The Supreme Court last week asked the UP government to pay Hindustan Unilever interest on the amount paid by the company to buy the bonds of the UP Cooperative Spinning Mills Federation. The company bought the bonds with the provident fund contribution of its employees on the guarantee of the government but the federation went into liquidation.
The company moved the Delhi high court, following which the principal amount was paid. The government declined to pay the interest and moved an appeal. The Supreme Court asked the government to pay the interest in three months.
It said: “The fact that the federation is in financial difficulties cannot be a ground for the government to say that it will not make payment of interest, even though it had guaranteed the repayment with interest. If such a contention is accepted, the very purpose of the guarantee will be defeated. We are indeed surprised that such a plea is put forward on behalf of the State of Uttar Pradesh.”
Judgments take precedence over circulars
A five-judge Constitution bench of the Supreme Court has clarified an earlier judgment of the Constitution bench regarding the primacy of court decisions over government circulars.
The government had sought the clarification as several companies were challenging the excise duty demand on the strength of the earlier judgment in the case, Collector of Central Excise vs Dhiren Chemical Industries. Their contention was that the circulars issued by the Central Board of Excise and Customs were binding on the revenue authorities. On the other hand, the government argued that circulars of the board could not prevail over judgments. In the latest judgment of the Constitution bench, Commissioner of Central Excise vs Ratan Melting Industries, the court upheld the government’s view.
It said: “So far as the circulars issued by the central or the state governments are concerned, they represent merely their understanding of the statutory provisions. They are not binding on the court. It is for the court to declare what the particular provision says and it is not for the executive.”
SC clarifies judgment on penalty for short levy or non-levy etc
In another judgment, the Supreme Court clarified two of its earlier judgments in the context of Section 11AC of the Central Excise Act. This section deals with penalty for short levy or non-levy when there is fraud, collusion or any wilful mis-statement or suppression of facts. The question was whether the assessee acted with a guilty mind or not.
One judgment of the Supreme Court last year stated that there was scope for discretion in imposing penalty. But another judgment of 2006 stated that the penalty was mandatory, and there was no need to establish a guilty mind on the part of the assessee. In the latest judgment clarifying the true position, Union of India vs Dharamendra Textile Processors, the court upheld the latter view.
SC dismisses appeal of the I-T commissioner against Gujarat HC
The Supreme Court last week dismissed the appeal of the Commissioner of Income Tax against the judgment of the Gujarat High Court which had quashed the penalty of Rs 4 lakh on Sarabhai Holdings Ltd a decade ago. The revenue authorities demanded advance tax following the rearrangement of the holdings in the firm, originally known as Sarabhai Chemicals Ltd.
The tax authorities argued that by a resolution of the reconstituted companies, the assessee was avoiding the payment of tax on the interest which had accrued. The Supreme Court, however, stated that the genuine nature of the resolution was not and could not be disputed. There was nothing to dispute or suspect the genuineness of the transaction, the judgment said.
Rahee Industries plea against Calcutta HC judgment dismissed
The Supreme Court last week dismissed the appeal of Rahee Industries Ltd against the judgment of the Calcutta High court which had allowed the petition of the Export Credit Guarantee Corporation of India. The company exported railway goods to an Egyptian firm and the consignee paid the entire price by depositing the same with its banker in Egypt who was supposed to transfer the same to HSBC Bank in India.
However, because of an embargo and the fluctuation in the money value, disputes arose between the parties. During the pendency of the suit HSBC disbursed whatever sum recovered after converting the same in Indian Rupee to the concerned parties in the ratio of 90:10.
The exporter contended that the corporation should pay the full increased recovery to it whereas corporation contended that the same should be apportioned in the ratio of 90:10 in terms of the insurance policy. The High Court held that the corporation was entitled to 90 per cent of the increased recovery. This has been upheld by the Supreme Court.
