[No.194]

Supreme Court

• Master Cables Pvt. Ltd. Vs. State of Kerala and Anr.

The question for consideration in the present appeal was the legality of the notice issued by the Deputy Commissioner of Commercial Taxes, Kollam vis-`-vis the provisions of the Kar Vivad Samadhan Scheme, 1998, framed under the Finance Act, 1998. Appellant was engaged in business of manufacture and sale of insulated electrical cable, registered under the Kerala General Sales Tax Act, 1963. Assessment proceedings in respect of the assessment years 1995-96 and 1996-97 were completed but on inspection of the premises of the appellant, certain amount of unaccounted production and sale of goods was found. Appellant took recourse to the provisions of the said Scheme and declaration made by it thereunder was accepted. By order dated 14.01.2003, the earlier assessment order was set aside, against which the appellant filed an appeal before the Kerala Sales Tax Appellate Tribunal. The matter was remitted to the Deputy Commissioner for its re- examination and by order dated 20.05.2003, the assessment in respect of the assessment year 1996-97 was set aside and re- assessment for the year 1995-96 was directed by an order dated 7.11.2003. Appeals filed by the appellant before the Tribunal questioning the said orders were dismissed. Sales Tax revisions filed thereagainst before the High Court was also dismissed, and hence the present appeal. It was contended by the appellant that having regard to the provisions of Sub-section (3) of Section 90 of the Scheme, the term "any other law for the time being in force" must be given a wide meaning so as to cover not only the direct tax or indirect tax envisaged thereunder but also the Sales Tax laws of the State. Held that the case of the appellant does not come within the purview of the Kar Vivad Samadhan Scheme as the provisions extended only to the enactments made by the Parliament, having regard to the constitutional Scheme contained in Article 246 of the Constitution of India, and the same cannot be extended to assessment of sales tax under a State legislature. The legislative field to enact a law relating to sales tax was within the exclusive domain of a State Legislature in terms of Entry 54, List II of the Seventh Schedule of the Constitution. Held that once it was found that a statutory authority had the jurisdiction to reopen a proceeding or set aside the order of the assessing authority, only the higher authorities can interfere therewith. Only because the appellant had taken recourse to the Scheme, it would not attract either Sub-section (3) of Section 90 of the Scheme or Section 91 thereof so as to cover a subject that is within the exclusive domain of the State Legislature. The Scheme must be read as limited to those laws which the Parliament has the legislative competence to enact and not which falls within the exclusive legislative field of a State, save and except where expressly so stated or inferred by necessary implication. Accepting the contention that the provisions of the Scheme would also apply to tax laws created by the State, it being beyond the legislative competence, would amount to colourable piece of legislation. Therefore appeal dismissed.

• Commissioner of Customs, Maharashtra Vs. Galaxy Entertainment (I) P. Ltd. and Ors.

