LEGAL DIGEST
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Bias of arbitratornotproved
THE Supreme Court last week dismissed the challenge of a construction firm to the arbitration award stating that when the parties enter into a contract making the Chief Engineer the arbitrator, knowing his role, authority or power, they stand bound by the choice. If the Chief Engineer is chosen despite knowing “his role in the affairs relating to the contract but nevertheless agree for him to be arbitrator and name him in the agreement to adjudicate the dispute/s between the parties, they stand bound by it unless a good or valid legal ground is made out for his exclusion,” the court stated in the case, Ladli Constructions Ltd vs Punjab Police Housing Corporation. In this case, a housing project was delayed leading to the cancellation of the contract. The matter was referred to arbitration, which went against the firm. It moved the Punjab and Haryana high court, without success. Before the Supreme Court, it argued that the arbitrator, who was the Chief Engineer, was biased. The executive engineer cancelled the contract at his instance and therefore the firm had reasonable apprehension of bias. The court did not accept this, remarking that except some vague statements, there was nothing to show bias on the part of the arbitrator.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> Excise on data processors
The Supreme Court has asked the central excise appellate tribunal to reconsider the cases of Vinitron Electronics Ltd and D-Link India Ltd on the question of duty liability after noticing the nature and functions of motherboards in the functioning of automatic data processing machines. The core issue in these cases was the classification of add-on cards and motherboards for the purpose of the Central Excise Act and the duty leviable. The tribunal ruled that add-on cards and motherboards are to be classified under a tariff heading which attracted higher duty. According to the Supreme Court which heard the appeals, the tribunal had not gone into the core question noted above. Therefore, the court asked the tribunal to reconsider the facts and decide the question anew.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> HCorders on road safety quashed
The Supreme Court has set aside the judgment of the Kerala high court which went beyond the scope of a motor accident claim in which the insurance company was ordered to pay Rs 4.76 lakh to the heirs of the mishap victim. The death occurred because the vehicle hit a stationary truck parked on a road side without the parking light switched on. The owner of the bike moved the high court against the award. It passed a series of general orders to the state government, like building bus bays on roads and adequate parking space for vehicles, by acquiring land if necessary. The state government appealed against this arguing that it was beyond the scope of the case and not practical. The Supreme Court partially accepted the contention and deleted the orders except those with which the government had no objection. The high court order suffered from serious flaws as it did not consider the feasibility of the proposed schemes to avoid accidents.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> Aluminium firm denied DEPS benefit
The Supreme Court has allowed the appeal of the Commissioner of Customs against the ruling of the tribunal in its case against Caryaire Equipment India on the latter’s claim of benefits under the Duty Entitlement Passbook Scheme. The question was whether aluminium grills could be termed as “extruded aluminium products” to claim benefit for export of the company’s products. If the answer is yes, the company would be eligible for the scheme. The commissioner denied the benefit and ordered confiscation. The tribunal upheld that view. But the Supreme Court quashed the tribunal’s order.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> CCI probe againstRailway dominance
The Delhi high court has dismissed the appeal of the Railway Board against the ruling of the Competition Commission of India which had ordered an investigation by its director general on a complaint of abuse of its dominant position. It was alleged in a complaint before the commission that the railways had increased charges for various services, not provided access to infrastructure such as rail terminals and imposed several restrictions on other players in the field. The commission rejected the objection of the railways that it was not an enterprise according to the definition in the Competition Act as it was conducting sovereign functions. On appeal, the high court also ruled that the railways were not exercising sovereign functions when it was involved in commercial activities like running trains. It could be done by private enterprises also. Therefore, the word enterprise covered railways and the competition law covered it.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> Trade markrowovertissue paper
The Delhi high court has passed injunction in favour of Premier Tissues India Ltd against Rolia Tissues Industries in a trade mark dispute over the name Premier. Premier Tissues alleged that the rival firm was using the mark ‘Premium’ in a way confusing customers. In its judgment, the high court said that the two sets of packaging with marks, Premier and Premium, are deceptively similar. “Prima facie, it is clear that it is a case of violation of vested rights of the plaintiff (Premier) and pirator thereof cannot become rightful owner in any manner.”
MJ ANTONY
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Source Business line
Compliance aspects of inward remittance
Any company setting out to receive foreign share capital has to know what percentage of investment is allowed in that industry by the Government.
An auto component manufacturing company from Korea was on the lookout for a suitable joint venture partner to set up a facility in India that would logistically support supply to the car manufacturer in Chennai. After conducting due diligence, the Korean company identified Anish Southern Group companies as an ideal venture partner, with whom the procedures for incorporation were set in motion. The new joint venture company, comprising both Korean investors and Indian investors, was incorporated with the Registrar of Companies with 49 per cent of equity investment by the Indian investor, and 51 per cent investment from the Korean investor.
The company opened the bank account with a private sector new generation bank, through which the funds were routed from Korea to India, and the branch of the bank is an Authorised Dealer (AD) of RBI. The AD secured KYC documents on receipt of the inward remittance, but didn't follow up on some other FEMA-related requirements for foreign inward remittance. The company allotted shares to all investors, and complied with ROC formalities by filing Form 2. The initial focus was on operations, and meeting its orders and augmenting supply chains and logistics to further strengthen its hold on the market. During the first audit of the books of the company, the auditors sought FEMA compliance papers for verification of the foreign share holding. At this point, the JV Company realised that they had unintentionally missed out on this aspect of the deal.
