Labour issues

The Supreme Court has referred an issue related to the status of labourers employed by contractors in industries in Maharashtra to a larger bench for an authoritative decision.

In the case of Raymond Ltd & another vs Tukaram Tanaji Mandhare & another, the workers had filed complaints under the Maharashtra Recognition of Trade Unions and Prevention of Unfair Labour Practices Act l97l before the industrial court, claiming that they are employees of Raymond. However, the textile company has disputed the status of the employees saying that there is no employer-employee relationship with any of the workers, as they were employed through the contractors.

Various benches of the Bombay High Court had taken different views on the issue of relationship. However, the High Court had held that a person, who is employed by a contractor?who undertakes contracts for the execution of the whole of the work or any part of the work? is an employee within the meaning of section 3(5) of the Act.

Rolling Mills

Dismissing the appeal filed by iron and steel products manufacturer Hans Steel Rolling Mill, the Supreme Court has held that ?importing of elements of one scheme of tax administration to a different scheme of tax administration would be wholly inappropriate as it would disturb the smooth functioning of that unique scheme. The time limit prescribed for one scheme could be completely unwarranted for another scheme and time limit prescribed under Section 11A of the Central Excise Act is no exception.?

Citing its earlier judgements, the apex court said that the compounded levy scheme for the collection of duty based on the annual capacity of production under Section 3 of the Act and Hot Re-rolling Steel Mills Annual Capacity Determination Rules, 1997, is a separate scheme from collection of central excise duty on goods manufactured in the country.

The Court clarified that Hans Steel had availed of the facilities under the Compound Levy Scheme, which itself opted for and filed declarations furnishing details about annual capacity of production and duty payable on such capacity of production.

Pursuant to the Hot-Re-rolling Steel Mills Annual Capacity Determination Rules 1997, a show cause notice was issued, demanding R2.19 lakh duty from the firm during September 1997 to March 2000 on the basis of the annual capacity determination of 3,355 MT. However, the firm in December 1998 changed the parameters, and the Commissioner in January 2001 redetermined its annual capacity at 1,890 MT. Being unsatisfied, the firm had moved the apex court.

Capital/revenue receipt

The Supreme Court has held that any payment under an agreement not to compete (negative covenant agreement) is a capital receipt and not a revenue receipt.

Clarifying the position, it said that a receipt of compensation for the loss of agency is different from the receipt of compensation attributable to a negative or restrictive covenant. The first one is revenue receipt whereas the second one is capital receipt. Setting aside Karnataka High Court?s judgement in the case of Guffic Chem Ltd vs CIT, Belgaum, it approved the Delhi High Court?s view in another similar case.

?indu.bhan@expressindia.com