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MANOJIT SAHA
Mumbai, 14 July The suspense over who will steer India's first all- women bank is over. The finance ministry has identified Usha Ananthasubramanian, executive director of Punjab National Bank, to be the chief executive of Bhartiya Mahila Bank, which will launch its operations from November with six branches. Ananthasubramanian is leading the core management team ( comprising employees from various public- sector banks) set up to put in place by October 31 the systems and processes necessary to start the bank's operations. The government will formally announce the name of the CEO after the Reserve Bank of India has issued the licence. Ananthasubramanian, 55, started her career in 1982 at Bank of Baroda as a specialist officer in the planning stream. She holds a dual master's degree — in statistics from the Madras University and in ancient Indian culture from the Mumbai University. Her experience could come in handy, as she has in the past led similar initiatives, such as overseeing the formation of Bank of Baroda's life insurance joint venture. That the country will have an all- women bank was announced by Finance Minister PChidambaram in his Budget speech earlier this year. He had said the bank will get an initial capital of ₹ 1,000 crore. After starting with one branch in each banking region, the bank will expand to 500 branches by the fourth year of operation. It will, however, have to comply with all RBI guidelines and will not offer any concessional rate to women. A five- member panel, headed by former Canara Bank CMD M B N Rao, prepared the blueprint for the bank. Since the bank will draw employees from public- sector banks, ( besides fresh recruitment), managing a diverse pool of human resource is going to be a big challenge. But sources in the know say Ananthasubramanian, who has an experience of over three decades, in which she has risen up the ladder, has been found to be suitable for the task. She has attended the leadership & corporate excellence management programme at Kellogg School of Management and a programme at Indian School of Business. She has also been associated with Bank of Baroda's transformation projects, including its rebranding and HR initiatives. BANKING ON WOMAN POWER | No excise duty on steel plates supplied to shipbuilders | |
Domestic steel makers had been pitching for this so that they could compete RUCHIKA CHITRAVANSHI
New Delhi, 14 July The government has exempted domestic steel companies from paying excise duty on supplying steel plates to shipbuilders, amove that would help both the steelmakers and shipbuilders. Indian shipbuilding companies currently import most of the steel required, which constitutes over 33 per cent of the total ship cost. Around 60 per cent of the overall body of a ship is made using steel. Domestic steel makers have been pitching for this exemption so that they can compete on equal footing with foreign mills. Experts say the move will boost the business of steel companies in the long run. At present, the demand for new ships has taken a severe hit due to an oversupply of vessels in the market. "The global shipbuilding industry is heavily subsidised. This move ( tax exemption) will hardly make a difference, though it will reduce the costs by maximum four per cent," said a shipping industry analyst, who did not want to be named. Shipbuilding companies in India mostly buy raw materials from overseas not because of the cost in the domestic market, but due to the variety and quality issues, a senior executive at a shipbuilding company said. "This ( tax exemption) will make little difference, because we would still need to import steel," added the official, who also preferred anonymity. This year's Budget had doled out some benefits to the shipbuilding sector by removing excise duty on vessels. The Budget had also announced the removal of countervailing duty on imported ships. The government has also increased the time limit for consumption of imported goods by ship repair units from three months to one year. This will help the shipping companies keep " critical spares", which are not available on a short notice, in stock for at least a year after which an import duty will have to be paid. There are 27 shipyards in the country, eight in the public sector and the rest in the private sector. The government had extended the shipbuilding subsidy scheme for both export and domestic orders on October 25, 2002. The shipping ministry has been trying to get a further extension of the subsidy since the scheme was applicable for contracts till August 14, 2007. on an equal footing with foreign companies LAYING AN EVEN KEEL |Indian shipping industry imports a majority of its steel requirement, constituting 33 per cent of the total ship cost |At present, the demand for new ships has taken a severe hit due to an oversupply of vessels in the market |The annual Budget had doled out some benefits to the industry by removing excise duty on vessels |The Centre has increased the time limit for consumption of imported goods by ship repair units from 3 months to 1 year | | LEGAL DIGEST | |
Dispute over power bills out of consumer courts purview
