When a law grants power to an officer to take certain action that he "deems it necessary" or has reason to believe, it does not mean his subjective satisfaction. Such power should not be exercised arbitrarily and must be used "in accordance with the restraints imposed by law.'' Supreme Court stated so while allowing the appeal of Tata Chemicals against the order of CESTAT. The company, engaged in the manufacture of soda ash and coke, imported coking coal produced by an Australian firm. Coking coal with ash content less than 12 per cent was exempt from basic customs duty. The consignment was tested by an independent foreign inspection agency which certified that the moisture content was less than 10 per cent. When it arrived at Okha, customs authorities took samples and tested them at the Central Fuel Research Institute. According to its report, the consignment contained ash content more than 12 per cent. Therefore, the authorities denied exemption from duty. The appellate tribunal confirmed the stand of the customs inspectors. On appeal, Supreme Court stated that the samples were drawn contrary to law, as the company's representative was not present when they were taken. "If the law requires that something must be done in a particular manner, it must be done in that manner," the judgment emphasised, and added that if it was not done so, the decision has no existence in the eye of the law at all.
Income tax relief for property firms
If acquiring and letting of properties is the business of a company, it comes under the income tax head 'income from business', and not 'income from house property', Supreme Court has ruled in the case, Chennai Properties and Investments Ltd vs CIT. The company acquired properties in Chennai and to let them out. The rental income was shown as income from business in the return filed by the company. The assessing officer, however, refused to tax the same as business income. According to him, since the income was received from letting out of the properties, it was in the nature of rental income. The company appealed to the commissioner who held that it was business income. The revenue authorities moved the Madras High Court against the ruling. The high court accepted the view of the tax authorities. Therefore, the company appealed to Supreme Court. It reversed the judgment of the high court. Supreme Court conceded that the dividing line between business income and rental income in such cases is difficult to find; but in the case of a company with its professed objects and the manner of its activities and the nature of its dealings with its property, it is possible to say on which side the operations fall and to what head the income should be assigned.
Excise benefit denied on heart device
Supreme Court has dismissed the appeal of BPL Ltd seeking excise exemption for two models of defibrillators, a medical device used in heart conditions. It delivers shock through paddles placed across the heart or on the surface of the body during cardiac emergency. According to the excise commissioner, Kochi, the devices manufactured by BPL were designed to provide external counter shock and was liable to duty. Only those which are meant for internal use had duty exemption. Since the product in question was the conventional one used externally, it did not enjoy exemption, it was argued. BPL produced evidence from the department of electronics, hospitals etc to argue that its products could be used internally also. The members of the appellate tribunal were divided on this technical question and referred it to a third member. His opinion went against the company. Its appeal to Supreme Court was not successful as it held that the products were primarily meant for external use and it is not implantable in the human body. The judgment emphasised that in interpreting notifications related to tax matters, exemption clauses must be strictly construed and the assessee must be able to prove conclusively that its claim was squarely within the ambit of the rules.
Extension of contract on phone valid
An arbitration agreement could be extended even by an email from a cellphone, the Bombay High Court observed last week in its judgment in the case, Diversey India Ltd vs Waverly Ltd, Sri Lanka. The agreement to distribute the products of the Indian company in Sri Lanka was terminated by Waverly, but it was extended for a few weeks during talks which were recorded in the Lankan MD's email sent from his phone. This was confirmed in emails from the Indian company. When the dispute of the companies went before the arbitrator, he ruled that the contract was not extended, ignoring the emails. The high court held that his view was "perverse and patently illegal". An arbitration clause could be extended by email, followed by subsequent conduct of the parties as in this case.
Revival plea of defunct firm rejected
The Madhya Pradesh High Court last week disallowed a company to revive itself after the Registrar of Companies struck it off the register in 2008. The company had run into losses earlier, but claimed that it wanted to revive its agri business. When the registrar declined, the company moved the high court invoking Section 560(6) of the Companies Act. However, the high court dismissed its plea because it could not comply with the condition imposed in the 2000 Act which fixed the minimum paid-up capital of Rs 5 lakh. The high court emphasized in the judgment, Shree Mohan Sugar vs Registrar of Companies, that the statutory rule cannot be relaxed on any equitable consideration.
Cheque bounce: Magistrate's order quashed
The Calcutta High Court last week dismissed the appeal of a company and some of its directors facing the charge of issuing cheques that were dishonoured, observing that the magistrate need not give elaborate reasons for issuing process. In this case, Fairdeal Suppliers Ltd vs Piyarelal Iron & Steel Ltd, the latter complained that the cheques bounced. The magistrate at first issued process to all the accused persons and they appeared before him. However, later the order was recalled and a fresh police report was demanded. After the report, the magistrate discharged them. The payee appealed to the session court, which ruled that the discharge was wrong. The appeal came to Supreme Court. The accused persons argued that the complaint did not explain the specific role of the directors and the magistrate's order was cryptic. The high court rejected these contentions and allowed the trial to proceed.
