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1991 (3) TMI 346
Issues: Interpretation of the term "food-stuff and food provisions" under entry 6 of Schedule III to the Gujarat Sales Tax Act, 1969.
Detailed Analysis: The case involved a reference made by the Sales Tax Tribunal at the instance of the State of Gujarat regarding the classification of the sale of Cadbury's Bournvita under the Gujarat Sales Tax Act, 1969. The key question was whether the sale of Bournvita fell under entry 6 of Schedule III as "food-stuff and food provisions" or under the residuary entry 13 of Schedule III. The Tribunal had upheld the contention that Bournvita did not qualify as food-stuff under entry 6 but rather fell under the residuary entry.
The opponent, M/s. Gokaldas Trading Co., argued that Bournvita was not commonly understood as food and was primarily recommended for specific groups like convalescing patients, nursing mothers, and elderly individuals. They contended that the term "food-stuff and food provisions" should be interpreted restrictively based on a previous court decision. On the other hand, the State argued that Bournvita was advertised as a valuable food product and contained ingredients that qualified it as an article of food under entry 6.
The Court analyzed the nature of Bournvita, which was described as a food drink made of various ingredients and recommended for nourishment. However, it noted that there was no evidence presented to support the claim that Bournvita was a substitute for food or commonly consumed as food. Referring to a previous court decision involving a similar product, the Court emphasized that the common understanding of an article as food in everyday language determines its classification under the relevant entry.
Based on the interpretation of the term "food-stuff and food provision" and the precedent set by previous judgments, the Court concluded that Bournvita did not qualify as food-stuff or food provision under entry 6 of Schedule III. It determined that Bournvita, despite being a food drink, was not consumed as a substitute for food by common people and therefore fell under the residuary entry 13 of Schedule III. The judgment favored the assessee, and no costs were awarded in the reference.
In conclusion, the Court's decision clarified the classification of Bournvita under the Gujarat Sales Tax Act, emphasizing the common understanding of an article as food in determining its tax treatment under the relevant entry of the Schedule.
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1991 (3) TMI 345
The High Court of Andhra Pradesh upheld the Tribunal's decision that "shell grit" and "poultry-feed mineral mixture" are classified as "poultry-feed" under entry No. 80 of the First Schedule. Expert opinions confirmed their use in poultry feed, leading to the dismissal of the tax revision case. (Case Citation: 1991 (3) TMI 345 - ANDHRA PRADESH HIGH COURT)
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1991 (3) TMI 344
Issues Involved: 1. Eligibility for exemption under Section 5(3) of the Central Sales Tax Act, 1956. 2. Commercial identity of raw hides and skins versus dressed hides and skins. 3. Interpretation of Section 14(iii) and Section 15 of the Central Sales Tax Act. 4. Applicability of previous judicial decisions and their relevance to the case.
Detailed Analysis:
1. Eligibility for exemption under Section 5(3) of the Central Sales Tax Act, 1956: The primary issue revolves around whether the turnover of Rs. 22,13,372.89, related to the purchase of raw skins processed into dressed skins for export, is eligible for exemption under Section 5(3) of the Central Sales Tax Act. The assessing authority initially denied the exemption, asserting that raw and tanned skins are commercially different commodities. This decision was upheld by the first appellate authority and the Tribunal, which relied on a previous Division Bench decision that distinguished between the goods purchased and exported.
2. Commercial identity of raw hides and skins versus dressed hides and skins: The appellant argued that under the Central Sales Tax Act, hides and skins, whether raw or dressed, should be treated as a single item. This argument is based on Section 14(iii) of the Act, which classifies hides and skins in both states as one category. The appellant contended that the transformation from raw to dressed skins does not create a new commodity but merely changes the state of the same commodity, thus qualifying for exemption under Section 5(3).
3. Interpretation of Section 14(iii) and Section 15 of the Central Sales Tax Act: The Court examined the interpretation of Section 14(iii) and Section 15, which treat hides and skins, whether raw or dressed, as a single item. The judgment referenced the Supreme Court's decision in the Mahi Traders case, which affirmed that the classification under Section 14(iii) is broad and includes all stages of hides and skins, whether raw or dressed. The Court also noted the Andhra Pradesh High Court's decision in Mohd. Basheer & Company, which supported the appellant's view that the goods purchased and exported are the same for the purposes of Section 5(3), despite the processing involved.
4. Applicability of previous judicial decisions and their relevance to the case: The Court critically analyzed previous judgments, including the Division Bench decision in T.C. Nos. 824 to 827 of 1980, which had been relied upon by the Tribunal. The Court found that this decision was no longer good law in light of the Supreme Court's rulings in Mahi Traders and the dismissal of the special leave petition in Mohd. Basheer & Company. The Court emphasized that the legislative intent behind Section 14(iii) and Section 15 was to treat hides and skins as a single commodity, regardless of their state, thus supporting the appellant's claim for exemption under Section 5(3).
Conclusion: The Court concluded that the principles laid down in the Mahi Traders case and the Andhra Pradesh High Court's decision in Mohd. Basheer & Company undermine the correctness of the Tribunal's decision. The Court held that the lack of commercial identity between raw and dressed hides and skins is irrelevant for the purposes of Section 5(3). What matters is whether the penultimate sale or purchase satisfies the conditions specified in Section 5(3). The Court set aside the Tribunal's order and remitted the matter to the assessing authority for fresh consideration in light of the legal principles established. The petition was allowed, with no order as to costs.
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1991 (3) TMI 343
Issues Involved: 1. Classification of T.M. poultry formula under Gujarat Sales Tax Act, 1969. 2. Classification of T.M. egg formula, T.M. forte, and T.M. 5 under Gujarat Sales Tax Act, 1969.