SECTORAL CAPS
Whenever any company sets out to receive foreign share capital, certain essentials need to be verified. It needs to know what percentage of investment is allowed in that specific industry under the Government of India's FDI schemes, and one needs to verify that the industry doesn't fall into the list where the Government has set sectoral caps or limits on foreign investment. There are three such categories — where 100 per cent FDI is allowed, where sectoral caps exist, and last but not the least, where FDI is absolutely not allowed. Further, there are industries where investment is allowed via the automatic route — in other words, only information reports need to be filed with the Reserve Bank of India. In certain other cases, prior approval of the government is required, and must be secured from the Foreign Investment Promotion Board (FIPB), Government of India.
The JV Company, having received FDI under the automatic route, should have reported certain details on the Advance Reporting Form to the Regional Office of the Reserve Bank of India, within 30 days from the date of receipt of inward remittances. The report would include details of the receipt of remittance towards issue of equity instrument (viz. shares / fully convertible debentures / fully convertible preference shares), copies of the Foreign Inward Remittance Certificate (FIRC) evidencing the receipt of inward remittances, and Know Your Customer (KYC) report on the non-resident investors from the overseas bank remitting the amount.
ADVANCE REPORTING
The procedure may be classified into two stages. Stage 1 happens on the receipt of share application money, and should be completed within 30 days of receipt of remittance. Stage 2 is due when shares are allotted. At that time, the JV Company needs to file a report on form FC-GPR with the respective regional office of the Reserve Bank of India.
This report must be accompanied by certain certifications from the Company Secretary and Statutory Auditors of the JV Company. Another point to be noted is that all the reporting happens through the AD category 1 branch of the bank where the company has an account, and which receives the remittance of share capital. It is, therefore, imperative that the AD keeps its customers informed of FEMA requirements in such cases.
In this case, failure to report the transaction will invite penal provisions under FEMA. The JV Company would need to apply to RBI for compounding of contravention under FEMA. One can also make an application for compounding, suo moto, on becoming aware of the contravention. It would, of course, be better to follow reporting requirements, rather than invite penal provisions, as these types of irregularities will dominate the horizon when the foreign investor wants to repatriate dividends or capital on a later date.
(The author is a Coimbatore-based chartered accountant.)
Source Economic Times
Budget 2012: Tax all but 35 services, states ask Centre
NEW DELHI: States have no objection to the Centre widening its service tax net in the forthcoming Union Budget, as long as 35 services like ambulance, beauty parlours, marriage halls, interest on bank deposits, leasing of vehicles and machines are kept out of the ambit of the levy.
With a broad consensus emerging between the states and the Centre, Finance Minister Pranab Mukherjee may announce coverage of most of the services used by individuals and business in the Budget 2012-13 to be presented on March 16.
With a broad consensus emerging between the states and the Centre, Finance Minister Pranab Mukherjee may announce coverage of most of the services used by individuals and business in the Budget 2012-13 to be presented on March 16.
The Centre has proposed introduction of a negative list service tax regime, meaning services out of the list would be taxed.
A unanimous view to this effect emerged in the meeting of the Empowered Committee of State Finance Ministers.
The panel, chaired by Bihar Deputy Chief Minister Sushil Modi, is examining the Centre-state issues on the much-delayed Goods and Services Tax (GST).
"The Empowered Committee is in favour of negative list. Centre can go ahead of with the negative list. It can be implemented from April 1, 2012, (but) 35 items approved by States (must) be kept in the negative list," Modi told reporters here.
He said the Centre should not impose service tax on the items falling in Schedule VII's List II of the Constitution, on which state impose taxes.
The panel, Modi said, has finalised the list of 35 services which should be included in the negative list.
Earlier, the Centre had released a negative list containing 22 services. At present, the tax at the rate of 10 per cent is levied on 119 services. For the current fiscal, the Centre hopes to mop up Rs 82,000 crore from this levy.
The negative list concept is practiced globally and is proposed to be introduced in India as part of the goods and services tax regime.
Services account for nearly 63 per cent of India's GDP and widening of the net could yield an additional 20 per cent in service tax.
At current prices, the contribution from services during 2010-11 comes at about Rs 50 lakh crore. However, the total collection from service tax during 2010-11 was over Rs 70,000 crore.
A unanimous view to this effect emerged in the meeting of the Empowered Committee of State Finance Ministers.
The panel, chaired by Bihar Deputy Chief Minister Sushil Modi, is examining the Centre-state issues on the much-delayed Goods and Services Tax (GST).
"The Empowered Committee is in favour of negative list. Centre can go ahead of with the negative list. It can be implemented from April 1, 2012, (but) 35 items approved by States (must) be kept in the negative list," Modi told reporters here.
He said the Centre should not impose service tax on the items falling in Schedule VII's List II of the Constitution, on which state impose taxes.
The panel, Modi said, has finalised the list of 35 services which should be included in the negative list.
Earlier, the Centre had released a negative list containing 22 services. At present, the tax at the rate of 10 per cent is levied on 119 services. For the current fiscal, the Centre hopes to mop up Rs 82,000 crore from this levy.
The negative list concept is practiced globally and is proposed to be introduced in India as part of the goods and services tax regime.
Services account for nearly 63 per cent of India's GDP and widening of the net could yield an additional 20 per cent in service tax.
At current prices, the contribution from services during 2010-11 comes at about Rs 50 lakh crore. However, the total collection from service tax during 2010-11 was over Rs 70,000 crore.
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