The short question for determination in the present civil appeals was whether technical and installation fee amounting to Rs. 59 lacs was required to be loaded in the assessable value of a 20-Lane Bowling Alley equipment imported in October, 1998 by the assessee-Galaxy Entertainment (I) Pvt. Ltd. The assessee imported 20-Lane Bowling Alley from M/s AMF Bowling Inc. based in USA. A show cause notice was issued on 18.5.1999 alleging that the assessee had grossly undervalued the said equipment by declaring the price at US $ 15000 CIF as against the normal price of US $ 30000 for a lane. It was alleged that the assessee had disguised part of the cost of the equipment as Technical and Installation Fee which was payable to the subsidiary of the foreign supplier, M/s AMF Bowling (I) Pvt. Ltd. According to the Department, the said equipment stood undervalued as similar equipment imported into India during 1997-98 by nine different assesses was valued at US $ 30000 per lane. Hence, the equipment was liable to confiscation. Adjudicating Authority held that the declared price at the rate of US $ 15199 per lane was highly discounted price and there was no reason for granting discount of 45% to the assessee. Held that the said equipment was undervalued and disguised as technical and installation fees and the cost was artificially divided to evade payment of customs duty. On appeal, the Appellate Tribunal held that there was no undervaluation; that the declared value of the equipments at the rate of USD 15199 per lane was the negotiated price and there was no suppression as the Technical and Installation Agreement dated 20.8.1998 was post-clearance agreement. Hence the present appeals. The Supreme Court held that during the year 1997-98 M/s Capital Leisure Pvt. Ltd., New Delhi made a similar import at a cost US $ 30000 per lane. The Department took the transaction as the basis of valuation under Rule 5(1)(c) of the Customs Valuation Rules. However, the import from USA by M/s Capital Leisure Pvt. Ltd. was of 6-Lane Bowling Alley and no similar transaction had exceeded 8- Lane Bowling Alley. In the present case, the assessee has imported 20-Lane Bowling Alley. Also records indicate hectic bargaining for 20-Lane Bowling Alley by the assessee. Held that the Tribunal was right in coming to the conclusion that the cost per lane at US $ 15000 was a proper negotiated price. Held that there was no merit in the contention of the Department that the cost of the equipment was deliberately bifurcated and that the Technical and Installation Charges Agreement dated 20.8.1998 was a disguise to arrive at the true value of the import. The Technical and Installation Charges Agreement dated 20.8.1998 stipulated raising of revenue for next three years by charging a fee of Rs. 5.90 per game for one million games bowled aggregating to Rs. 59 lacs, as a matter of promotion and there was no nexus between that agreement and the sale proceeds of the equipment paid by the assessee to M/s AMF Bowling Inc., USA. The post-clearance agreement was revenue generation agreement and under Rules of Interpretation to the Customs Valuation Rules, post-clearance agreements are excluded. Appeal dismissed.

• Soma Chakravarty Vs. State through CBI

The appellant along with the other accused had allegedly entered into a criminal conspiracy and by misusing their official position caused undue pecuniary advantage to themselves causing a corresponding loss to the Indian Trade Promotion Organization (ITPO) from whose account money was released against bogus receipts of advertisements. The publicity department of ITPO was concerned with the release of advertisements in newspapers. Ad hoc advertisements were issued on ad hoc basis with the specific approval of the Chief Managing Director or Executive Director only. Shri Bal Krishan, Deputy Manager was in charge of ad hoc advertisements and was authorised to process the bills for such advertisements. It was alleged that Shri Ajay Uppal, proof Reader/Senior Assistant of ITPO floated 6 bogus firms and submitted 76 bogus bills worth Rs. 30,30,057/- for payment by signing under fictitious names, of which 14 were dishonestly processed and verified by the accused Soma Chakravarty and P. K. Jindal, in connivance with the co-accused. It is further alleged that the appellant knew that those bogus bills had not been entered in the bills register of the publicity Division of ITPO. Charge sheet was filed against accused for conspiracy to cheat, forgery, cheating and corruption. Trial court framed the impugned charges against the appellant Ms. Soma Chakravarty and Mr. P.K. Jindal and against the framing of charges a criminal revision was filed in the High Court, which dismissed the same, by the impugned judgment. It was contended that there was no material before the Special Judge to frame charges against the accused. The High Court dismissed the Criminal Revision Petition and hence the appeal by special leave. Held that if on the basis of material on record the Court could form an opinion that the accused might have committed an offence, it can frame the charge, though for conviction it has to be proved beyond reasonable doubt that the accused has committed the offence. Held that when a person signs on a document he or she is expected to make some enquiry before signing it and in fact the accused was never assigned any duty for processing or signing the bills for ad hoc advertisements. Though it was contended that the accused signed the fake bills by negligence but without any mala fide intention, that is a matter that is to be seen at the time of the trial. Agreeing with the view taken by the High Court the Supreme Court held that there were serious allegations of misappropriation of a huge amount of money belonging to the government, and it cannot be said at this stage that there is no material at all for framing the charge against her. Appeal dismissed.

High Courts

Gujarat

• Rhombic Laboratory and Anr. Vs. State Of Gujarat and Anr.