Detailed Analysis:
1. Classification of T.M. poultry formula:
The primary issue was whether T.M. poultry formula should be classified under entry 25 of Schedule I as "poultry-feed" or under entry 26(1) of Schedule II, Part A as "drugs and medicines" of the Gujarat Sales Tax Act, 1969. The Deputy Commissioner of Sales Tax initially held that T.M. poultry formula, being primarily used for treating and preventing diseases, could not be regarded as poultry-feed and thus fell under entry 26(1) of Schedule II, Part A. The Tribunal, however, after referring to authoritative literature and applying the test laid down in Glaxo Laboratories (India) Ltd. v. State of Gujarat [1979] 43 STC 386, held that the product could be described as poultry-feed. The State argued that the product, containing terramycin, a known drug, should be classified as a drug or medicine. The Court concluded that T.M. poultry formula, being a drug or medicine, is covered by entry 26(1) of Schedule II, Part A to the Gujarat Sales Tax Act, 1969.
2. Classification of T.M. egg formula, T.M. forte, and T.M. 5:
The Deputy Commissioner initially held that these products, containing terramycin, could not be regarded as poultry-feed and should fall under the residuary entry 13 of Schedule III. However, the Tribunal, after examining the composition and use of these products, determined that they could be described as poultry-feed. The State conceded that if these products were not regarded as poultry-feed, they would fall under entry 26(1) of Schedule II, Part A as "drugs and medicines." The Tribunal, referring to the literature and the test laid down in Glaxo Laboratories' case, found that these products, being in the nature of additives given to poultry for nutritional purposes, could be classified as poultry-feed. The Court agreed with this assessment, noting that the concept of poultry-feed has evolved to include additives like vitamins, minerals, and antibiotics. Thus, T.M. egg formula, T.M. forte, and T.M. 5 were classified as poultry-feed under entry 25 of Schedule I, making them exempt from tax.
Conclusion:
1. T.M. poultry formula is classified as a drug or medicine and covered by entry 26(1) of Schedule II, Part A to the Gujarat Sales Tax Act, 1969. 2. T.M. egg formula, T.M. forte, and T.M. 5 are classified as poultry-feed and covered by entry 25 of Schedule I to the Gujarat Sales Tax Act, 1969, exempting them from tax.
Final Judgment:
The question was answered in favor of the State regarding T.M. poultry formula and in favor of the assessee regarding T.M. egg formula, T.M. forte, and T.M. 5. There was no order as to costs in this reference. The reference was answered accordingly.
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1991 (3) TMI 342
Issues Involved: 1. Exigibility to Andhra Pradesh sales tax of the subsidy amount received by a manufacturer of fertilizer from the pool regulated by the Central Government. 2. Definition and interpretation of "turnover" u/s 2(s) of the Andhra Pradesh General Sales Tax Act, 1957. 3. Applicability of subsidy as part of sale consideration for tax purposes.
Summary:
1. Exigibility to Andhra Pradesh Sales Tax of Subsidy Amount: The primary issue was whether the subsidy received by fertilizer manufacturers from the Central Government pool should be included in the sales turnover and thus be subject to Andhra Pradesh sales tax. The court noted that the subsidy was provided to compensate for the loss or deficit due to the retention price system imposed by the government, which prevented manufacturers from increasing prices in proportion to their production costs. The assessing authority had included this subsidy in the sales turnover, treating it as part of the sale price of fertilizers.
2. Definition and Interpretation of "Turnover" u/s 2(s) of the Andhra Pradesh General Sales Tax Act, 1957: The court examined the definition of "turnover" both before and after the Amendment Act 18 of 1985. Before the amendment, "turnover" was defined as the total amount set out in the bill of sale or charged as consideration for the sale of goods. After the amendment, the definition was expanded to include various scenarios where the bill of sale might not correctly set out the sale amount or where there was no bill of sale. The court emphasized that the petitioners had issued bills of sale as required by law and had not received any amount from purchasers beyond what was mentioned in these bills.
3. Applicability of Subsidy as Part of Sale Consideration for Tax Purposes: The court concluded that the subsidy received from the Central Government did not form part of the sales turnover. The subsidy was intended for the larger interest of the industry and was not related to any single sale transaction. The court referred to previous judgments, including State of A.P. v. Ranka Cables Pvt. Ltd., which supported the view that payments under government schemes for industry support should not be treated as part of the sale price for tax purposes. The court also considered other cases cited by the Government Pleader but found them not applicable to the present controversy.
Judgment: The writ petition was allowed, and the assessment order for the year 1983-84, which included the subsidy as part of the turnover, was set aside. The court ruled that the subsidy received by the manufacturer could not be treated as part of the turnover u/s 2(s) of the Andhra Pradesh General Sales Tax Act. The proceedings concerning other items under the Act were to be decided according to law. No costs were awarded, and the Government Pleader's fee was set at Rs. 500.
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1991 (3) TMI 341
Issues Involved: 1. Whether the Tribunal was right in law in not allowing the applicant to raise the plea of set-off under rule 42 of the Gujarat Sales Tax Rules, 1970.
Detailed Analysis:
Issue 1: Tribunal's Refusal to Allow Plea of Set-Off under Rule 42
Facts of the Case: The applicant, a limited company engaged in manufacturing and selling paper, is a registered dealer under the Gujarat Sales Tax Act, 1969, holding a recognition certificate under section 32. This certificate allowed the applicant to purchase raw and processing materials and consumable stores without prepaying tax, provided these were used in manufacturing taxable goods for sale. The applicant purchased such materials both with and without tax payment between May 6, 1970, and March 31, 1971. The manufactured paper was sold locally, inter-State, and on consignment outside Gujarat.
Assessment by Sales Tax Officer: The Sales Tax Officer assessed the applicant on January 7, 1976, determining that 28% of the sales were unqualified (consignment sales outside Gujarat) and 72% were qualified (local and inter-State trade). Consequently, purchase tax was levied on the unqualified sales.
Appeal to Assistant Commissioner: The applicant appealed, but the Assistant Commissioner confirmed the Sales Tax Officer's findings, citing the applicant's failure to correlate the purchased goods with the manufactured goods sold locally or inter-State.
