Tax sops are not forever

Written by Indu Bhan | Indu Bhan | Updated: Mar 6 2013, 06:08am hrs
Liquor licence not a legal right

Quashing the Kerala High Courts judgment in the case of State of Kerala vs Kandath Distilleries, the Supreme Court has held that a high court cannot direct the state to part with its exclusive privilege in the matter of granting licence for establishing distilleries under the Foreign Liquor (Compounding, Blending & Bottling) Rules, 1975, and the Abkari Act. The apex court said: Legislature when confers a discretionary power on an authority, it has to be exercised by it in its discretion, the decision ought to be that of the authority concerned and not that of the court. Court would not interfere with or probe into the merits of the decision made by an authority in exercise of its discretion.

While large number of applications for setting up of large number of distillery units were received in 1998, the Kerala government had accorded approval to only four liquor manufacturersM/s Amrut Distilleries, M/s Empee Distilleries, M/s KS Distilleries, and M/s Elite Group of Companiesfor setting up units in different districts of the state.

However, Kandath was not granted licence as the government maintained that its application was defective. This was challenged by the distillery in the HC, which asked the state government to grant licence to Kandath as it felt that the government had ingenuously made a classification to weed out the firm. Senior counsel CS Rajan, appearing for the state, submitted that a citizen has no fundamental right to trade or carry out business of liquor and that the matter relating to grant of licence for dealing in liquor or starting distillery unit is within the exclusive domain of the state.

P&H HC order quashed

Setting aside the Punjab and Haryana High Court order in the case of State of Haryana vs Polar Industries, the Supreme Court has upheld the cancellation of the sales tax exemption granted to certain industries for violation of the terms of the eligibility certificate. In this case, the Haryana government under Section 13-B of the Haryana General Sales Tax Act, 1973, had promulgated an exemption scheme that granted certain exemptions to the industries set up in the specified areas in the state. Polar Industries, the manufacturer of electrical goods, was also granted this benefit between 1991-96. But during this period, it was found that the company had availed tax exemption, but made sales outside Haryana by way of transfer of goods manufactured by it.

Since the Assessing Authority was of the view that the assessee had violated the conditions incorporated in the Eligibility Certificate in violation of Rule 28A(11)(a)(ii) of the Rules, the exemption was, therefore, withdrawn and the assessee was asked to pay tax with interest for the period in question. This was challenged by the firm in the HC, which stated that the government action was wrong as it was imposing tax on the inter-state sales transaction or branch transfers that was impermissible in view of the specific bar under the Constitution and the Central Sales Tax Act and accordingly set aside the assessment orders.

However, the apex court quashed the HC order and directed the assessing authority to pass fresh assessment order for the periods in dispute after affording opportunity of hearing to the assessee. Senior counsel RP Bhatt, for the state, contended that sales effected by way of branch transfers or consignment sales outside Haryana was taken only for the purpose of quantifying notional tax liability and not for any other purpose.

No deferment if appellant absent

The Supreme Court in the case of KS Panduranga vs State of Karnataka stated that it is not incumbent upon a high court to adjourn the hearing of a case because the appellant or his counsel are not present.

It said that the court may, as a matter of prudence or indulgence, adjourn the matter but it is not bound to do so.

Addressing the concern that such a decision by the high court could result in a decision hurting the case of an accused, the top court said if the case is decided on merits in the absence of the appellant, the higher court can remedy the situation.

The observations came on an appeal filed by Panduranga who alleged that the Karnataka High Court should not have decided his plea on merits in his absence.

The trial court had sentenced Panduranga, working as superintendent with Bangalore-based Karnataka Vidyuth Karkhana, to four years rigorous imprisonment for taking a bribe of R5,000 from a transporter. The HC had confirmed the conviction, but reduced the sentence to two years rigorous imprisonment.