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Duty-free shops at airports saved from GST 2019-10-14

The Bombay High Court last week stated that if duty-free shops (DFS), which cater for outgoing or incoming international passengers, are subjected to local taxes like GST by the state, the tax burden will increase and price of goods, which are supposed to be free of taxes and duties, will go up. That would prevent DFS’ in India from competing with those at international airports elsewhere in the world. This will also prejudicially affect our foreign trade and augmentation of foreign exchange. The court thus quashed the show cause notice issued to a Mumbai airport DFS in the case, Flemingo Travel Retail vs Union of India. It further stated that the state action was arbitrary and violative of Article 286 of the Constitution which restricts tax on import and export of goods or services.

Source: Business Standard, Mumbai Edition, October 14th, 2019.

IBC applicable to tea firm without sanction 2019-10-14

In the case of tea companies, it is not necessary to get the government’s consent to initiate proceedings under the Insolvency and Bankruptcy Code (IBC), the Supreme Court declared in its judgment in Duncans Industries vs A J Agrochem. Duncans, which had 14 tea estates, was the corporate debtor in this case. It argued in the National Company Law Appellate Tribunal that according to the Tea Act, the permission of the government was mandatory to initiate winding up of a tea company. Therefore, the action under the IBC initiated by the operational creditor against it was not maintainable as there was no government consent. The argument was rejected by the tribunal. The Supreme Court rejected Duncans’ appeal. It said that the IBC has overriding effect over the Tea Act. The purpose of the IBC was to revive the industry and winding up came as the last resort. The objectives were different. Moreover, the IBC is a later enactment and it would eclipse the old Tea Act.

Source: Business Standard, Mumbai Edition, October 14th, 2019.

Drinks for club members free from tax 2019-10-14

The Supreme Court has ruled that service tax cannot be imposed on members’ clubs for the supply of food and drinks to permanent members. This applies from 2005 onwards, whether clubs are incorporated or not. The court stated so while dismissing the appeals of the revenue authorities against the ruling of the Calcutta High Court involving demand notices issued to Calcutta Club. The club argued that it is not a dealer within the meaning of the West Bengal Sales Tax Act as there is no sale of any goods in the form of food, refreshments, drinks or other consumables to its permanent members. It further contended that the club treated itself as an agent of the permanent members and no consideration was passed for supplies of food, drinks or beverages. There was only reimbursement of the amount by the members and therefore, no sales tax could be levied. The authorities countered it by insisting that profit-motive is unnecessary as the supply of goods by a club to its members fell within the definition of “sale” in law. While rejecting the revenue authorities’ contentions, the Supreme Court also set aside the view of certain high courts and accepted that of Gujarat and Jharkhand.

Source: Business Standard, Mumbai Edition, October 14th, 2019.

Criminal cases in road accidents valid 2019-10-14

The Supreme Court has set aside the order of the Gauhati High Court issued to subordinate officers to prosecute offenders in motor vehicle accidents only under the provisions of the Motor Vehicles (MV) Act, and not the Indian Penal Code. The high court had issued the direction to officers of Assam, Nagaland, Meghalaya, Manipur, Tripura, Mizoram, and Arunachal Pradesh. The high court had ruled that in cases of road traffic or motor vehicle offences, prosecution under the provisions of the Indian Penal Code (IPC) is illegal. Therefore, the question arose which law would apply — the MV Act, or the IPC. The high court held that criminal law must succumb to the statutory provisions of the MV Act, and any investigation contrary to the same would be unsustainable in law. Appeals were filed by Arunachal Pradesh and Tripura. The Supreme Court ruled that in view of the rise in road accidents due to negligence, both laws would apply. “Both the statutes operate with full vigour in their own independent spheres. Even assuming that some of the provisions of the MV Act and the IPC are overlapping, it cannot be said that the offences under both statutes are incompatible,” the judgment emphasised.

Source: Business Standard, Mumbai Edition, October 14th, 2019.

State must keep its promise of incentives 2019-10-14

In two judgments, the Chhattisgarh High Court has ruled that the state cannot turn its back on entrepreneurs, who set up industries based on the promise of concessions in one industrial policy, and re-write the terms when a new policy is announced. In this case, concessions were provided in the 2004-2009 policy and companies made huge investments. But the benefits were unilaterally withdrawn when the 2009-2014 policy started. The terms of the expired policy were also changed to deny or curtail the benefits under the former policy. Two firms, Jindal Steel and Power and Shri Bajrang Power & Ispat challenged the action of the government in the high court. Allowing their petitions, the high court asserted that the government could not justify its action as “rectification of mistake”. The industries are entitled to a legitimate expectation that the promises given to them will be fulfilled. The court asked the government to re-work the extent of benefits payable to the firms within two months. It was allowed to set off the investment subsidy in respect of the arrears, as well as the tax liability.

Source: Business Standard, Mumbai Edition, October 14th, 2019.