Tribunal Proceedings: The applicant appealed to the Tribunal, raising a new claim for set-off under rule 42 during oral submissions. However, the Tribunal did not permit this claim, as it was not raised before the lower authorities. The Tribunal confirmed the lower authorities' decisions regarding the breach of form No. 19.
Application under Section 69(1): The applicant then applied under section 69(1) for the Tribunal to refer a question of law to the High Court. The applicant argued that the lower authorities' findings implied that 72% of the goods were tax-paid and used in qualified sales, thus entitling them to a set-off under rule 42. The Tribunal referred the question to the High Court.
High Court's Analysis: The High Court noted that the applicant could have alternatively pleaded for set-off before the Sales Tax Officer during reassessment proceedings under section 44. The High Court found that the lower authorities had sufficient material to entertain the claim for set-off under rule 42, based on their findings that 72% of the goods were used in qualified sales. The High Court held that the Tribunal should have allowed the applicant to raise the set-off claim, as it did not require new evidence or fresh facts.
Conclusion: The High Court concluded that the Tribunal was not justified in rejecting the set-off claim solely because it was not raised before the lower authorities. The Tribunal should have permitted the applicant to raise the plea of set-off under rule 42 or, at the very least, remanded the matter to the Sales Tax Officer for consideration based on the existing record.
Judgment: The High Court answered the reference in the negative, holding that the Tribunal was not right in law in not allowing the applicant to raise the plea of set-off under rule 42, thus ruling in favor of the assessee and against the department. There was no order as to costs.
Reference Answered: The reference was answered in the negative, favoring the assessee.
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1991 (3) TMI 340
Issues: - Assessment under Rajasthan Sales Tax Act, 1954 - Stay application rejection by Additional Commissioner, Commercial Taxes, Rajasthan, Jaipur - Compliance with natural justice principles in recording reasons for rejection
Analysis: The judgment involves two writ petitions by Rajasthan Spinning and Weaving Mills Limited and Bhilwara Spinners Limited concerning a common legal question. The petitioners, engaged in manufacturing and selling blended synthetic yarn, were assessed for the year 1987-88 by the Commercial Taxes Officer, resulting in a demand of Rs. 7,54,093. Subsequently, a demand notice was issued, and the petitioners filed an appeal and a stay application. The assessing authority rectified the assessment, reducing the demand to Rs. 7,38,313. The Additional Commissioner, Commercial Taxes, Rajasthan, Jaipur, rejected the stay application partially, leading to the writ petitions challenging the order.
The key contention raised was the lack of a reasoned order by the Additional Commissioner in rejecting the stay application for certain items. The petitioners argued that under section 11(3) of the Rajasthan Sales Tax Act, it was mandatory for the authority to record reasons for rejecting a stay application. The petitioners emphasized that mere conclusions without providing reasons did not meet the legal requirements. On the other hand, the respondents supported the Additional Commissioner's decision, stating that reasons were given for rejecting the stay for specific items based on prima facie assessment.
The court analyzed the requirement of giving reasons under the Act, emphasizing the importance of natural justice principles, including providing an opportunity to be heard and recording reasons for decisions. It highlighted that the discretion of authorities should be exercised judiciously within defined limits and supported by valid reasons. The court noted that the Additional Commissioner's order lacked explicit reasons for rejecting the stay application for certain items, merely stating prima facie assessment without detailed justification. It clarified that conclusions alone did not suffice as reasons, emphasizing the need for a clear rationale behind decisions to ensure fairness and legality.
Consequently, the court allowed the writ petitions, setting aside the Additional Commissioner's orders and directing a proper disposal of the stay applications in accordance with the law. It instructed that no coercive measures should be taken against the petitioners for recovering the additional tax until the stay applications were re-evaluated with proper reasoning and legal compliance.
In conclusion, the judgment focused on the necessity of providing detailed reasons for administrative decisions, especially in matters of granting or rejecting stay applications, to uphold transparency, fairness, and legal requirements under the Rajasthan Sales Tax Act.
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1991 (3) TMI 339
Issues: Levy of tax on "C purlins" manufactured from iron skelp and H.R. coils under the Andhra Pradesh General Sales Tax Act, 1957.
Detailed Analysis:
The judgment concerns a revision filed under section 22 of the Andhra Pradesh General Sales Tax Act, 1957, challenging the orders of the Sales Tax Appellate Tribunal confirming the tax levy on "C purlins" manufactured by the petitioner. The petitioner argued that the goods purchased had already suffered tax under the Act and, post-manufacture, the products remained under the category of "iron and steel," thus not constituting a change in commodity. The petitioner contended that taxing these goods violated the principle of not taxing declared goods at more than one point and at specified rates under the Central Sales Tax Act, 1956.
The Tribunal, considering relevant precedents, held that the goods manufactured by the petitioner were distinct commodities from the purchased goods, justifying the tax levy. The petitioner relied on decisions from the Bombay and Orissa High Courts, arguing that the goods should not be taxed separately under the Act. However, the Tribunal found that the specific provisions and exemptions in those judgments did not apply to the present case under the Andhra Pradesh General Sales Tax Act.
The High Court analyzed the Act's provisions, specifically focusing on the Third Schedule's treatment of various sub-items under "iron and steel" as distinct commodities for tax purposes. It noted that the Act did not provide exemptions for goods made from iron and steel unless explicitly stated. By contrasting the treatment of other items like "hides and skins," where specific relief was granted, the Court rejected the petitioner's argument that the goods sold were not liable to tax based on the Act's scheme. Consequently, the revision was dismissed, upholding the tax levy on the petitioner's manufactured goods.
In conclusion, the High Court dismissed the petition, affirming the Tribunal's decision to levy tax on the "C purlins" manufactured by the petitioner from iron skelp and H.R. coils, as the goods were considered distinct commodities under the Andhra Pradesh General Sales Tax Act, 1957.
