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D. Murali

KINETIC Motor Company Ltd was begun in 1984 as a joint venture with Honda Motor of Japan "to manufacture and market advanced scooters in India," informs www.kineticindia.com. In 1998, Kinetic acquired a major stake and realigned its tie-up with Honda as `a technical collaboration'.

But there was this taxman snooping into Kinetic asking for the whereabouts of Rs 10 lakh Modvat credit taken on inputs. Kinetic said that it had written off the value of the inputs. "Look, those inputs are still lying inside your factory," said the taxman. And Kinetic explained, "But using them became `impracticable and impossible' after the collaboration with Honda Motors stood terminated."

At the Commissioner (Appeals) level, the decision went in favour of Kinetic. Aggrieved by the order, the Department used all its kinetic energy to zoom to the New Delhi Tribunal, to realise the revenue potential in the case. But the Tribunal was not impressed. It asked the Department to look at the relevant rule, as it stood then. Credit can be denied to an assessee only on two grounds, said the Tribunal. One, "for having not used the inputs in the manufacture of goods," and, two, "for having removed the inputs as such."

The taxman pleaded that the first condition was attracted because the inputs lay unused. But the tribunal was quick to point out that there is no time limit under the rule for the utilisation of inputs by the assessee, and that Kinetic had not stopped the production of two-wheelers after the termination of collaboration contract.

"Credit cannot be denied to the assessee for having failed to utilise the inputs for a long time or for having written off the value of the inputs in the books, when those had not been removed by them from the factory as such," reads the order of Mr P. S. Bajaj, Tribunal member.

"When women love us, they forgive us everything, even our crimes; when they do not love us, they give us credit for nothing, not even our virtues," laments Honore de Balzac, a French novelist. One can say that of the taxman too.

Passenger not carried for reward

MORADABAD, June 1, 1986. It was half-past-eight in the morning. S. C. Bhatnagar, a BHEL employee was standing in the compound of Roadways bus-stand waiting for a bus. A bus did come; but it hit Bhatnagar and he died instantly. His widow, daughters and sons filed a petition under Section 110A of the Motor Vehicles Act, 1939, claiming a compensation of Rs 3,62,576.

At the Motor Accident Claims Tribunal the bus owner argued that the income of the deceased was wrongly shown, and that the bus was overloaded. In 1991, the Tribunal said that the liability of United India (UI), whose policy had been taken by the bus owner, was unlimited. The Tribunal fixed the compensation at Rs 1,46,832, plus interest at 9 per cent.

Unhappy with the order, UI strode up to the Allahabad High Court, and said that its liability was limited to the extent of Rs 50,000 because Bhatnagar was a person other than `passengers carried for hire or reward'. The court conceded that "The term `comprehensive' cannot be taken to mean unlimited liability because it refers to different types of liability and not the extent of liability in financial terms."

However, citing a recent apex court decision in National Insurance Company vs Baljeet Kaur, and also many other decisions, the court ruled that UI should pay the entire awarded amount and thereafter it can recover the excess amount from the vehicle owner.

John Acton said, "History provides neither compensation for suffering nor penalties for wrong." One does fault courts likewise, but this case was different.

LawLane@TheHindu.co.in

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