It is a basic principle of law that no action shall be taken without providing a hearing to the affected party. This principle, called the law of natural justice, is "flexible" according to situations, and it need not be followed as an empty formality, Supreme Court stated in its recent judgment, Dharampal Satyapal vs Deputy Commissioner. The doctrine cannot be applied as a "strait-jacket formula."It all depends upon the kind of functions performed and to the extent to which a person is likely to be affected. For this reason, certain exceptions have been invoked under certain circumstances. "For example, courts have held that it would be sufficient to allow a person to make a representation and oral hearing may not be necessary in all cases, though in some matters, depending upon the nature of the case, not only full-fledged oral hearing but even cross-examination of witnesses is treated as necessary concomitant of the principles of natural justice,"the court explained. However, if no prejudice is caused to a party, the principle need not be applied as an empty formality. In this case, the company had availed of tax benefit for industries set up in north-eastern states. Later the benefit was withdrawn for industries dealing in pan masala, tobacco and tobacco substitutes. The authorities wanted to recover from the company what it had benefited. The company challenged it in the high court and Supreme Court on the ground of breach of natural justice. The court dismissed its argument in the special circumstances of the case.
Depreciation allowance gets priority
Supreme Court has held that in income tax assessments, the unabsorbed depreciation should be allowed before the allowance of the unabsorbed investment in computing income of a firm. The question arose in the case, Seshsayee Paper & Boards vs Dy Commissioner. The firm had unabsorbed investment allowance of previous years as well as unabsorbed depreciation of the earlier years. In its income-tax return, however, it chose to carry forward investment allowance and claimed set-off of the unabsorbed investment allowance thereby showing the returned income as 'Nil'. According to the assessing officer, it was not the investment allowance, but unabsorbed depreciation of the earlier years which had to be set off first by giving priority to the unabsorbed depreciation. Therefore, the officer adjusted the unabsorbed depreciation of the earlier years and accepted 'Nil' income return but on his interpretation of rules. The firm challenged it in the Madras High Court without success. Supreme Court dismissed its appeal. It explained that according to a 1976 CBDT circular the combined effect of the provisions of Sections 32, 32A, 33, 33A and 72 is that in a case where there are allowances in the nature of depreciation, investment, development rebate, development allowance and losses, such allowances and losses would be deductible in the specified order where the profits are insufficient to absorb all of them.
Royalty not involved in CD copying
If a copyright holder or distributor of music gives job work to a firm which duplicates the video/audio CDs and returns them to the copyright holder, the duplicating firm will not be liable to pay excise duty by including the royalty on the music embedded in the CDs. In this case, M/s K.R.C.D. (I) Pvt Ltd vs CCE, the transaction went like this: the artist/lyricist who is the owner of copyright parts with the copyright for a certain consideration to a producer of music which music/picture is then captured on CD. The producer in turn parts with such copyright in favour of a distributor who, ultimately, gets the CDs duplicated on job work basis. The distributor then sells the CDs in the market to the ultimate customer. The revenue authorities in this case issued show cause notice to the job working firm taking the view that the royalty would be taken into account for excise, as such royalty is inextricably connected with the music. That view was upheld by the tribunal, leading to the appeal. Setting aside the tribunal's view, the court maintained that the CDs after duplication were totally given back to the distributor who sold them in the market. The job work firm itself did not sell them. Therefore it has nothing to do with the royalty.
Agreement can't oust court jurisdiction
The Gujarat High Court last week ruled that it has admiralty jurisdiction to pass orders regarding ships entering Indian territorial waters even if there is an agreement between parties to refer disputes to arbitration or other courts. In this case, Phaethon International Co SA vs M V Americana, the ship was in Hazira port. There was a claim of $141,812.99 against Americana and therefore the court was moved to arrest the ship. In defence, the latter argued that there was an agreement to refer disputes to the high court of England. Therefore the admiralty jurisdiction of the high court in India was ousted. The high court rejected the argument in a detailed judgment and ordered issue of warrant of arrest of the ship while the issue is being adjudicated. If such an order is not passed, the claimant would suffer "irreparable loss which would not be compensated in terms of money," the judgment said.
Penalty on film distributors
The Competition Commission last week imposed penalty on the office bearers of one group of film distributors and cinema owners in Kerala for anti-competitive practices. They had formed an association and denied new releases to another group. The Director General of the commission conducted an enquiry and confirmed the charges. Producers also succumbed to the pressure of the cinema owners' powerful cartel. The judgment stated that all of them "transgressed their legal contours". The penalty was calculated on the basis of seven per cent of the average income for the relevant financial years.
Exporters' bodies are not 'consumers'
The National Consumer Commission has dismissed the complaint of the Confederation of Exporters and Expo Mart Exhibitors alleging deficiency in service by India Exposition Mart Ltd which charged them external development charges over and above the price of space allotted to them. Exporters were allotted individual spaces in a complex in Greater Noida, in the National Capital Territory, to showpiece their wares. But they were aggrieved by the demand of extra payments and the extent of space allotted to them. The commission rejected their complaint holding that the exporters were not consumers according to the definition of the word in the Consumer Protection Act. According to the law, those who buy goods or avail of services for commercial purposes are not consumers. They cannot approach the consumer forums, but should seek other legal forums.