The Supreme Court has held that consumer courts cannot entertain complaints against power bills assessed under the Electricity Act or take action against power corporations. The ruling was given in an appeal moved by the UP Power Corporation Ltd against a number of consumers of electricity, who were accused by the corporation of theft of power or diversion of power to commercial use. The National Consumer Commission had ruled that they were consumers and, therefore, entitled to move consumer forums for deficiency in service. Setting aside that decision, the Supreme Court stated that indulging in " unauthorised use of electricity" does not fall within the jurisdiction of consumer forums. A complaint against the assessment made by the corporation is not maintainable before a consumer forum. >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> Sentence in cheque bounce cases In a cheque bouncing case, the sentence shall normally run concurrently for the same set of offences, and not consecutively, the Supreme Court ruled last week in the case V K Bansal versus Haryana Financial Corporation. In this case, a director of a group of companies took loans from the corporation for three of the firms. The repayment cheques bounced and therefore 15 cases under Section 138 of the Negotiable Instruments Act were filed against him by the corporation and he was convicted in them and sentenced to undergo imprisonment from six months to one year. Appeals to the high court were also dismissed. He moved the Supreme Court, pleading that the sentences should run concurrently and not consecutively. The court, after analysing Section 427 of the Criminal Procedure Code, which deals with such situation, stated that the court has discretion to pass such orders to benefit the prisoner in case the prosecution is based on a single transaction, no matter several complaints have been filed. Applying the principle, the court analysed the complaints and ruled that except in one case, the sentences shall run concurrently. >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> VRS not a matter of right A voluntary retirement scheme introduced by a company does not entitle an employee as a matter of right to the benefits of the scheme. Whether an employee should be allowed to retire in terms of the scheme is a decision which can be taken only by the employer, except in cases where the scheme itself provides for retirement to take effect when the notice period comes to an end, the Supreme Court stated in the judgment, C V Francis versus Union of India. In this case, a manager of the Steel Authority of India applied for voluntary retirement scheme (VRS) and left the country to take up employment in the US. He did not join duty and the application for VRS was not accepted. His services were terminated. He challenged these actions in the Jharkhand high court which rejected his arguments. The Supreme Court dismissed his appeal. >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> Road accident compensation The Supreme Court has ruled that in a road accident, the claim for compensation is payable both for loss of earning capacity as well as permanent disability. The Madras High Court had held to the contrary in the case, S Manickam versus Metropolitan Transport Corporation. It had set aside the award amount of ₹ 1 lakh under the head permanent disability on the ground that substantial amount had been fixed under the head loss of earning capacity. The victim was 45 years old and he was running a furniture firm with 15 employees. The Supreme Court stated that the compensation was low and awarded ₹ 8.5 lakh. It observed: " The determination of quantum in motor accident cases and compensation under the Workmen's Compensation Act must be liberal since the law values life and limb in a free country in generous scales. The adjudicating authority, while determining the quantum of compensation, has to take note of the suffering of the injured person which would include his inability to lead afull life, his incapacity to enjoy the normal amenities which he would have enjoyed but for the injuries and his ability to earn as much as he used to earn or could have earned." >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> Minister's role in land acquisition The Supreme Court has upheld the Bombay High Court judgment in the case of a 1987 land acquisition for expansion of a market in Pune in which the then state revenue minister, Narayan Rane, was accused of changing the plan for the benefit of some developers. The minister withdrew the acquisition after several years, allegedly to benefit some parties. In the appeal, Mutha Associates versus State of Maharashtra, the minister wanted to remove certain harsh observations made by the high court, but the Supreme Court deleted them only partly. The judgment stated that the minister's direction to withdraw the acquisition was " arbitrary, lacked objectivity and ignored the material on record." He did not give an opportunity to the municipality to show why the acquisition was necessary for public purpose. The high court had observed that the minister had " tried to overreach the judicial process" and acted mala fide. The Supreme Court dropped the allegation of mala fide but retained the rest of the remarks against the minister. MJ ANTONY THINKSTOCK | | Tax treaties override Vodafone amendments
AP High Court, in the case of Sanofi Pasteur Holding SA, said amendments made in the I- T Act do not nullify India's tax treaties | |
The story of Vodafone's case in Supreme Court is not an old story. In the Vodafone's case, Vodafone, Netherlands, entered into an agreement with a Hong Kong company to acquire shares of a Cayman Island company which in turn held controlling interest in Hutchison Essar ( Hutch), an Indian company. The effect of this transaction was that the controlling interest of Hutch was effectively transferred to Vodafone.