Commercial court isn’t for every dispute 2019-10-14

Disputes involving high-value transactions cannot be dressed up as commercial suits and taken to commercial courts for speedy disposal. “The very purpose for which the Commercial Court Act was enacted in 2015 would be defeated if every other suit merely because it is filed before the Commercial Court is entertained,” the Supreme Court stated in its judgment in Ambalal Sarabhai Enterprises vs K S Infraspace LLP. “This is for the reason that the suits which are not actually relating to commercial dispute but being filed merely because of the high value and with the intention of seeking early disposal would only clog the system and block the way for genuine commercial disputes, which may have to be entertained by the commercial courts as intended by the lawmakers.” In this case, the issue was the mortgage of immovable property in Vadodara. The commercial court can hear it only if the property is used exclusively in trade or commerce. That was not so in this case, the court stated while dismissing the appeal.

Source: Business Standard, Mumbai Edition, October 14th, 2019.

Commissioners to seal fake drugs 2019-10-07

In a rare instance, the Delhi High Court has appointed two commissioners who will ensure that a pharmaceutical company operating from Mumbai and Dehradun will comply with the court order in a trademark case. In this case, Psychotropics India vs Syncom Healthcare, the former had obtained a decree of permanent injunction against the opposite party. However, it was not obeyed. The trial court rejected the plea to appoint commissioners. On appeal, the high court observed that the present case involved medicines which required special attention. The use of infringing marks would affect the interests of the general public as patients may continue to buy medicines which are passed off as genuine. A stricter test must be applied in matters concerning pharmaceuticals. The court directed the commissioners to visit the two firms and seize the infringing products. The police have been asked to assist the commissioners during the operations. The infringing company has been directed to cooperate with the commissioners who will submit a report to the court in two weeks.

Source: Business Standard, Mumbai Edition, October 7th, 2019.

Winding route to IPR justice 2019-10-07

A few weeks ago, the Delhi High Court had highlighted the plight of tribunals dealing with intellectual property rights because of vacancies. In that case, Mylan Laboratories vs Union of India, the company had complained that the Intellectual Property Appellate Board could not pass a valid order in its application because of vacancies. The court had made an ad hoc arrangement for proceeding with the application in the tribunal despite lack of quorum. The company now returned to the high court challenging the order of the deputy controller of Patents & Designs as the board is not fully constituted and is not functional. The ad hoc arrangement also did not work out as the board chairperson has demitted office since then. The high court declined to entertain the petition and disposed it of, leaving the company to other remedies.

Source: Business Standard, Mumbai Edition, October 7th, 2019.

Rules to ease congestion at port upheld 2019-10-07

The Supreme Court has dismissed an appeal challenging the rates and conditions for warehousing imposed by the tariff manager at Kandla Port. The circular issued by him in 1998 explained the congestion in the port and non-availability of space. To overcome this problem, storage of cargoes would not be allowed for more than two months and the auction of such cargoes would be made under the Customs Act and the Port Trusts Act. Further, no renewal would be considered for the areas allotted on warehousing terms if the cargo had remained stored for more than 60 days. This rule was challenged by a clearing agent arguing that the traffic manager had no authority to issue such a circular. Moreover, there could be valid reasons for delays in clearing the cargo. Dismissing the appeal, the Supreme Court stated in the judgment, Maheshwary Handling Agency vs Trustees of Kandla Port, that under the rules, the traffic manager had wide discretion to prohibit the discharge of goods which are likely to obstruct traffic, cause congestion or hinder movement at the port.

Source: Business Standard, Mumbai Edition, October 7th, 2019.

Pan masala loses excise benefit 2019-10-07

The government cannot be faulted for withdrawing exemption from payment of excise duty on pan masala, plastics, and other listed items, though an earlier notification might have granted such a benefit. The withdrawal can be justified on the ground that it is necessary for the public interest, the Supreme Court stated in its judgment, Union of India vs Unicorn Industries. By a 2003 notification, the government had granted excise benefits to tobacco and related products. This exemption was available to units located in Industrial Growth Centre or Industrial Infrastructure Development Centre or Export Promotion Industrial Park or Industrial Estate or Industrial Area or Commercial Estate or Scheme Area, as the case may be, in Sikkim. Later, the benefit was granted to units in Assam also. However, in 2007, the benefit was withdrawn, as a result of which tobacco and manufactured tobacco substitutes and plastic carry bags of less than 20 microns were included in the negative list. This led to the manufacturers moving the high courts of Sikkim and Guwahati. Both high courts ruled that the pan producers were entitled to the benefit as promised by the government earlier. Reversing those judgments, the Supreme Court asserted that “public interest is accepted as superior equity which can override individual equity.” It has been justified in the case of electricity discounts in hill areas and PVC resins.

Source: Business Standard, Mumbai Edition, October 7th, 2019.

Helping units denied exporters’ IT sop 2019-10-07

Manufacturers who support exporting industries and direct exporters cannot be treated on par for income tax deductions, the Supreme Court ruled in its judgment, CIT vs Carpet India. Therefore, the supporting units cannot claim a deduction of export incentives given to direct exporters in Section 80HHC of the Income Tax Act. The court gave this ruling in a large batch of appeals against the judgment of the Punjab & Haryana High Court, which took a different view. Analysing the relevant provisions, the court observed that given the statutory scheme, “it is clear that the exporter stood on a completely different footing from the supporting manufacturer as the parameters and scheme for claiming deduction relatable to exporters under 80HHC(1) are completely different from that of supporting manufacturers under Section 80HHC(1A).”

Source: Business Standard, Mumbai Edition, October 7th, 2019.

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