Appellant-accused drug manufacturers were held to be guilty for offence punishable under Sections 3 and 7 of Essential Commodities Act and for violation of Drugs (Price Control) Order, 1987 on ground that appellants had marketed their drug formulation “Quinine Tablets 300” without prior price approval by competent authority. Appellants however challenged said order of trial court on ground that complainant officer was not competent authority or was not authorized to initiate such a complaint against appellant and that on date of filing of complaint, the Drugs (Price Control) Order, 1987 was repealed by new Control Order i.e. Drugs (Price Control), Order, 1995. Hence, present appeal. Whether prosecution was right in initiating proceedings against appellant under Drugs (Price Control), Order, 1987 which was repealed on the day proceedings were initiated. Held, in present case, deletion of Quinine from list of drug / formulation mentioned in schedule is relevant fact and after commencement of new Drugs (Price Control), Order, 1995, prosecution could not have been instituted under Drugs (Price Control), Order, 1987. It is settled that Court should look to language of saving clause of repealing section and language of that clause should be interpreted in light of Section 6 (e) of General Clauses Act. In present case, no proceedings were initiated under Drugs (Price Control), Order 1987 till 6th January, 1995. No action could have been brought which can be said to be a fresh initiation of proceedings under old Statute which was repealed by a fresh Drugs (Price Control) order and on this count accused can be given benefit. Appeal is allowed.

• Banaskantha District Co-Op. Union Vs. State of Gujarat and Ors.

Petitioner is a district level Federal Co-operative Society. Two talukas of petitioner’s revenue district were carved out by State Government and transferred to a newly formed revenue district. District Registrar, having charge over newly formed revenue district granted registration to Respondent No. 4 which is a District Co-operative Union. Against said order, Registrar, Co-operative Societies, Gujarat, initiated suo motu revisional proceedings and cancelled order of registration. Respondent No. 4 preferred revision before State Government and said revision came to be granted and order granting registration came to be restored. Petitioner-society meanwhile filed a petition before High Court against granting of registration for Respondent No. 4 and was asked to approach concerned authority. Hence, present revision. Whether petitioner co-operative society is right in challenging order of State Government granting registration to respondent No. 4 ? Held, it is apparent that in a case where a new revenue district comes into existence by virtue of a decision taken by State Government, upon consequential formation of district level Co-operative Society various primary Co-operative Societies at taluka level and village level of talukas which were forming part of another district earlier in point of time, and have subsequently become part of newly formed district, are bound to be affected and existing district level union or State level union cannot be heard to state that such Co-operative Societies which were members of existing district level union should not be permitted to join district level union of newly formed district. Once, geographically, talukas in question are carved out by State Government and declared to be part of newly formed district, as a natural corollary societies falling within such areas are bound to be aligned with taluka level societies who in turn would get aligned with newly formed district level union upon formation of new district. If such newly formed district level Co-operative Union seeks registration and satisfies requisite condition prescribed by law, it is not open to existing district level union to object to same as even otherwise such district level union has no right as such to insist that a particular Co-operative Society must become its member, more particularly when taluka or village in which such society exists is forming part of newly formed district and has been carved out from existing district. Therefore, petition does not merit acceptance and is accordingly rejected.

• The New India Assurance Co. Ltd. Vs. Meenaben Pankajkumar Joshi And Ors.

