In a batch of appeals from different states, the Supreme Court ruled that a manufacturing company was not entitled to refund of commercial taxes if benefits under the law are not passed on to the ultimate consumer. Otherwise, there would be unjust enrichment, the court stated while hearing the appeals, led by Commissioner of Central Excise vs Addision & Co.
Manufacturers had claimed refunds on taxes paid, invoking discounts such as those on excise and turnover tax. The authorities issued notices asking the firm to show that the duty had not been passed on to buyers. They maintained that they had passed on the burden of duty to their dealers and, therefore, were entitled to refund.
Various tribunals and high courts have taken differing view on this and hence it was referred to a larger bench of the Supreme Court. The apex court invoked Section 11-B of the Central Excise Act and explained that "the sine qua non for a claim for refund is that the claimant has to establish that the amount of duty of excise in relation to which such refund is claimed was paid by him and it has not been passed on to any other person."
It may be necessary to verify who ultimately bore the burden of the duty. It might be difficult to identify who had actually borne the burden but such verification would help the revenue authorities find out whether manufacturers have unjustly enriched themselves. If it is not possible to identify the persons who bore the burden, the excess paid shall go to the consumer welfare fund set up under Section 12-D.
Sub-contractors' work excluded from sales tax
The Supreme Court ruled last week that the value of work entrusted by the main contractors to sub-contractors or payments made to them shall not be taken into consideration while computing total turnover under the Karnataka Sales Tax Act. The dispute arose in the context of commercial tax laws in other states, as in the Andhra Pradesh value-added tax law.
In the latest batch of cases, titled L&T vs Commissioner, the revenue authorities in Karnataka argued that the value of the work entrusted to sub-contractors can be included at the hands of the assessee. While sales tax can be levied at a single point, turnover tax can be levied at multi-points, both at the hands of the main contractor and sub-contractor.
The company argued that it would amount to double taxation. It had undertaken several contracts, like building an indoor stadium in Bengaluru. It had appointed sub-contractors for its projects and they had been assessed separately. There could be only one taxable event under Article 366 of the Constitution, the company argued. The Supreme Court accepted this view and set aside the judgment of the Karnataka High Court.
Dismissal for negligence upheld
When negligence is blatant and confirmed by the inquiry officer, the dismissal of an employee is justified, the Supreme Court stated in its judgment, Management of TNSTC vs Chandrasekaran. The labour commissioner or the high court cannot go into the evidence again, when the disciplinary committee has examined the facts.
In this case, a driver ran over a car causing five deaths and injuries to several others in 2003. He had already caused 32 accidents earlier, some of them fatal. After an inquiry he was dismissed. On appeal, the commissioner and the Madras High Court ordered his reinstatement with back wages, continuity of service and other benefits. The Supreme Court said the commissioner or high court could not substitute their opinion for that of the committee, when the inquiry had found the person guilty.
Arrest by excise intelligence illegal
When a firm has been regularly filing returns that have been accepted by the Sales Tax Department, the Directorate General of Central Excise Intelligence cannot without a show cause notice or enquiry arrest top executives merely on suspicion of evasion, the Delhi High Court has stated in its judgment, Makemytrip Ltd vs Union of India. A top executive has been arrested and cases filed against several tour operators by the directorate. The high court said the measures adopted were illegal.
Bank guarantees stayed
The Delhi High Court last week restrained Dena Bank and Indian Bank from encashing bank guarantees provided by Jyoti Structures to Dakshinanchal Vidyut Nigam. It also barred 'blacklisting' of the firm. The firm was given a project to electrify villages in various districts of Uttar Pradesh under the Rajiv Gandhi Grameen Vidyutikaran Yojna. Alleging that the work was going slow, the Nigam terminated the contract and invoked the bank guarantees. It prevented the firm from participating in bids for a year.
The firm moved court against the invocation of the bank guarantees arguing that they were not unconditional. They could be invoked only if the project had not commenced. The firm also submitted that though the work was slow, it still had time to complete it. The high court acceded to the prayers and observed that blacklisting was done without notice to the firm, which was a legal requirement.
Insurer to pay for theft in Africa
The National Consumer Commission last week dismissed the appeal of Oriental Insurance and directed it to reimburse an exporter firm, Ajanta International, for the theft of goods sent to Lusaka, Zambia. The goods were loaded in a container from Mumbai to Lusaka and discharged in Dar es Salaam. The goods were stolen while being taken by road to Lusaka. The exporter claimed reimbursement according to the Marine Cargo Policy.
It was repudiated on the ground that the transaction between the exporter and the foreign buyer was on 'cost and freight' basis, hence, the ownership got transferred to the consignee when the goods were loaded. Therefore, there was no insurable interest with the Indian firm. Rejecting the argument, the commission said the transaction being of delivery against acceptance, the property did not get transferred, even though the delivery of the goods was taken by the agent of the consignee. The transfer would be effective only on payment of the price.
