Jaipur Udyog Ltd's appeal to be considered

LEGAL DIGEST

After more than two decades of legal proceedings, the Supreme Court has asked the Appellate Authority for Industrial & Financial Reconstruction to consider the appeal of Jaipur Udyog Ltd against the winding up proceedings, provided the sick company deposits Rs 10 crore.

The order was passed on the appeal of Cement Workers Karamchari Sangh, though one section of the workers had accepted the rehabilitation scheme.

The Court said that delay in disposal of the case caused "great prejudice to the creditors and deep distress to the workers". The delay benefited only the company and the promoter in the revival scheme, Gannon Dunkerley Ltd. The Court also appointed retired Justice NN Mathur as the arbitrator to deal with the grievances of the workers.

Synco Industries denied IT benefits

The Supreme Court has dismissed the appeal of Synco Industries Ltd against the judgment of the Bombay High Court which had upheld the ruling of the Mumbai income tax tribunal denying income tax benefit to the company. The company has oil and chemical units in Rajasthan. It made profits in both units but had losses in earlier years from the oil division.

The company claimed deductions under Sections 80HH and 80I of the Income Tax Act claiming that the units should be treated separately and the loss suffered by the oil division in the earlier years was not adjustable against the profits of the chemical division.

The assessing officer noticed that the gross total income before deductions was nil and therefore denied the deductions. The Supreme Court upheld the view of the tribunal and the High Court and stated that the gross total income of the assessee has first got to be determined after adjusting losses and if its gross total income is nil, it would not be entitled to deductions under Chapter VI-A of the IT Act.

Lohia Sheet Products gets duty refund

The Supreme Court has directed the Customs authorities to refund the duty paid under protest by Lohia Sheet Products as it was entitled to exemption of duty on copper and brass wastes imported by it to manufacture handicrafts.

The authorities maintained that the exemption under a July 1996 notification was available only to scrap generated during production in the factory, and not to imported wastes.

The firm argued that it had paid duty at the time of import and it could not be asked to pay countervailing duty also as it would amount to duty at two stages.

Such double payment has been barred by the Supreme Court in its 1999 judgment in the Hyderabad Industries, it was argued. The Supreme Court accepted the contention and allowed its appeal.

SC upholds penalty on Bharjatiya Steel

The Supreme Court has upheld the penalty imposed on Bharjatiya Steel Industries by the Uttar Pradesh Commissioner of Sales Tax for buying iron scrap from the railways at a public auction at concessional rate of tax and then selling it to another person.

The firm is a manufacturer of steel ingots and it used 90 per cent of the steel scrap for manufacturing purposes by melting and converting them into finished products. The rest of the scrap, weighing 2,533 metric tonnes, was sold without informing the assessing authority.

Therefore, the authority imposed a penalty for illegally selling the scrap. The firm argued that what was sold was worthless and it could not find the quality of the material as the auction was on "as is where is basis". However, the second buyer manufactured goods from the rejects. Therefore, the sale was done with a guilty mind, the Supreme Court said, justifying the penalty.

Loan guarantor liable in case of default

A person who stands guarantee for a loan-seeker is liable to repay the dues in case of default by the principal debtor, the Supreme Court has said.

The provision of Section 130 of the Contract Act which allows a person to revoke the guarantee during the subsistence of a contract would not come to the rescue of such a guarantor, while dismissing the plea of the guarantor, Sita Ram Gupta.

Gupta had appealed against the order of the Delhi High Court order which ruled that he was liable to pay the unpaid amount to the Punjab National Bank which had loaned certain amount to the principal debtor.

The High Court rejected his plea that he was not liable to pay as he had subsequently revoked the guarantees. It noted that since Gupta had reached an agreement with the bank that he was extending a "continuing guarantee" to the debtor, he cannot abdicate his liability.