Claimant’s husband was involved in motor vehicle accident wherein his car was hit by a truck insured by appellant-insurance company as result of which he suffered injuries and succumbed to death. Claimants filed petition for compensation on ground that accident was caused by negligent parking of truck on middle of road without any reflector, side signal or tail lamp. Tribunal held that the accident was caused mainly by negligent parking of truck on middle of road and that truck driver was negligent to extent of 85 per cent and awarded compensation with interest at rate of 12 per cent per annum. Hence, present appeal. Whether Tribunal erred in attributing 85 per cent negligence to truck driver, even though truck was lying in a stationary condition and deceased driving Opel Astra car could have easily avoided accident? Held, argument of learned counsel for appellant-Insurance Company that panchnama does not indicate that there was any kachchha shoulder on either side of asphalt road, has to be rejected because Court would like to take judicial notice of fact that State highways are two lane roads with kachchha shoulders on either side. Though panchnama does not indicate exact width of road, it is well known that asphalt road on a State Highway is wide enough for passage of two vehicles. In this situation, parking of truck on asphalt road was itself an act of gross negligence compounded by absence of any reflector or tail light on rear side of truck. During night hours, even a person driving his car at reasonable and moderate speed would not be in a position to notice such truck parked on a Highway from a distance long enough to stop the car so as to avoid any accident. Therefore, there is no justification for attributing any negligence to deceased who was driving the car. The truck was parked on asphalt road without any reflectors or working tail lights. Any person driving a car on the State highway in early morning hours would never expect any vehicle like a truck parked on highway and that too without any reflector or any other signal. Therefore, accident was caused entirely on account of negligence of car driver and that no negligence could have been attributed to deceased who was driving Opel Astra car.

Press Information Bureau

• CBDT Notifies New Series of Forms for Filing Income Tax Return for Assessment Year 2007-08

PIB Dated 15.05.2007: Vide Notification S.O. No. 762(E) dated 14th May, 2007, the Central Board of Direct Taxes have notified eight Return Forms for assessment year 2007-08. They are ITR-1 - return of income for Individuals having salary / pension / family pension and interest income and no other income; ITR-2 - return of income for Individuals and HUFs having income from any source except from business or profession; ITR-3 - return of income for Individuals and HUFs being partners in firms and not having proprietory business or profession; ITR-4 - return of income for Individuals and HUFs having proprietory business or profession; ITR-5 - combined form for return of income and fringe benefits for Firms/AOP/BOI; ITR-6 - combined form for return of income and fringe benefits for Companies; ITR-7 - combined form for return of income and fringe benefits for Charitable / religious trusts, political parties and other non- profit organizations and ITR-8 - stand alone form for return of fringe benefits for persons who are not liable to file return of income but are liable to file return of fringe benefits. All these Forms (except Form ITR-7) have been designed as annexure-less so as to make them amenable for electronic filing. Last year, electronic filing was made compulsory for corporate tax-payers. This year, electronic filing has been made compulsory for firms also which are liable to tax audit under section 44AB. Corporate taxpayers and such firms may either file their return electronically under digital signature or may transmit the data of the return electronically. On successful electronic transmission of data (without digital signature), the Income Tax Department will electronically send the taxpayer a duly filled one-page verification form (Form ITR-V). The taxpayer will have to take a print out of two copies of Form ITR-V, duly verify and sign the two copies, furnish one copy to the Income tax Department and obtain acknowledgement on the other copy for his own record. All other categories of taxpayers (other than charitable trusts, institutions, etc.) will have the option to file the return in a paper form or electronically or in a bar-coded return form.

• Draft Companies Bill amending the Companies Act,1956 is under preparation

PIB Dated 15.05.2007: The Government initiated the process for comprehensive revision of the Companies Act, 1956 by preparing a concept paper on company law. An Expert Committee headed by Dr. J J Irani was constituted to subject various views/opinions received to merit evaluation and make recommendations to the Government on revision of the Companies Act, 1956 and the Committee submitted its report on May 31, 2005. Accordingly, the Irani Committee has recommended that law should take into account the requirements of different kinds of companies and prescribe the essential requirements of their corporate governance structure and recommended that Small and Private Companies should be provided greater flexibility and freedom of operation while enabling compliance at low cost. To unleash the entrepreneurial talent of the people in the information and technology driven environment, law should recognize One-Person Company (OPC). Such companies should be provided with a simple legal regime through exemptions. Taking into account the recommendations of the Irani Committee as also other inputs received by the Government, a draft Companies Bill is under preparation, in consultation with Ministry of Law, to be introduced in the Parliament once finalized with requisite approvals.