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1991 (3) TMI 338
Issues Involved: 1. Whether the movement of cement from Mangalore to Kerala constituted inter-State sales under section 3(a) of the Central Sales Tax Act, 1956. 2. Jurisdiction of the Commercial Tax Officer, Mangalore, to issue proposition notices. 3. Appropriateness of the valuation method adopted by the respondent for the entire consignment.
Detailed Analysis:
Issue 1: Inter-State Sales The primary issue revolves around whether the movement of cement from Mangalore to Kerala constituted inter-State sales under section 3(a) of the Central Sales Tax Act, 1956. The petitioner argued that the cement was offloaded at Mangalore due to unforeseen circumstances, and the movement of goods from Mangalore to Kerala was not occasioned by any sale or purchase within Karnataka. The petitioner emphasized that the entire movement was incidental to the original contract with buyers in Kerala, and hence, the sales did not qualify as inter-State sales.
The department, however, contended that the movement of cement from Mangalore to Kerala was pursuant to the orders placed by customers in Kerala, and thus, these transactions constituted inter-State sales. The department relied on the Supreme Court's decision in the English Electric Company of India Ltd. case, which held that when the movement of goods from one state to another is an incident of the contract, it constitutes an inter-State sale.
The court analyzed the facts and legal precedents, including Tata Iron and Steel Co. Limited v. S.R. Sarkar and Sahney Steel and Press Works Ltd. v. Commercial Tax Officer. It concluded that for a sale to be considered inter-State, there must be a covenant in the contract or an incident of the contract necessitating the movement of goods from one state to another. The court found that the state failed to establish a prima facie case that the movement of goods from Mangalore to Kerala was occasioned by a sale in Mangalore. The movement was due to the ship being diverted to Mangalore, and there was no contract stipulating that the cement must be supplied from Mangalore.
Issue 2: Jurisdiction The petitioner challenged the jurisdiction of the Commercial Tax Officer, Mangalore, to issue proposition notices. The court referred to the Supreme Court's decision in Commissioner of Sales Tax v. Suresh Chand Jain, which emphasized that the onus lies on the Revenue to disprove the contention of the dealer that a sale is a local sale and to show that it is an inter-State sale.
The court found that the respondent failed to establish that the action to levy Central sales tax was justified. The court held that the jurisdiction to issue proposition notices was not properly established, as the necessary conditions for imposing sales tax under the Central Sales Tax Act were not satisfied.
Issue 3: Valuation Method The petitioner also contended that the respondent was not justified in adopting the value of the entire consignment of cement despatched from Mangalore to various places in Kerala, including despatches to its godowns, under the heading "inter-State sales of cement." The court noted the Government Advocate's concession that only despatches made directly to customers in Kerala would be subject to assessment under the Central Sales Tax Act, and not those made to the petitioner's godowns.
The court agreed with the petitioner that the valuation method adopted by the respondent was inappropriate. The court found that the respondent failed to produce invoices to support the contention that the sale took place in Mangalore and that the movement of goods from Mangalore to Kerala was pursuant to such sales.
Conclusion The court allowed the writ petitions and quashed the proposition notices dated February 17, 1988. The court held that the movement of cement from Mangalore to Kerala did not constitute inter-State sales under section 3(a) of the Central Sales Tax Act, 1956. The court also found that the jurisdiction to issue the proposition notices was not properly established and that the valuation method adopted by the respondent was inappropriate.
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1991 (3) TMI 337
Issues Involved: 1. Legality of the exercise of revisional jurisdiction by the Assistant Commissioner of Sales Tax to levy purchase tax under section 16(1) of the Gujarat Sales Tax Act, 1969. 2. Correctness of the levy of purchase tax on 30% of the purchases of hexine oil under section 16(1)(a) of the Gujarat Sales Tax Act, 1969. 3. Legality of the imposition of penalty under section 45(1)(b) of the Gujarat Sales Tax Act, 1969 by the Assistant Commissioner in suo motu revision.
Detailed Analysis:
Issue 1: Legality of the Exercise of Revisional Jurisdiction
The primary issue was whether the Assistant Commissioner of Sales Tax was justified in invoking revisional jurisdiction under section 67 of the Gujarat Sales Tax Act, 1969, to levy purchase tax. The applicant had purchased hexine oil against certificates in form 19 and form "C" and used it for both manufacturing its own de-oiled cakes and for job-work for third parties. The Sales Tax Officer initially failed to levy purchase tax on these purchases. The Assistant Commissioner, upon review, found this omission and exercised his revisional powers to levy the tax. The court held that the revisional authority has broad powers to correct any errors or omissions in the orders of subordinate authorities. The Assistant Commissioner was justified in invoking his revisional jurisdiction, as the Sales Tax Officer had failed to levy purchase tax despite clear evidence of liability. Thus, the Tribunal was correct in holding that the exercise of revisional jurisdiction was valid.
Issue 2: Correctness of the Levy of Purchase Tax on 30% of Purchases
The second issue involved the correctness of the levy of purchase tax on 30% of the purchases of hexine oil. The applicant had mixed hexine oil purchased against form 19 with that purchased against form "C" and stored it in a single tank. The Assistant Commissioner and the Tribunal found that the applicant used part of this mixed oil for job-work for third parties, which was a breach of the certificate's terms. The Assistant Commissioner adopted a rough and ready formula, estimating that 30% of the hexine oil was used for third-party job-work, based on the proportion of total production. The court upheld this method, finding no documentary evidence to support the applicant's claim that the oil was used solely for its own manufacturing. Thus, the levy of purchase tax on 30% of the purchases was deemed correct and valid.
Issue 3: Legality of the Imposition of Penalty
The third issue was whether the Assistant Commissioner could impose a penalty under section 45(1)(b) in suo motu revision. The applicant argued that the Assistant Commissioner exceeded his jurisdiction, as the Sales Tax Officer had not imposed any penalty. However, the court found that the Sales Tax Officer had issued a show-cause notice for penalty, indicating an awareness of the need for penalty proceedings. The court distinguished between assessment and penalty proceedings, noting that penalty proceedings are independent and distinct. The court held that if the original authority had initiated penalty proceedings, the revisional authority could impose a penalty if the original authority failed to do so. Since the Sales Tax Officer had initiated penalty proceedings, the Assistant Commissioner was within his rights to impose the penalty in revisional jurisdiction. Therefore, the Tribunal was correct in upholding the penalty imposed by the Assistant Commissioner.
