Business Standard

Bill of lading not basis of customs duty

The Customs appellate tribunal had upheld the view of the Customs authorities, but the Supreme Court said that the tribunal had "lost sight of the first principles"

M J Antony 

Valuation of goods for Customs duty should be done only at the time and place of importation and it should not be based on the bill of lading but on goods arriving in India. The Supreme Court rejected the argument of the Commissioner of Customs that the quantity mentioned in the bill of lading should be the basis of payment of duty, not the quantity actually received in this country.

The Customs appellate tribunal had upheld the view of the Customs authorities, but the Supreme Court said that the tribunal had "lost sight of the first principles". It stated in its judgment, in Mangalore Refinery and Petrochemicals vs Commissioner of Customs, that the tribunal was wrong in holding that a levy in the context of import duty can only be on imported goods, that is, on goods brought into India from a place outside of India. Till that is done, there is no charge to tax.

Explaining the law further, the judgment stated that the taxable event in the case of imported goods is "import". The taxable event in the case of a purchase tax is the purchase of goods. The quantity of goods stated in a bill of lading would perhaps reflect the quantity of goods in the purchase transaction between the parties, but would not reflect the quantity of goods at the time and place of importation.

A bill of lading quantity, therefore, could only be validly looked at in the case purchase tax but not in the case of an import duty. Moreover, the judgment pointed out that where goods which are imported are lost, pilfered or destroyed, no import duty is leviable on it until they are out of Customs and come into the hands of the importer. It is clear, therefore, that it is only at this stage that the quantity of the goods imported is to be looked at for the purposes of valuation, the judgment declared.

Telco cleared of unfair practice charge

The Supreme Court last week set aside the 'cease and desist' order of the erstwhile Monopolies and Restrictive Practices Commission against Telco on the allegation that it had indulged in unfair trade practice in the conditions for booking Indica cars in 1999.

The judgment largely depended on the definition of unfair prac-tice, which has been adopted by the Competition Commission, successor to the earlier commission. Some customers alleged that the deposit amount was too high and exceeded the basic price of the car if cess, taxes and transportation cost were left out.

The commission made an enquiry in which Telco contested the charge and asserted that its conditions were not prejudicial to public interest. The price was set to discourage speculative booking. The SC ruled that the conditions did not fall within any of the prohibited categories and the commis-sion omitted to notice certain crucial factors in the case.

Order against Dr Reddy's Lab set aside


The Supreme Court has cleared Dr Reddy's Laboratories of misdeclaration of the description of diagnostic equipment and set aside the ruling of the Customs appellate tribunal against it. The pharmaceutical company had described the imported machinery as auto analysers with software programmed to analyse blood samples.

The goods were seized and the director of revenue intelligence issued a show cause notice to the firm, maintaining that the equipment should be classified as photometers, inviting higher duty. The commissioner accused the firm of several manipulations. The Supreme Court allowed the appeal of the company.

Chowkidar wins prolonged litigation

A chowkidar on daily wages, who abandoned work for 14 years in 1994, has got Rs 2 lakh as compensation from the Supreme Court. The labour court in Ujjain had ordered reinstatement without back wages. Therefore, the Madhya Pradesh government appealed to the Supreme Court, alleging that he was employed on a daily wage basis for a short while and not recruited according to statutory rules.

In its judgment, State vs Mohan Lal, the court set aside the order for reinstatement, but as a final settlement of the old dispute ordered the government to pay the compensation. The judgment cited precedents in which compensation has been given but not reinstatement.

Revenge of a company auditor

A statutory auditor, peeved by his removal from a company, can create a lot of legal headache for it, the Delhi high court observed in its judgment in the case, H K Chadha vs Basti Sugar Mills. "Having knowledge of all intricate details about the working of the company, he can misuse the same and make distortions by virtue of his position and resort to exploitative complaints to statutory government authorities and initiate malicious litigation as in the present case to prevent the company from functioning or implementing decisions," the HC stated.

The auditor had a few shares in the defunct company and when it was merged with another, troubles started heaping upon the company. The auditor who lost his post launched a series of litigation challenging the merger. Dismissing his petition against the merger and imposing damages, the HC observed: "Valuable judicial time has been squandered on this meritless litigation at his instance who must compensate the system. This is possible by making a deposit towards legal aid, a constitutional right of poor and disadvantaged litigants and provided institutionally by this court."

Penalty on dominant film federation

In view of repeated anti-competitive conduct of the Kerala Film Exhibitors Federation, the Competition Commission of India last week ordered stern action against its executives. The top two shall pay penalty at the rate of 10 per cent of the annual turnover in the past three years within two months.

They shall keep away from administrative and management functions of the federation for two years. The federation has also been ordered to "organise, in letter and spirit, at least five competition awareness and compliance programmes over the next six months in Kerala for its members." The orders were passed on a complaint by one of the theatre owners, Crown Theatre, who did not join a strike called by the federation protesting against service charges imposed by the state government.

The federation asked the distributors not to lend film to the theatre, leading to the complaint before the commission. After investigation, the commission found that the federation had abused its dominant position in the market and indulged in anti-competitive practices like asking distributors not to provide films to the theatre to show films of its choice.

The commission stated that the federation has been indulging in and perpetuating anti-competitive practices. "It is clear from the submissions of various film distributors that because of the diktats of the federation, release of Malayalam and Tamil films were denied to the theatre."

First Published: Sun, September 13 2015. 21:31 IST
RECOMMENDED FOR YOU