RBI

Press Release

• RBI announces rate of interest on Floating Rate Bonds, 2014

Press Release No. : 2006-2007/1554 Dated 14.05.2007: The rate of interest on the Floating Rate Bonds, 2014 (FRB, 2014) applicable for the year (May 20, 2007 to May 19, 2008) shall be 7.86 percent per annum. The variable base rate for payment of interest shall be the average rate of the implicit yields at cut-off prices of the last three auctions of Government of India 364 day Treasury Bills held up to May 19, 2007. The variable base rate based on the average rate of the implicit yields at cut-off prices of the said last three auctions of Government of India 364 day Treasury Bills worked out to be 7.72 per cent.

SEBI

Press Release

• Permanent Account Number (PAN) to be the sole identification number for all transactions in the securities market

Press Release No. PR No.153/2007 Dated 27.04.2007: SEBI vide circulars dated July 13, 2006 and September 26, 2006 had earlier stipulated that PAN would be mandatory for trading in the cash market with effect from January 01, 2007. Further, SEBI vide circular dated September 26, 2006 had also stipulated that PAN would be mandatory for operating demat accounts with effect from January 01, 2007. These mandates have come into force and have been operationalised. Further, in order to strengthen the Know Your Client (KYC) norms and identify every participant in the securities market with their respective PAN thereby ensuring sound audit trail of all the transactions, it has been decided that PAN would be the sole identification number for all participants transacting in the securities market, irrespective of the amount of transaction. The same shall come into force with effect from July 02, 2007. The above direction of SEBI is pursuant to the announcement made by the Hon'ble Finance Minister in the Union Budget 2007-08 to make PAN the sole identification number for all participants in the securities market with an alpha-numeric prefix or suffix to distinguish a particular kind of account.

Cases

• Arthur Ross, et al Vs. Louise Wise Services, Inc.

Plaintiffs applied to defendant Agency for assistance in adopting an infant and plaintiffs were offered a baby boy for adoption. However, defendant agency did not disclose the fact that the birth parents of the baby boy had suffered emotional disturbances. By the time the adopted baby was 4 years old he started showing troublesome behaviour which led plaintiffs to seek professional help. Thereafter, when said boy grew up he was diagnosed with paranoid schizophrenia. Plaintiffs then filed suit against defendant agency for concealing material fact from them. Trial Court and appellate division courts held that the statute of limitations had run on the issue of negligence and intentional infliction of emotional distress claims by the plaintiff. Hence, present appeal. Held, nothing in the record indicates that the defendant-agency attempted after the adoption to conceal medical histories to induce plaintiffs to forbear from filing suit alleging negligence or infliction of emotional distress. Plaintiffs did not get in touch with the Agency until 1970, by which time both torts of negligence and infliction emotional distress were already time-barred. Therefore, even if the Agency made fraudulent misrepresentations, plaintiffs had not been induced to refrain from filing suit, and equitable estoppel is not warranted in this case. Accordingly, the order of the Appellate Division should be modified, without costs, by granting defendant's motion to dismiss plaintiffs' demand for punitive damages and, as so modified is affirmed.