Conclusion: All three questions were answered in the affirmative, in favor of the State and against the applicant. The Assistant Commissioner was justified in exercising revisional jurisdiction to levy purchase tax and impose a penalty, and the Tribunal correctly upheld these actions. The reference was answered accordingly.
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1991 (3) TMI 336
Issues Involved:
1. Whether the sales of machinery of plant No. 2 and stock-in-trade were liable to tax under the Gujarat Sales Tax Act, 1969. 2. Whether the sales were made in the course of business. 3. Whether the sales were made under compulsion and not by free will.
Issue-Wise Detailed Analysis:
1. Liability of Sales to Tax under the Gujarat Sales Tax Act, 1969:
The primary issue was whether the sales of machinery of plant No. 2 and stock-in-trade were liable to tax under the Gujarat Sales Tax Act, 1969. The Tribunal and lower authorities held that these sales were liable to tax. The appellant contended that these sales were not made in the course of business and were under compulsion due to a court-sanctioned scheme. However, the court found that the appellant-mill company was carrying on its business during the assessment period, filing returns, and maintaining its registration certificate. Therefore, the sales were considered to have been made in the course of business and were liable to tax.
2. Sales Made in the Course of Business:
The appellant argued that the sales were not made in the course of business as the manufacturing activity had ceased. However, the court noted that the appellant-mill company had only suspended its manufacturing activity and had not closed down. The company continued to file sales tax returns and had not canceled its registration certificate. The court concluded that the appellant-mill company was carrying on its business during the relevant period, and the sales were made in the course of business.
3. Sales Made Under Compulsion:
The appellant contended that the sales were made under compulsion due to the court-sanctioned compromise scheme and were not voluntary. The court examined whether the sales were made under compulsion or with free will. It was found that the appellant-mill company and its creditors voluntarily approached the court under section 391 of the Companies Act for the sanction of the compromise scheme. The scheme allowed the appellant to sell its assets with the consent of the Union Bank of India and under the scrutiny of a committee. The court determined that the appellant-mill company had the volition to sell its assets and that the transactions were made with free will. The stipulations in the compromise scheme were intended to safeguard the interests of creditors and did not impose any compulsion on the appellant-mill company.
Conclusion:
The court concluded that the transactions of sales of machinery and stock-in-trade were liable to tax under the Gujarat Sales Tax Act, 1969. The sales were made in the course of business and were not under compulsion. The court answered the question in the affirmative, in favor of the department, and against the assessee. There was no order as to costs.
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1991 (3) TMI 335
Issues Involved: 1. Whether the deed dated December 29, 1973, was a deed of dissolution or merely a deed of retirement of two partners. 2. Whether the applicants continued to be liable for payment of tax after their retirement due to the conditions stipulated in the deed and the provisions of Section 25 of the Gujarat Sales Tax Act, 1969.
Issue-wise Detailed Analysis:
Issue 1: Nature of the Deed (Dissolution vs. Retirement) The first issue revolves around the interpretation of the deed dated December 29, 1973. The Tribunal framed the question of whether the deed was a deed of dissolution of M/s. Jalaram Engineering Works or merely a deed of retirement of the two applicants as partners.
Upon examining the terms and conditions of the deed, the court noted that although the deed was captioned as a "deed of dissolution," it explicitly allowed the remaining two partners to continue the business with the same assets. The applicants were described as "retiring partners," and the remaining partners as "continuing partners," indicating that the partnership firm did not come to an end. The court concluded that the deed was not a deed of dissolution but a "deed of retirement of two partners." Thus, the Tribunal was correct in holding that it was merely a deed of retirement.
Issue 2: Liability for Tax Post-Retirement The second issue pertains to the interpretation of condition No. 4 of the deed and Section 25 of the Gujarat Sales Tax Act, 1969. Condition No. 4 stipulated that the continuing partners would take over the liabilities, including tax liabilities, from the date of retirement. However, Section 25 of the Act overrides any contract to the contrary, stating that each partner of a firm is jointly and severally liable for the payment of tax.
The court emphasized that a retiring partner must intimate the date of retirement to the Commissioner in writing within 15 days to terminate their liability for tax accruing after their retirement. Since the applicants did not provide such intimation, their liability continued despite their retirement. The court rejected the argument that a new firm came into existence post-retirement and that only the continuing partners were liable for tax. The Tribunal correctly held that the liability of the retiring partners continued due to their failure to notify the Commissioner as required by Section 25.
Conclusion The court answered both questions in the affirmative, against the assessee and in favor of the department. The deed was determined to be a deed of retirement, not dissolution, and the applicants continued to be liable for the firm's tax liabilities due to their failure to notify the Commissioner of their retirement within the stipulated time. The reference was answered in the affirmative with no order as to costs.
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1991 (3) TMI 334
The revision application was allowed by the Government of India in a case involving transit losses of Raw Naphtha, HSD, D.O., L.D.O. Different products were loaded on the same ship, resulting in losses in some and gains in others. The gains were not initially considered in computing losses. The Government allowed adjustment of gains against losses, following a previous decision, and upheld the condonation of losses to the extent allowed by lower authorities.
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1991 (3) TMI 333
Issues: Accused facing prosecution under section 630 of the Companies Act for withholding premises post-retirement. Jurisdiction to quash criminal proceedings based on orders from a civil court.
Analysis: The petitioners, former employees accused of wrongfully withholding premises post-retirement, sought to quash criminal proceedings under section 630 of the Companies Act. They argued that civil court orders for maintaining status quo should overrule criminal prosecution. However, the court delved into the facts, emphasizing that the premises belonged to the respondent, and the petitioners occupied them as a service benefit. Upon retirement, they were obligated to vacate the premises. The court clarified that no landlord-tenant relationship existed. The court noted that the civil court might not have been fully informed of this aspect, leading to the misunderstanding. The court highlighted that withholding premises after employment cessation constituted an offense under section 630 of the Companies Act.
