2003 (7) TMI 749 - HC - Indian Laws

Summary

Issues Involved:
1. Whether the petitioner is an "industrial concern" under Section 2(e) of the Research and Development Cess Act, 1986.
2. Whether the petitioner imported "technology" as defined under Section 2(h) of the Cess Act.
3. Validity of the levy and collection of cess under the Cess Act on the payments made by the petitioner.
4. Whether Section 2(h) of the Act is ultra vires Articles 14 and 19(1)(g) of the Constitution.
5. Whether Rule 3 of the rules under the Cess Act is ultra vires the Act.
6. Whether the petitioner is liable to pay interest on delayed payment of cess.

Issue-wise Detailed Analysis:

1. Whether the petitioner is an "industrial concern" under Section 2(e) of the Research and Development Cess Act, 1986:
The petitioner argued that it is not an industrial concern within the meaning of Section 2(e) of the Cess Act read with Section 2(e) of the Industrial Development Bank of India Act (IDBI Act). However, the court found that the petitioner is indeed an industrial concern as it entered into a foreign collaboration agreement involving the import of technology, which was approved by the Central Government. This conclusion was supported by the counter affidavit and the collaboration agreement dated 22.11.1988.

2. Whether the petitioner imported "technology" as defined under Section 2(h) of the Cess Act:
The petitioner contended that there was no import of technology and that the contract was essentially a civil contract. The court rejected this argument, stating that the collaboration agreement with Heit-Kampt and Balcke-Durr involved the import of technology necessary for executing the contract awarded by NTPC. The court emphasized that the technology was not available in India and was imported from Germany by the petitioner.

3. Validity of the levy and collection of cess under the Cess Act on the payments made by the petitioner:
The court upheld the levy and collection of cess under the Cess Act, stating that the petitioner, being an industrial concern that imported technology, is liable to pay the cess as per Section 3(2) of the Act. The court dismissed the petition, finding no merit in the petitioner's arguments.

4. Whether Section 2(h) of the Act is ultra vires Articles 14 and 19(1)(g) of the Constitution:
The court did not find any grounds to declare Section 2(h) of the Act as ultra vires Articles 14 and 19(1)(g) of the Constitution. The petitioner's arguments in this regard were not substantiated, and the court did not address this issue in detail.

5. Whether Rule 3 of the rules under the Cess Act is ultra vires the Act:
The court did not find Rule 3 of the rules under the Cess Act to be ultra vires the Act. The petitioner's arguments were not convincing, and the court upheld the validity of the rule.

6. Whether the petitioner is liable to pay interest on delayed payment of cess:
The court discussed the misconception about interest, stating that interest is not a penalty but the normal accretion on capital. However, the court acknowledged the Supreme Court's decision in Indian Carbon Ltd. v. State of Assam, which held that interest on delayed payment of tax can only be charged if the statute provides for it. Since the Cess Act does not have a provision for interest on delayed payment, the court could not direct the realization of interest. Instead, the court recommended that the respondent consider imposing a penalty under Section 9(2) of the Act.

Conclusion:
The court dismissed the writ petition, upholding the levy and collection of cess under the Cess Act. The petitioner was found to be an industrial concern that imported technology and was liable to pay the cess. The court also recommended that the Central and State Governments consider amending taxing statutes to provide for interest on delayed payments.