• In re Helen W

Plaintiff-mother was found to be under influence of drugs and therefore her two kids were subjected to juvenile court jurisdiction and were placed in foster care and plaintiff mother was provided with supervised visits and reunification services. At the permanent plan hearing plaintiff mother sought custody of her two children back. However, the court found by clear and convincing evidence it was likely the children would be adopted and their bond with the mother did not make adoption detrimental to them. (§ 366.26, subd. (c)(1)(A).) The court terminated the mother's parental rights and ordered the children placed for adoption. Hence, present appeal. Plaintiff mother challenged juvenile court decision on ground that juvenile court impermissibly relied upon only the foster mother's intention to adopt in finding the children adoptable. Held, even if the juvenile court had relied solely on the foster mother's willingness to adopt, the adoptability finding would be supported by clear and convincing evidence. When a child is deemed adoptable only because a particular care taker is willing to adopt, the analysis shifts from evaluating the characteristics of the child to whether there is any legal impediment to the prospective adoptive parent's adoption and whether the he or she is able to meet the needs of the child. The adoption assessment report included ample evidence that the foster mother would face no legal impediment to adoption and would excel, as she had for over two years, at meeting the children's needs throughout their lives. The report detailed the foster mother's social history and commitment to the permanent plan of adoption. The report also explained she had no criminal record, was financially secure and emotionally mature, and fully understood the responsibilities of adoption. The parent contesting the termination of parental rights bears the burden of showing both regular visitation and contact and the benefit to the child in maintaining the parent-child relationship. It is clear from the record that the mother maintained regular visits with children, but it is also clear that sufficient evidence supports the juvenile court's conclusion the parent-child relationship did not rise to the level required under the benefit exception. Nothing in the record indicates that the children have any needs that can be met only by the mother. Therefore, judgment terminating parental rights is affirmed.

News

• British MPs support copyright extension for sound recordings

The British House of Commons Culture, Media and Sport Committee released a report recommending that the government "bring forward proposals for an extension of copyright term for sound recordings to at least 70-years." The current British audio recordings copyright limit, instituted in the Copyright Act of 1911, is limited to 50 years from the time of the recording. The report contradicts the 2006 Gowers Review of Intellectual Property, which found that "it is not clear that extension of term would benefit musicians and performers very much in practice," while potentially having a negative effect on the balance of trade. The committee report did not attempt to dispute the Gowers report, but instead emphasized the committee's belief that a "copyright represent a moral right of a creator to choose to retain ownership and control of their own intellectual property." Current British law grants creators of literary, dramatic, musical, or artistic works 70 years of copyright protection after the creator's death. US laws currently limit copyright terms of audio recordings to 95 years following its release. A European Union directive that has been codified into British law requires EU approval for the proposal to become law.

• Treasury terror watch list facing FOIA lawsuit

The Lawyers Committee for Civil Rights of the San Francisco Bay Area (LCCR) filed a lawsuit against the US Treasury Department's Office of Foreign Asset Control (OFAC) requesting the public disclosure of a terrorist watch list containing more than 6,000 names. LCCR requested the document in 2005, and maintains that there is no legal basis for the Treasury Department to withhold the list. The government must file a response to the Freedom of Information Act lawsuit within 30 days.

• White House, senators strike immigration reform deal

Key US senators from both political parties and White House cabinet officers reached a tentative agreement on immigration reform, after weeks of negotiations. The proposal, which President Bush calls "secure, productive, orderly, and fair", gives more weight to an immigrant's education level than his family connections in the US when awarding green cards. Additionally, illegal immigrants would be able to obtain a probationary card allowing them to live and work legally in the United Sates, but which would not place them on the road to permanent residency or citizenship. Once border security is improved and the high-tech worker identification program is implemented, however, such card-holders would be able to seek permanent residency status. Illegal immigrants would have to pay a $5000 fine plus fees in order to obtain a "Z visa," placing them on an eight- to thirteen-year track toward permanent immigrant status. A temporary guest worker program would also be implemented once the borders are declared secure, and the worker identification program is enacted.

• US seeks extradition of Muslim cleric imprisoned in UK

Lawyers for the US government argued for the extradition of Muslim cleric Abu Hamza al-Masri in a hearing before a London court Thursday. Al-Masri is currently serving a seven-year prison sentence in Britain for urging his followers to kill Jews and other non-Muslims and using "threatening, abusive or insulting words or behavior" to stir up racial hatred. Hamza faces US charges of attempting to establish terrorist training camps both in Oregon and in Afghanistan. The hearing, initially scheduled for Wednesday, was postponed to give Hamza time to recover from an operation. The US called for Hamza's extradition last year, but hearings were delayed pending his appeal of his current conviction in the UK courts. The appeals were dismissed [JURIST report] in November. Hamza's lawyers say the extradition warrant should be dismissed because it was issued on evidence obtained by torture.