State Governments Would Be Entitled To Levy Taxes On Purchases
In December 1996, the court ruled that local authorities can charge property tax on buildings occupied by other governments for commercial purposes.
Last month, it declared that the state governments will have exclusive right to license and control potable liquor business, including levy of excise duty on it.
Last week, the court ruled that the state can charge purchase tax on the Food Corporation for the foodgrains it buys from the market. (FCI vs State of Kerala). This judgment is significant because it affects not only the food sector but also other areas where there is compulsory purchase of goods by different agencies.
In the present case, the corporation was buying grains from the state governments under the Essential Commodities Act, to make up its national pool. When the sales tax departments of the states demanded purchase tax from the FCI, the corporation said that it was not buying grains voluntarily and that the levy procurement was compulsory acquisition which fell outside the power of the state government.
The Supreme Court rejected this argument, and asserted that levy procurement was purchase and therefore, the state governments were competent to levy tax on such transactions. The law on this point covers goods like coffee, tea, alcohol, cement and oil. Since the high courts had differed on this issue for some time, the law has now been settled at the apex level.
The problem in these cases arose because the goods were purchased under schemes of compulsory acquisition. In Coffee Board vs Commissioner of Taxes(1988), the question was whether the acquisition of coffee from the growers by the Coffee Board amounted to sale, liable to be taxed. The Supreme Court held that it was a sale, despite the element of compulsion.
Another case was Vishnu Agencies vs Commercial Tax Officer(1978), which involved the Cement Control Order promulgated by the West Bengal government. It was held that a regulatory law, even if it limited the area of free choice, did not take away the basic character or core of sale from the transaction.
In State of Punjab vs Dewan Breweries Ltd, the question for consideration was whether the supplies of IMFL by distilleries to permit holders were sales for the purposes of tax. The breweries argued that there was no sale, as the prices were fixed and they had no choice regarding the distribution of liquor. This was rejected by the court.
The rule followed by the court is that so long as mutual consent, express or implied, is not totally excluded, these transactions would amount to sales. Thus the series of Supreme Court judgments are beneficial to the state governments, which are hard pressed for money.
Golden handshake
The Hindustan Machine Tools Ltd has just escaped a heavy financial burden following its victory in the Supreme Court on the issue of voluntary retirement scheme (HMT vs M S Kang). The high court had asked it to give its former employees, who had accepted the golden handshake, the same benefit that it was giving to those who had opted to retire under the conduct rules.
Those who had accepted the golden handshake had turned around and demanded additional payment following the pay revision for the existing employees. Their argument was that those who retired under the conduct rules were given the benefits under the pay revision, while those who accepted the golden handshake were discriminated against.
The Supreme Court examined the special scheme (golden handshake) and the scheme under the conduct rules and concluded that they were entirely different. Those who accepted the golden handshake are no longer employees. On other hand, those who retired under the conduct rules would still be eligible for compensation like pension or gratuity.
Wage agreement
The Supreme Court has ruled that a written agreement between an employer and his employees would continue till substituted by a fresh settlement and no party could claim the benefit of an oral agreement to modify the terms of the written agreement (Fabril Gasosa vs Labour Commissioner).
In this case, there was an agreement over dearness allowance. Later, the union wanted to end this pact to submit a new charter. There was no fresh settlement, but the employer relied upon the unions stand and froze the DA. The union demanded the DA according to the original settlement and moved the labour commissioner. The commissioner as well as the high court favoured the employees. The appeal of the company was also dismissed by the Supreme Court.
The apex court ruled that even if the first settlement expired, the obligations under it would be valid till it is substituted by a new agreement. It may not be a technically binding settlement, but it would be a valid contract and enforceable.
Tailpiece
A translation is said to be the other side of the carpet. If so, the colour and meaning of laws drafted in Hindi might be losing twice more, going by the recent statement of a top law ministry official. Speaking about simplifying legal language, he said that Hindi laws meant for Hindi-speaking states are first drafted in English, then translated into Hindi and retranslated into English.