The Income- tax Department took a view that Vodafone was liable to withhold taxes on payments made to the Netherlands company since the transaction resulted in transfer of controlling interest of the Indian company. However, on appeal by Vodafone to Supreme Court, it was held by the court vide its order dated January 20, 2012, that the transaction is not liable to tax in India as no direct transfer of the shares of Indian company has been made. Section 9 does not cover indirect transfer of capital asset in India and Section 195 relating to withholding taxes would apply only for payments made from a resident to a non- resident. The Government of India, instead of accepting the Supreme Court verdict, made retrospective amendments in the income- tax act to nullify the effect of Vodafone's case. The Act was amended to provide that: |Section 9 includes indirect transfers. |Section 2( 14), " property" includes any rights in or in relation to an Indian company, including rights of management or control or any other rights whatsoever. |Section 2( 47), " transfer" includes transfer of controlling interest of an Indian company by way of transfer of shares of foreign company. |" Situs of shares" of a company incorporated outside India shall be deemed to be in India if the share derives, directly or indirectly, its value substantially from the assets located in India. The net effect of the aforesaid amendments was that the decision of the Supreme Court in Vodafone's case is no longer a good law. Now, any transaction entered into outside India between two foreign residents shall also be subject to the provisions of the Indian Income Tax Act if the said transaction has any bearing on any asset situated in India. The action of the Legislature to amend law retrospectively had a direct negative impact on the foreign investment in India. The confidence of foreign investors in the indian judicial system was shaken. This was, however, quickly realised by the Government of India and, therefore, the government decided to settle Vodafone's matter amicably. However, it may be emphasised that the impact of the amendments that the transaction between two non- residents would be taxed in India is not universally applicable. Reference in this regard may be made to the decision of the Andhra Pradesh in the case of Sanofi Pasteur Holding SA, 354 ITR 316. The facts are: There is a company in India which is being held by a company incorporated in France, SH. The said French company was ultimately held by other French companies. The ultimate French holding company entered into agreement with another French company, Sanofi, to buy the shares of SH. Applying the amended provisions of the Act, the Income Tax Department took the view that the transaction between the two French companies liable to tax in India. However, the AP High Court has observed that the amendments made in the I- T Act do not override the tax treaties India has with other countries. It was further observed: " A strained construction which subverts the policy underlying India entering into a double taxation avoidance treaty with another State, by enabling dual taxation through artificial interpretation of treaty provisions, either by the tax administrator or by the judicial branch at the invitation of the Revenue of one of the Contracting States to a treaty would transgress the inherent and vital constitutional scheme, of separation of powers." It was held by the Court that provisions of Article 14 (relating to taxability of capital gains) of the Indo- France tax treaty does not provide for dual taxation. Under Article 14( 5), where shares of a company which is a resident of France are transferred, representing a participation of more than 10 per cent in such entity, the resultant capital gain is taxable only in France. The fact that the value of the shares alienated comprises underlying assets located in other contracting state is irrelevant in the context of Article 14( 5). The amended definition of " transfer" as per the Income Tax Act cannot be used for interpreting Article 14. It was further held by the court that there is no transfer of the right, title and interest in or transfer of Indian company shares. The transaction could not be taxed in India on the basis that there was a deemed alienation of Indian company shares. The good faith interpretation does not permit incorporation of a see- through or look- through provisions in tax treaty provisions, to cover indirect or incidental transfer of rights in or control over assets of Indian company. Thus, it is clear from the above decision that the amendments made in the Act do not override the provisions contained in the tax treaty and, therefore, even after the amendments, the transaction which is governed by the tax treaty may not be liable to tax in India. The article has been co- authored by Alok Gupta e- mail: hp. agrawal@ sskmin. com a. gupta@ sskmin. com FOREIGN ENTERPRISE HP AGRAWAL The net effect of the amendments was that the decision of the Supreme Court in Vodafone's case is no longer a good law. Now, any transaction entered into outside India between two foreign residents would also be subject to the provisions of the Income Tax Act if the transaction has any bearing on any asset in India | | | | | | | Excisability, thy name is confusion | |
Live horse's duty of excise is blank. And live fish's duty is nil. Electric energy duty is blank. In this context Iam writing this treatise. Imagine, even the latest tribunal judgment is pretty much wrong on this issue . I respectfully disagree with this judgment of the CESTAT Amaravathi Co- operatives Sugar Mills versus CCE, Coimbatore, 2013( 291) ELT126( TriChennai), which says that " press mud and sludge are specified in the First Schedule of the Central Excise Tariff against headings 23032000 and 23033000 but they are not subject to a duty of excise, as under the rate column the duty of excise is indicated as nil. Hence till such time, no duty is specified in the First Schedule of the Central Excise Tariff, press mud and sludge cannot be considered to be excisable goods". The judgment, therefore, says that the rate of duty being nil, the goods are not excisable.