The judgment referenced a similar case where the Bombay High Court held that post-employment, claiming tenancy rights over company premises was invalid. The court agreed with this stance, emphasizing that the offense of wrongful withholding of premises under section 630 was valid even amidst civil litigation. The court dismissed the petitions at the admission stage, emphasizing the legal obligation to vacate premises post-retirement.
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1991 (3) TMI 332
Issues Involved: 1. Applicability of the Sick Industrial Companies (Special Provisions) Act, 1985. 2. Validity of the order directing winding up of the appellant company.
Issue-wise Detailed Analysis:
Issue 1: Applicability of the Sick Industrial Companies (Special Provisions) Act, 1985
The appellant company argued that the industry was run under the Sick Industrial Companies (Special Provisions) Act, 1985, and thus the company court could not direct its winding up. The provisions of sections 4, 15(1), 16, 17, 20, 22, and 31 of the Act were cited to support this contention. However, the learned company judge rejected this argument, stating that the Act's provisions could only be invoked if an inquiry under section 16 was pending, a scheme under section 17 was under preparation or consideration, or a sanctioned scheme was under implementation. None of these conditions were met in this case.
The court clarified that for the Act to apply, the company must be a "sick industrial company" as defined under section 3(o) of the Act, and a proceeding must be initiated before the Board under sections 15 and 16. The board of directors of the sick industrial company should have made a reference to the Board within sixty days from the finalization of the duly audited accounts, as per section 15(1). However, no such step was taken by the appellant company either before or during the pendency of the winding-up petition.
Section 15(2) of the Act, which allows the Central Government, Reserve Bank, State Government, or a public financial institution to make a reference to the Board, was deemed discretionary and not mandatory. The court emphasized the difference between the mandatory "shall" in section 15(1) and the discretionary "may" in section 15(2).
Additionally, section 16(1)(b) allows the Board to initiate an inquiry suo motu or upon receiving information about the financial condition of the company. However, this provision is also discretionary. Consequently, the court concluded that the provisions of the Act were not attracted to the appellant company since section 15(1) was not invoked, and there was no mandatory obligation for the bank to make a reference under section 15(2).
Issue 2: Validity of the Order Directing Winding Up
The appellant company was unable to discharge its debts or generate funds and did not present any viable scheme for improving its industry. The learned company judge concluded that the company had ceased operations for more than a year due to financial constraints and was unable to secure financing from other sources. Consequently, the only course of action was to order the winding up of the company.
The court found no merit in the appellant's argument that the first respondent bank should have approached the Board under section 15(2) of the Act. The bank had provided several opportunities for the appellant company to generate funds and discharge its debt, but the company failed to do so. The court also noted that there was no evidence to support the appellant's claim that the surrounding area was a cotton-growing region dependent on the company's operations.
The court referred to two Supreme Court decisions cited by the appellant. In E.I.D. Parry (India) Ltd. v. State of Tamil Nadu, the Supreme Court emphasized the importance of keeping a factory operational to support local employment and agriculture. However, the court found no foundation for applying this principle in the present case, as there was no evidence that the area surrounding the appellant company was a cotton-growing region.
In Navnit R. Kamani v. R. R. Kamani, the Supreme Court considered a scheme presented during the winding-up proceedings. However, no such scheme was presented in the present case, despite the long pendency of the petition and appeal.
Therefore, the court concluded that the learned company judge was justified in ordering the winding up of the appellant company, as there was no viable alternative to discharge its debts.
Conclusion:
The appeal was dismissed, and the order directing the winding up of the appellant company was upheld. The provisions of the Sick Industrial Companies (Special Provisions) Act, 1985, were not applicable as the necessary steps under section 15(1) were not taken, and section 15(2) was discretionary. The company was unable to discharge its debts or present a viable scheme for its revival, justifying the order for winding up.
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1991 (3) TMI 329
Issues Involved: 1. Interpretation of Section 293(1)(a) of the Companies Act, 1956. 2. Validity of the Board Resolution dated 5th February 1991. 3. Allegations of fraud and mala fides in the sale of the vessel "Boss Vishwa". 4. Adequacy of notice and agenda for the Board meeting. 5. Estoppel and subsequent conduct of the petitioners.
Summary:
1. Interpretation of Section 293(1)(a) of the Companies Act, 1956: The primary issue is the interpretation of the term "undertaking" u/s 293(1)(a) of the Companies Act, 1956. The court held that the term "undertaking" refers to the "unit", the business as a going concern, and not merely some asset of the undertaking. The court concluded that the sale of the vessel "Boss Vishwa" does not constitute the sale of an "undertaking" as the company owns three vessels and the business can continue with the remaining vessels.
2. Validity of the Board Resolution dated 5th February 1991: The petitioners challenged the board resolution on the grounds that it was passed without the prior consent of Deepak Fertilisers and that the notice for the board meeting was inadequate. The court found that the resolution was passed by a majority of directors and that the notice was adequate under the circumstances. The court also noted that the Sawhney group had initially consented to the sale and was estopped from challenging it later.
3. Allegations of fraud and mala fides in the sale of the vessel "Boss Vishwa": The petitioners alleged that the sale was fraudulent and at an undervaluation. The court found no merit in these allegations, noting that the sale price of US $16 million was supported by valuation reports and approved by the Director-General of Shipping. The court also observed that the petitioners had initially consented to the sale and could not now claim it was fraudulent.
4. Adequacy of notice and agenda for the Board meeting: The petitioners argued that the notice for the board meeting was inadequate as it did not include the agenda. The court held that the notice was adequate given the circumstances and that the directors were presumed to be aware of the purpose of the meeting. The court also noted that any procedural defect was curable and did not warrant setting aside the resolution.
