading 30.02 of the Central Excise Tariff (cultures of micro-organisms) whereas the authorities classified the products under 30.05 (pharmaceutical products).

The tribunal approved of the view of the authorities. It was reversed by the Supreme Court. J Mitra also succeed in a case relating to pregnancy test kits. In the case of Span Diagnostics, the Supreme Court allowed the claim of the company, following the ruling in the case of J Mitra, except in relation to three items.

SC rejects Orissa govt's appeal

The Supreme Court has rejected the Orissa government's view that the tobacco and tendu leaves merchants from West Bengal had to pay sales tax to the Orissa government.

The registered purchasers of the commodities from West Bengal argued that they were liable to pay only under the Central Sales Tax and not under the state law because it was inter-state trade.

Since trade in these commodities was a state monopoly, the purchasers had to buy them from the Orissa Forest Department Corporation Ltd, a state undertaking.

When the state government demanded tax, the purchasers moved the Orissa High Court. It cited the laws relating to tendu leaves and allowed the petitions. The Supreme Court upheld the high court's view.

Penalty on Taarika Exports upheld

The Supreme Court on Monday dismissed the appeal of M/s Taarika Exports against the order of the Customs authorities imposing a penalty on it under the Foreign Trade Act.

The company was told to pay Rs 45 lakh as penalty for not exporting goods, as also utilising the imported goods and failure to export within the stipulated time.

The regional licensing authority had issued an advance licence to the firm and it used the licence in full for import of raw materials but only a part of the finished goods was exported.

Therefore, there was a shortfall in the export obligation. The firm moved the Delhi High Court, arguing that the conditions of the licence were harsh. It was dismissed. On further appeal, the Supreme Court upheld the penalty but reduced it to Rs 20 lakh.

Apex court allows L&T's appeal

The Supreme Court last week allowed the appeal of Larsen & Toubro Ltd against the ruling of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) imposing excise duty on PSC girders built for Konkan Railways in 1994.

The excise authorities had attempted to impose a penalty of Rs 32 lakh on the company and its appeal was dismissed by the Commissioner of Central Excise and the tribunal.

They held that there was suppression of facts, and manufacture of girders was liable to the duty. The Supreme Court reversed their decisions and freed the company from the liability.

Sale of dog food to attract VAT

The Supreme Court last week dismissed the appeal of Sree Durga Distributors, rejecting its claim that dog food and cat food sold by it attracted no VAT under the Karnataka law. Entry 5 of the first schedule of the Karnataka VAT Act 2005 deals with "animal feed and feed supplements" and other named processed commodities.

The firm argued that dog food and cat food would fall in the category of animal feed. The Supreme Court examined the wording of Entry 5 and ruled that cat food and dog food have been excluded from the entry. Therefore, they are not entitled to the benefit of the VAT Act.

Country liquor bottles not taxable

The Supreme Court has set aside the ruling of the Allahabad High Court in the case, Cooperative Company Ltd vs Commissioner of Trade Tax, involving sales tax on bottles containing country liquor.

The firm produced both Indian made foreign liquor (IMFL) and country liquor. The assessing authority maintained that tax would be payable in respect of containers of country liquor.

The high court ruled that bottling charges were part of the turnover and were liable to tax. Against that decision, the firm appealed to the Supreme Court.

It remitted the matter to the high court and asked it to decide the crucial questions whether there existed any implied contract for sale or whether, in effect, any separate charges have been levied for prices of bottles separately or not.

SC rejects appeal on tax deductions

The Supreme Court has dismissed the appeal of the Commissioner of Income Tax, Coimbatore, in a large batch of appeals involving the question of deduction under Section 80HHC of the Income Tax Act.

In these cases, the firms had computed the allowable deduction under the provision without taking into account the total turnover, the sales tax and excise duty. Therefore, the authorities issued notices asking them to explain why the total turnover should not be recomputed by including sales tax and excise duty.

According to them, deduction from total turnover was restricted only to three items, namely, profit on sale of import licence, duty drawback and CCS. The dispute was carried to the appellate authority. It held that sales tax and excise duty were liabilities of the assessees to the government.

Therefore they were not included in the total turnover. Approving this view, the Supreme Court rejected the interpretation of the relevant provisions of the Act given by the authorities.

Retired judge as arbitrator rejected

The Supreme Court last week set aside the Delhi High Court order appointing a retired judge of the high court as an arbitrator in a dispute involving partners in a firm called Empire Art Industries (Jagdish Chander vs Ramesh Chander).

The partnership deed stated that in case of disputes, the partners shall refer them for arbitration "if the parties so determine". The high court took it as an arbitration agreement. The Supreme Court rejected this view, interpreting Section 7 of the Arbitration and Conciliation Act and stated that this was not an arbitration agreement according to its definition in the Act.

The parties have to determine afresh whether they should go for arbitration or take recourse to other methods for resolving their differences. Therefore, the order appointing the retired judge as arbitrator was set aside.