This is what according to me is precisely wrong. The correct position is that even if the rate of duty is nil, the goods can still be excisable, if they are manufactured and are marketable goods. Iam not writing about the other factual portions of the judgment regarding the admissibility of CENVAT credit but only on the theoretical issue: When the rate of duty is shown as nil in the Central Excise Tariff, are the goods excisable? The judgment has relied on the definition of excisable goods in Section 2( d) which is as follows: "Excisable goods means goods specified in the First Schedule and the Second Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) as being subject to a duty of excise" We have to read also the charging section 3 and subsection ( a) which says that the rate prescribed in the tariff for excisable goods will be levied and collected. So the rate does not determine excisability. This means that in order to be excisable, the goods should be ( i) manufactured, ( ii) marketable ( iii) appearing in the tariff and ( iv) subject to duty of excise. All the conditions must be satisfied. Regarding ( i) ( ii) and ( iii) there is no controversy here. Regarding ( iv) that is, subject to duty of excise, the controversy is that the tribunal judgment says that since there is no rate of duty (that is the rate of duty is nil), they are not excisable. This is where I disagree. Even if the goods attract nil rate of duty they can still be excisable provided the other conditions (i), ( ii) and ( iii) are satisfied. Now, regarding condition ( iv), that is, subject to duty of excise, the question is nil duty is a rate of duty or not. It is clear that the tribunal judgment has thought it fit to hold that nil duty is not a rate of duty. That is not correct. Nil duty is also a rate of duty as has been held in the following judgments: 1. T N Handloom Weavers versus ACCE [ 1978( 2) ELT ( J 57) ( Mad)] 2. Karnataka Cement Pipe Factory versus Supcenex [ 1986 ( 23) ELT313 (Kar)] 3. Wallace Flour Mills 1989 ( 44) ELT598( SC) 4. CCE, Hyderabad, versus Vazir Sultan Tobacco Co — 1996 ( 83) ELT3 ( SC) "The Supreme Court in this case has held that though by virtue of an exemption notification, the rate of duty was nil, this does not mean that they were not excisable goods. They were excisable goods. Nil rate of duty is also arate of duty" There is another very important consideration namely that in the tariff we find that the rate of duty is nil in many cases, which are actually manufactured, marketable and excisable. Examples, 27160000 electrical energy, 09011200 decaffeinated coffee, 19051000 crispbred, 19052000 gingerbread, 19054000 rusks, toasted bread and similar toasted products, 19059030 extruded or expanded products, savoury or salted, 19059040 papad, 19059090 other, 53071090 yarn of jute or of other textile bast fibres of heading 5303. There is also no way to legally distinguish between where the tariff rate is nil and where the exempted rate is nil. Conclusion : If we take customs and excise tariffs together, then the rates of duty are variously written as nil, blank and free. In effect, all of them mean nil. Some are excisable and some are nonexcisable. Animals like cats and dogs are in the excise tariff. The CBEC should form a task force to resolve this confusion. smukher200@ yahoo. com EXPERT EYE SUKUMAR MUKHOPADHYAY Even if the rate of duty is nil, the goods can still be excisable, if they are manufactured and are marketable goods | | A public interest litigation to be imagined | |
Picture an arm of the Indian State that is charged by law to provide essential services to the public. Imagine the service delivery being really slow and dilapidated.