5. Estoppel and subsequent conduct of the petitioners: The court found that the petitioners and the Sawhney group were estopped from challenging the sale as they had initially consented to it and had taken steps to implement the sale. The court also noted that the petitioners had acted inconsistently by opposing the sale after having supported it initially.
Conclusion: The court dismissed the judge's summons for an interim injunction, holding that the petitioners had not made out a prima facie case. The court also rejected the petitioners' application for an order restraining the foreign buyer from entering into any transaction of sale of the vessel with a third party. The court emphasized that there were no equities in favor of the petitioners and that the sale was in the best interest of the company.
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1991 (3) TMI 315
Issues Involved:
1. Winding up of Kamla Spinning and Manufacturing Mills Private Limited. 2. Valuation of assets and properties by GTCO. 3. Invitation of offers to take over the assets on lease. 4. Scheme of compromise and/or arrangement by Neptune Trading Co. 5. Approval of the scheme by various creditors and stakeholders. 6. Objection by All-India Scheduled Castes Development Co-operative Society Limited. 7. Sanctioning of the scheme by the court.
Detailed Analysis:
1. Winding up of Kamla Spinning and Manufacturing Mills Private Limited:
On April 14, 1986, Kamla Spinning and Manufacturing Mills Private Limited was ordered to be wound up under the provisions of the Companies Act, 1956. The official liquidator was appointed as liquidator of the company.
2. Valuation of assets and properties by GTCO:
By order dated March 27, 1989, GTCO was appointed as a valuer to assess the value of the assets and properties of the company and also to prepare an inventory. GTCO submitted a valuation report dated May 24, 1989, showing the total value at Rs. 2,00,23,975.
3. Invitation of offers to take over the assets on lease:
After receiving the valuation report, the court directed the official liquidator to invite offers for taking over the assets on lease to re-start the company and generate employment for the workers. The court considered the interests of the company in liquidation, creditors, and workers. Fresh advertisements were issued, and five offers were received, out of which three were withdrawn.
4. Scheme of compromise and/or arrangement by Neptune Trading Co.:
Neptune Trading Co. sponsored a scheme of compromise and/or arrangement between Kamla Spinning and Manufacturing Mills Private Ltd. and its creditors and employees. This was filed in Company Application No. 218 of 1990. Arvind Mills Limited had also proposed a scheme earlier but withdrew it in favor of the scheme tendered by Rajiv Cotton Traders.
5. Approval of the scheme by various creditors and stakeholders:
Separate meetings of various classes of creditors and employees were held, and the scheme was voted in favor by: - Secured creditor (Bank of Baroda) - Employees' State Insurance Corporation - Ahmedabad Electricity Company Ltd. - Government of Gujarat - Unsecured creditors - Employees of the company
The statutory creditors like the Collector of Central Excise and Customs, Chief Commissioner of Income-tax, Regional Provident Fund Commissioner, and Commissioner of Sales Tax did not attend the meetings.
6. Objection by All-India Scheduled Castes Development Co-operative Society Limited:
The society proposed to take Kamla Spinning Mills on leave and license basis for a minimum period of five years, offering a monthly compensation of Rs. 1,11,000. However, the court noted that the society lacked experience in running a textile mill and had no bona fide intention. The society's proposal was objected to by the secured creditor (Bank of Baroda) and the Textile Labour Association.
7. Sanctioning of the scheme by the court:
The court sanctioned the scheme proposed by Neptune Trading Co. (Rajiv Cotton Traders) as it was approved by almost all concerned parties, complied with statutory requirements, and was deemed fair and reasonable. The court ordered the following terms and conditions: - Revocation of the winding-up order from March 25, 1991. - Official liquidator to hand over possession of the assets. - Kamla Spinning and Manufacturing Mills Private Limited to file a certified copy with the Registrar of Companies by April 25, 1991. - Official liquidator to submit a report on the commission payable to the Central Government within 15 days. - Court reserved the right to direct civil proceedings against ex-directors for criminal acts. - Expenses incurred by the official liquidator to be borne by the company. - Scheme to be implemented under court supervision. - Liberty to apply for further directions if any difficulty arises in execution or implementation.
The court rejected Company Application No. 42 of 1991 and Company Application No. 173 of 1988, as they did not survive in view of the sanctioned scheme.
Conclusion:
The scheme proposed by Neptune Trading Co. was sanctioned as it was in the best interest of the company, creditors, and employees. The objections raised by All-India Scheduled Castes Development Co-operative Society Limited were dismissed due to lack of experience and bona fide intentions. The court provided specific directions for the implementation and supervision of the scheme.
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1991 (3) TMI 314
Issues Involved:
1. Validity of service of summons on the opposite party. 2. Interpretation of service of summons under Order 29, Rule 2, Civil Procedure Code (CPC) vis-`a-vis Section 51 of the Companies Act. 3. Justification for setting aside the ex parte decree. 4. Limitation for filing an application under Order 9, Rule 13, CPC.
Detailed Analysis:
1. Validity of Service of Summons on the Opposite Party:
The petitioner filed a suit for eviction on grounds of reasonable requirement and damage to the premises. Summons were sent to the opposite party tenant by both bailiff and registered post. The summons sent by registered post was returned with the endorsement "refused," leading to an ex parte decree. The opposite party later contended that the summons was fraudulently suppressed, and the office was temporarily closed, making the service of summons invalid. The trial judge initially found the summons to be duly served, but the appellate judge reversed this, leading to the current revision petition.
2. Interpretation of Service of Summons under Order 29, Rule 2, CPC vis-`a-vis Section 51 of the Companies Act:
Order 29, Rule 2, CPC, specifies that summons may be served on a corporation by sending it to the registered office or where the corporation carries on business. However, Section 51 of the Companies Act mandates that documents (including summons) must be served at the registered office of the company. The appellate judge held that service at the branch office did not comply with Section 51, rendering the service invalid. The petitioner argued that service at the business premises should suffice, but the court emphasized that compliance with Section 51 is mandatory for limited companies.
