Governments can’t ban inter-state sand trade
The Supreme Court has ruled that a state government cannot ban the movement of sand to other states, as it violated the freedom of trade. It struck down a rule made by the Gujarat government under the Mines and Minerals (Development and Regulation) Act in its judgment in State of Gujarat vs Jayeshbhai. The leaseholders and traders in river sand, which is a mineral, challenged the rule as it prevented them from sending processed sand to builders in Maharashtra. The Gujarat High Court had struck down the rule maintaining that the state government had no power to make such a rule that impinged on the freedom of inter-state trade guaranteed under Article 301 of the Constitution. However, the Madras and Andhra Pradesh High Courts had taken a contrary view and upheld the minor mineral rules in the respective states. Owing to the conflicting views among the high courts, the Supreme Court was called upon to settle the law. The apex court found the Gujarat High Court’s view correct. The judgment clarified the law thus: “Nothing prevents the state from restricting the quantum of sand being excavated. However, once it permits sand to be excavated, neither can it legally restrict its movement within the territory of India nor is the same constitutionally permissible. Likewise, there is no restriction on the State importing sand from other states. If it is the case that the demand of any State is not being met, it may purchase sand from other states. In any event, the market will dictate trade in sand inasmuch as it may make no business sense for mining company to transport and sell its sand in a faraway destination after incurring large costs on transportation.”
Rule on staff director in bank upheld
An employee of a nationalised bank can be chosen as a director in the board of directors if he/she has rendered five years’ continued service in that bank and will not superannuate while holding the office of the director. The Supreme Court stated so while dismissing the appeal of the Federation of Bank of India Staff Unions against the ruling of the Bombay High Court. The Banking Companies (Acquisition & Transfer of Undertakings) Act provides for the nomination of directors. The employees can suggest names from among them for one director. In this case, the union suggested three names. But they were rejected as they would retire during their terms as directors. This was challenged by the unions in the high court. Their petitions were dismissed. The Supreme Court also dismissed their appeal and upheld the rules about qualifications for employees’ candidate.
Wider powers for penalty on brokers
The Supreme Court has widened the scope of imposing a penalty on defaulting brokers by the adjudicating officer of the Securities and Exchange Board of India (Sebi) in its judgment in Adjudicating Officer vs Bhavesh. Doubts were expressed earlier about the correctness of a Supreme Court judgment on this point. Therefore, the matter was referred to a larger bench before which several brokers were parties. The relevant provisions in the Sebi Act prescribed a penalty for failure to furnish information to the board. It ranged from Rs 1 lakh to Rs 1 crore. One provision listed factors to be taken into by the officer while imposing a penalty, such as the amount of disproportionate gain, the loss caused to the investor and repetitive nature of the default. The question in this batch of appeals was whether the list was exhaustive. The judgment asserted that the list was not complete and the officer can impose a penalty according to the facts and circumstances in a given case. The court then proceeded to examine a large number of cases before it and passed separate orders in them according to the principle laid down by it.
Excise duty liability not on job workers
Textile traders cannot avoid excise duty by passing on the liability to their job workers if the aggregate value of the goods exceeds Rs 25 lakh, the Supreme Court ruled in its judgment in the case, Dinesh Textiles vs Commissioner of Central Excise. In this case, the trader argued that the job workers were themselves manufacturers and they should pay the duty. The appellate tribunal did not accept this argument. The Supreme Court upheld the tribunal’s order pointing out that the mills have supplied raw materials to more than 70 job workers and the total clearance was more than Rs 1.45 crore. Therefore, the mills have to pay the duty under the Central Excise Rules. It is not the individual clearance of job workers that should be taken into account, but the aggregate of all clearances made by the mills, the judgment clarified.
40 years to decide a tax question
It took four decades to finally determine “a limited question” referring to tax benefits granted to newly established industrial undertakings in backward areas. The long legal battle on a 1979 assessment ended in the Supreme Court earlier this month with the companies winning their point, in the leading case, Vijay Industries vs CIT. The dispute was over Section 80HH of the Income Tax Act, which deals with a deduction in respect of profits and gains from newly established units in backward areas. Whereas the assessee companies wanted deduction at the rate of 20 per cent of profits and gains, i.e., gross profits, the stand of the Income Tax Department was that deduction at the rate of 20 per cent was to be computed after taking into account depreciation, unabsorbed depreciation and investment allowance. The argument of the revenue authorities was rejected.
Bank should honour drafts issued by it
“By issuing a draft, every bank undertakes a liability which it is bound to discharge at the instance of the person in whose favour it has issued the draft or any person claiming through him. It would lead to unimaginable uncertainty in the business and the financial world if bank drafts were to be countermanded easily,” wrote the Calcutta High Court last week in its judgment in Nepal Bangladesh Bank Ltd vs Everett (India) Ltd. In this case, two drafts were issued to the company, which were rejected by the bank where it was presented. This led to a suit that was decreed by a single judge bench of the high court. The division bench dismissed the bank’s appeal, observing that “in the current scenario where the integrity of the financial system in general and banking channels, in particular, are under ominous dark clouds such conduct of the bank cannot be countenanced.” The court imposed a penalty of Rs 1 lakh on the bank which will be given over to the mediation cell of the West Bengal legal services authority.
via From inter-state sand trade to excise duty, here are the key court orders | Business Standard Column