So broken that it is comparable with agovernment pharma company delivering medicine to a household a generation or two after the patient has died. Imagine whispered allegations of lack of transparency, nepotism and corruption being levelled about some sections of this institution. To help benchmark how bad things are, let's say India ranks second from the bottom in a listing of all similarlyplaced service providers across the world. Also imagine the Indian State having to pay damages for an inordinate delay ( close to a decade) in even starting to provide the services it is meant to. Now picture a public interest litigation (PIL) asking a court to set this institution right. Chances are, the judges would pass serious strictures. It is likely that the court would appoint a retired judge to monitor how the service delivery is improved and file reports at frequent intervals. It is highly possible that the dependence on other arms of the State for funding, staffing, and administration may invite a rebuke or two, calling it a "caged parrot". Equally possible is the prospect of the chief executive of the institution being summoned to court and being told that he would have to make good the damages incurred by the exchequer because the organisation did not perform its job. Here's the bad news. Such an institution actually exists. The good news ( for the institution): it is not very likely that courts would render a very harsh treatment in this imaginary PIL. The institution in question is the very justice delivery system that Indian courts themselves administer. The justice delivery system is struggling to cope, creaking at the joints and bursting at the seams. Statistics published by the National Court Management System ( NCMS), an initiative of the Supreme Court of India to review justice delivery in India, record that Indian courts have to deal with about 3crore ( 30 million) cases with a judicial strength of just about 19,000 judges. With anational population of 120 crore ( 1.2 billion people), we have about 16 judges for every ten lakh ( one million) people. The first ever ruling against India in a bilateral investment protection treaty inflicting damages on the exchequer arose because one high court could not hear a challenge against an international arbitration award for nine years, the proceedings to enforce the award in another high court was stayed, and proceedings in the Supreme Court to resolve the conflict did not get considered for four and half years. It is eminently possible that a civil suit you institute to resolve a dispute with your neighbour would likely be resolved when your respective grandchildren attain your age. Sadly, it is also true that judicial appointments are not transparent at all, and lead to speculation that have broken out of the realm of being whispers – only last week, the Chief Justice of the Gujarat High Court is reported to have alleged that he was sidelined for elevation to the Supreme Court because he had opposed the appointment of the sister of the Chief Justice of India as a high court judge. The provision of justice delivery services by courts is a core sovereign function. Various attempts to improvise and innovate have indeed been made, but they end up again at the mercy of this very system. Laws enabling arbitration have been interpreted and re- moulded beyond recognition – indeed, the bilateral investment treaty claim that India pathetically lost was a case of international arbitration. A new law to create a " commercial division" in high courts to cut out one layer of trial, and to directly start at the high court for disputes of ₹. 5 crore and above, is simply not getting passed by Parliament. Courts have been administratively non- innovative in charging for their services. To give a stark example: a court hearing and resolving Vodafone's ₹ 11,000crore tax dispute would have earned less than ₹ 1,000 for such heavy work. Of course, every time a problem is highlighted, anew regulator and a new appellate tribunal are conceptualised, ousting the jurisdiction of ordinary civil courts – the latest is a move to set up a dispute resolution forum exclusively to deal with public- private disputes in the infrastructure space. The objective may indeed be laudable, but getting people to man the regulators and appellate tribunals remains a challenge. The Securities Appellate Tribunal, for instance, a stellar tribunal that has mostly delivered rulings on appeals within a few months, has been without a full strength for over two years now. Even if the tribunal gives its rulings within months, once an appeal from there is accepted for hearing by the Supreme Court, the time frame for final hearings to even commence shifts to anywhere from two years to ten years. Naturally, human tendency leads many judges to dispose of as many cases as possible in as short a time as possible to do their bit to salve their conscience and address the beaten- to- death cliché of "justice delayed being justice denied". According to NCMS, in 2011, over two crore cases were disposed of – every judge, on an average, disposing of about 1,200 cases in twelve months – a hundred cases in a month i. e. three cases a day, assuming she worked without a single day off. The impact of such zealous work is marginal. Pendency marginally came down from 3.20 crore cases to 3.136 crore cases. Since the conduct of trade, commerce and business is dynamic, two crore new cases were filed. Undue haste as a solution is a problem worse than the one sought to be solved. Bad jurisprudence complicates life for those who are not in dispute since they have re- arrange their affairs to stay compliant with newly- interpreted law. Not for nothing does the counter- cliché equally hold good: justice hurried is justice buried. If only rebukes and strictures could solve problems of governance, there may indeed have been a successful PIL about this subject. The author is a partner of JSA, Advocates & Solicitors. The views expressed herein are his own. somasekhar@ jsalaw. com WITHOUT CONTEMPT SOMASEKHAR SUNDARESAN THINKSTOCK | | | | | |
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