3. Justification for Setting Aside the Ex Parte Decree:
The appellate judge found that the office of the opposite party was closed from March 1984 to November 1985, corroborated by the testimony of C.S. Baby. The trial judge had dismissed this testimony, but the appellate judge accepted it, leading to the conclusion that the summons was not duly served. The appellate court's finding of fact, based on evidence, was upheld, and the ex parte decree was set aside due to non-service of summons at the registered office.
4. Limitation for Filing an Application under Order 9, Rule 13, CPC:
The opposite party filed the application under Order 9, Rule 13, CPC, on December 16, 1985, after discovering the ex parte decree on November 22, 1985. The petitioner argued that the application was barred by limitation as it was filed more than 30 days after November 13, 1985, when the opposite party allegedly became aware of the dispossession. However, the court held that limitation starts from the date of knowledge of the decree, which was November 22, 1985. The application was therefore within time, and the appellate judge's decision to set aside the ex parte decree was upheld.
Conclusion:
The High Court dismissed the revision petition, affirming the appellate judge's decision to set aside the ex parte decree. The court emphasized the necessity of serving summons at the registered office of a limited company as per Section 51 of the Companies Act and found that the summons was not duly served. The application under Order 9, Rule 13, CPC, was filed within the limitation period from the date of knowledge of the decree. The parties were directed to bear their respective costs.
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1991 (3) TMI 313
Issues Involved: 1. Limitation period for filing the application under section 543 of the Companies Act, 1956. 2. Applicability of section 458A of the Companies Act, 1956. 3. Requirement of court sanction for filing the application under section 543.
Issue-wise Detailed Analysis:
1. Limitation Period for Filing the Application under Section 543 of the Companies Act, 1956: The respondents contended that the application was barred by limitation as it was filed beyond the five-year period prescribed in sub-section (2) of section 543 of the Companies Act, 1956. The winding-up order was passed on August 28, 1981, and the application was filed on October 5, 1987, which is more than five years after the winding-up order.
2. Applicability of Section 458A of the Companies Act, 1956: The official liquidator argued that section 458A of the Companies Act, 1956, should be applied to exclude certain periods from the computation of the limitation period. According to section 458A, the period from the date of commencement of the winding up to the date of the winding-up order, and one year immediately following the date of the winding-up order, should be excluded. If these periods are excluded, the application would be within the five-year limitation period.
The respondents countered that section 458A was not applicable to the present application because section 543 itself specifically stipulated the period of limitation. They argued that section 458A applies only to suits or applications in the name and on behalf of the company filed after obtaining the sanction of the court, not to applications under section 543.
The court referred to a previous judgment in Arkay Chit and Commercial Trading Co. P. Ltd., In re [1982] 52 Comp Cas 174, where it was held that both the period from the commencement of the winding up to the date of the winding-up order and the period of one year following the winding-up order should be excluded in computing the limitation period. The court agreed with this interpretation, stating that section 458A has an overriding effect and applies to all applications made in the name and on behalf of the company.
3. Requirement of Court Sanction for Filing the Application under Section 543: The respondents argued that the official liquidator did not obtain the sanction of the court before filing the present application, which is necessary for section 458A to apply. The court, however, noted that an order dated July 2, 1982, in Company Application No. 92 of 1982, had accorded permission to the official liquidator to exercise all or any of the powers under section 457(1) of the Companies Act, which includes the power to institute or defend any legal proceeding in the name and on behalf of the company. The court further held that for applications under section 543(1), the sanction contemplated under section 457 can be implied when the application is presented to the company court itself.
Conclusion: The court concluded that the present application made by the official liquidator under sub-section (1) of section 543 is in the name and on behalf of the company and that the provisions of section 458A are attracted to such an application. Therefore, if the period covered by section 458A is excluded, the application is within the prescribed time limit. Consequently, the court held that the company application is not barred by time and shall be posted for preliminary hearing for directions under rule 261 of the Companies (Court) Rules, 1959.
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1991 (3) TMI 294
Issues: 1. Interpretation of the term "Ocean Going Vessels" under Tariff Item 68 for excise duty exemption. 2. Applicability of previous Tribunal judgment in considering barges as "Ocean Going Vessels." 3. Impact of a subsequent Supreme Court judgment on the classification of vessels primarily intended for inland navigation.
Analysis: 1. The primary issue in this appeal before the Appellate Tribunal CEGAT, New Delhi, was the interpretation of the term "Ocean Going Vessels" under Tariff Item 68 for excise duty exemption. The question revolved around whether the vessels/ships manufactured by the respondents fell within this category as exempted under specific notifications.
2. The lower appellate authority had previously held that the "Barges" manufactured by the respondents were indeed covered by the expression "Ocean Going Vessels" and thus exempted under the relevant notifications. The appellant conceded that a prior Tribunal judgment favored the respondents in treating their barges as "Ocean Going Vessels" under the same notifications.
3. However, the appellant sought to rely on a subsequent Supreme Court judgment in the case of Chowgule & Co. Pvt. Ltd., which raised the issue of vessels primarily intended for inland navigation not qualifying as "Ocean Going Vessels." The appellant argued that as the vessels in question were primarily for inland navigation to transport ores, they should not be considered as "Ocean Going Vessels."
4. The respondent's advocate contended that the Tribunal's earlier judgment directly addressed the exemption notification in question and was applicable to the present case. He argued that the Supreme Court judgment cited by the appellant dealt with a different controversy and did not consider the specific term "Ocean Going Vessels" under the relevant notifications.
5. After considering the arguments from both sides, the Appellate Tribunal agreed with the respondent's position. The Tribunal found that the Supreme Court judgment cited by the appellant was not applicable to the present circumstances. Therefore, based on the Tribunal's earlier judgment supporting the classification of the barges as "Ocean Going Vessels," the appeal was dismissed.
This detailed analysis outlines the key legal issues, arguments presented by both parties, and the Tribunal's decision based on the interpretation of relevant legal provisions and precedents.
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