The Supreme Court last week ruled that there are two conditions for getting Modvat credit benefit: i) On the raw materials i.e. on the inputs, the manufacturer must have paid duty and such raw material must have been used in the process of manufacturing the final product in his factory or premises. ii) Excise duty must have been levied on the final product. If there is no duty levied on the final product, there would not be any question of grant of any relief because in that case there would not be any cascading effect on the duty imposed. The court explained the legal position in its judgment in the case, M/s KCP Ltd vs Commissioner of Central Excise. The firm is engaged in setting up machinery for sugar and cement factories after buying some equipment from the local market. The dispute arose when it sent goods bought from the local market to Vietnam where the Indian company was to set up a sugar plant for M/s Vina Sugars. The Indian company claimed Modvat credit on the machinery and equipment packed and shipped out. They declared that they were 'capital goods'. The revenue authorities rejected the claim. The department was of the view that none of such purchased items had been used by the Indian firm in its factory premises in relation to manufacture of the final product manufactured by it. Accepting the department's view, the Supreme Court stated that the firm had only acted as a trader or as an exporter in relation to the machinery purchased by it, which had been exported and used for setting up a sugar plant in a foreign country. In any case, it cannot be said to have manufactured that plant in its factory. Moreover, the assessee firm did not pay any excise duty on the sugar plant set up by it in Vietnam and therefore, there cannot be any question of availing any Modvat credit.
New formula for computing damages
The Supreme Court has ordered the National Insurance Company to pay enhanced compensation of Rs 3.75 lakh for a 12-year-old child who suffered 18 per cent permanent disability in a road accident. It criticised the motor accident claims tribunal and the high court for wrongly calculating the compensation in the case, Master Mallikarjun vs National Insurance. The tribunal awarded Rs 63,000 while the high court enhanced it to Rs 1.09 lakh. "It is unfortunate that both the tribunal and the high court have not properly appreciated the medical evidence available in the case," the Supreme Court stated. The age of the child and deformities on his body resulting in disability have not been duly taken note of. The court then laid down a formula to compute compensation based on medical evidence. It said: "We are of the view that the appropriate compensation on all other heads in addition to the actual expenditure for treatment, attendant, etc., should be, if the disability is above 10 per cent and up to 30 per cent to the whole body, Rs 3 lakh; up to 60 per cent, Rs 4 lakh; up to 90 per cent, Rs 5 lakh and above 90 per cent, it should be Rs 6 lakh. For permanent disability up to 10 per cent, it should beRs 1 lakh, unless there are exceptional circumstances to take a different yardstick."
Notice not must for CCI probe
The Delhi High Court last week ruled that the Competition Commission of India is not required to give notice or hearing to the person against whom an information is given or a reference is made before the commission directs further investigation in exercise of the powers conferred upon it by the Competition Commission Act. Dismissing the writ petition of South Asia LPG Co Ltd against the commission, the court stated that Section 19 did not provide for any opportunity of hearing to the person against whom the reference is made nor did it provide for any such hearing to such a person, before further investigation is directed by the commission. The issue arose when a complaint of abuse of dominant position was moved before the commission. East India Petroleum Ltd was engaged in providing terminalling service at Vishakhapatnam port which enabled it to handle imports and exports of bulk liquid products as well as liquefied gas fuels. The gases were unloaded from ships by an entity owned by HPCL and pumped by HPCL through a pipeline, part of which was owned by HPCL and part by East India. On commissioning of underground cavern by South Asia, the unloading services offered by HPCL were handed over to it in the year 2008 and gradually the unloading arm of HPCL was discontinued. Thereafter all the products were unloaded only through South Asia. East India submitted an information petition to the commission, alleging that South Asia had created a dominant position in terminalling services and abused its dominance and charged exorbitantly for its services. The legal issue over notice and opportunity of hearing was raise while the commission was considering its Director General's report. The judgment remarked: "Even an accused in a criminal case is not entitled to a hearing before a magistrate passes an order for further investigation... The person against whom an information is given or a reference is made to the commission cannot be placed on a footing higher than that of an accused in a criminal trial."
Five-legged race for arbitration
The Bombay High Court last week declined to appoint a sole arbitrator in a dispute between five partners who were running a luxury hotel in Mumbai. The partners had signed an agreement in which they had stated that in case of disputes, each one would appoint an arbitrator. When they fell out, some partners were in one group regarding one issue, while there were other combinations and permutations. Moreover, if an even number of arbitrators were appointed, there should be a fifth one to preside over the team. All these complications made it difficult to agree on arbitrators. Ultimately four arbitrators were named by different combinations of partners. One group moved the high court to appoint a sole arbitrator to avoid delay and excessive costs. The high court declined to do so, giving a strict reading of the arbitration clause. "The clause would require to be complied with by all the parties since that is the contract or an agreement between them. The agreement cannot be rewritten by the court," stated the judgment in the case, Perin Hoshang vs Kobad Dorabji.
Afcon's challenge to tender dismissed
The Bombay High Court has dismissed the petition of Afcons Infrastructure Ltd against the decision of Oil and Natural Gas Commission (ONGC) in the selection of a contractor for the conversion of Sagar Pragati, a mobile offshore drilling unit to a mobile offshore production unit. After a tender, ONGC shortlisted a consortium of two corporations to undertake the work as their bid was the lowest. Afcons challenged the choice as arbitrary and alleged that the consortium did not possess a dry dock facility which was mandatory in the bid and that the tender conditions were altered at the instance of the consortium. The high court rejected both these arguments. Regarding the bids, the high court stated that consortium's bid was the lowest bid, the difference between the two bidders being to the extent of $ 5 million.
