Monday, August 17, 1998
today's calendar
|
B U S I N E S S | Monday, August 17, 1998 |
|
| weather n
spotlight today's calendar |
|
|
Gift coupons inside
products not lottery: SC Delicensing
of sugar industry soon |
 |
Glaxo recovery case on
August 18 Escorts
JCB bags Rs 7 crore order |
|
Dhumal opens packaging unit
at Baddi |
|||||
|
|
|
|
Gift coupons inside products not lottery: SC NEW DELHI, Aug 16 (PTI) — In an order that would boost innovative marketing strategies, the Supreme Court has held that insertion of gift coupons inside a product did not amount to lottery and restrictive trade practices. Reversing an order by the Monopolies and Restrictive Trade Practices Commission (MRTPC) against HMM Ltd, which marketed Horlicks, a Division Bench comprising Justice S.P. Bharucha and Justice G.D. Pattanaik ruled “the fact that some bottles of Horlicks contained a slip of paper which entitled the buyer to a prize is not a lottery in the ordinary sense of the word. ”The MRTPC had held that the cost of the gift scheme introduced by HMM Ltd in September 1985 on Horlicks in Delhi area was covered by the increase on price effected two months earlier. The MRTPC said the gift scheme “was intended to wean away the consumers from Bournvita by allurements of lucky prizes of high value rather than by fair means which may benefit the general run of the consumers. ”The commission said the prizes were “manifold costlier than the price of a bottle of Horlicks, a fact on account of which the winning of the prize will be of overriding consideration than the product in question. ”The MRTPC held “on these postulates it is not difficult to say that the trade practice is no better than a lottery and that the buyer who does not get any prize, does lose it as against the one who wins it although both take to the same transaction. The apex court while rejecting MRTPC’s finding said for holding a trade practice to be an unfair trade practice, it must be found that it caused loss or injury to the consumer. Insofar as prizes were concerned, there had to be the intention of not providing them as offered or creating the impression that they were being given or were being offered free of charge when in fact they were fully or partly covered by the amount charged in the transaction as a whole, it said. While holding that conduct of a lottery for the purpose of promoting sale, use or supply of a product is an unfair trade practice, the supreme court said, “it is difficult to see clear, sustainable findings on these aspects in the judgement of the MRTPC. ”The court said it was the director general of the MRTPC who made allegation that the cost of the gift was covered by the increase in price of Horlicks and it was for him to establish it. Since he did not, the
allegation ought to have been rejected.”Lastly, the
court said “it is difficult to hold that a consumer
who bought a bottle of Horlicks that did not entitle him
to a prize suffered a loss.” |
Glaxo recovery case on August 18 NEW DELHI, Aug 16 (PTI) — The 17-year-old dispute between the government and Glaxo India Ltd (GIL) over the recovery of about Rs 189.44 crore from the latter might see the end soon with the Delhi High Court fixing final hearing in the case for next week. The government had ordered for recovery of the money from the company claiming it had charged more than the fixed price while selling the bulk drugs — Betamethasone Alcohol (BA), Betamethasone Valearate (BV) and Betamethasone-Di-Sodium Phosphate (BP). A Division Bench of Justice R.C. Lahoti and Justice C.K. Mahajan fixed August 18 for concluding reply by senior lawyer Fali S. Nariman, appearing for GIL after Additional Solicitor General C.S. Vaidyanathan assisted by standing counsel Meera Bhatia finished arguments on Wednesday on a revision petition by the company, challenging the recovery on the ground that price fixation in government’s drugs prices control orders (DPCO) of 1979, was “faulty”. GIL counsel claimed that the government had not indicated the specific provision of DPCO under which the recovery of the money was being sought and the government agreeing to revise the prices of drugs in question thrice since 1981, showed that it conceded the price fixed previously was “erroneous”. The government, however, maintained that the prices were worked out as per the cost audit reports, company data and the average figures from 1980 to 1984. The government claimed GIL
had accepted the revised prices and Department of
Chemical and Fertilisers (DCF) was free to work out the
subsequent revisions after an order was passed by the
High Court in November 1986. |
Delicensing of sugar industry soon NEW DELHI, Aug 16 (PTI) — Sugar industry is all set to be delicensed with the Union Cabinet expected to take a decision on the issue this month, Industry Minister Sikander Bakht has said. “We are proposing to delicense sugar, I think may be at the next Cabinet meeting, certainly very soon. It is very possible sugar will be delicensed in August itself,” he told a private television channel. After delicensing of sugar, practically only five areas would be under license control as they were important from the view of defence and country’s security, he told Home TV, a release from the network said. A decision on sugar delicensing had been deferred by the Cabinet last month in order to arrive at a consensus on the issue. The Food Ministry has told the Cabinet that it has no objection to delicensing provided no two sugar or khandsari units are commissioned within a radius of 25 km. A proposal by the Industry Ministry to dereserve 200 to 300 of the 800 items reserved in the small scale sector had been rejected by Prime Minister Atal Behari Vajpayee, he said. However, products manufactured by small scale industry could be made by other sector provided it exports 75 per cent of its products, Bakht said. Mr Vajpayee had rejected the dereservation proposal following a representation from the small scale industry. The minister said the Prime Minister’s decision to reject the dereservation was not wrong. Government’s proposed decision to delicense the industry is despite a high-powered committee on sugar industry, headed by former Food Secretary B.B. Mahajan, recommending continutation of the present licensing policy. The commission while recommending continuation of the licensing policy had called for decontrolling of the industry, especially from its levy sugar obligations. India has no immediate plans to hike import duty on sugar as the recent levy imposed on the commodity’s shipments into the country offered considerable protection to domestic industry, official sources have said. The Rs 850 per tonne countervailing duty on sugar imports equalised the excise duty paid by domestic sugar mills and the 5 per cent basic customs duty was a tariff protection for the indigenous industry, the sources said. Commerce Minister Ramakrishna Hedge has also ruled out any increase in import duty for sugar. Asked about reports of Commerce Ministry’s move to get the import duty hiked, he told PTI “as far as I know, there is no such proposal.” Concerned over increasing imports into India, especially from Pakistan, the industry has demanded that basic customs duty on the commodity’s imports be hiked to 20 per cent. Indian Sugar Mills
Association (ISMA) feels that a domestic production of
125 lakh tonnes for the season (October 1997-September
1998) coupled with imports would result in current
season’s stocks lasting upto first quarter of next
season. |
Escorts JCB bags Rs 7 crore order NEW DELHI, Aug 16 — Escorts JCB, the market leader in excavator loaders in India, has bagged a bulk order of 60 front end loaders worth over Rs 7 crore from the Municipal Corporation of Delhi. The front end loaders are
specially designed for municipal usage as the machines
are fitted with a unique real cooling package which
improves the performance considerably by preventing the
garbage from sticking to the cooling system, Mr Eash
Jaitly, Chief General Manager of EJCB said in a release. |
Dhumal opens packaging unit at
Baddi CHANDIGARH, Aug 16 — Prem Kumar Dhumal, Chief Minister of Himachal Pradesh, today inaugurated a new packaging unit of M.J. Enterprises Limited at Baddi near hear. The group has launched brands such as Reebok, Parker pens, Gillette, Perfetti etc. The company supplies stickers, labels, monocartons and corrugated cartons to the U.B., Bhilwara, Jindal and Luxor groups. Mr Rajiv Bhatnagar,
Director of the unit, said that this unit will provide
all facilities, including processing multi-colour
printing, automatic carton glueing, dye-cutting and
lamination of cartons under one roof. |
FOR nearly four years, the powers that-be have prevented the Tata-Singapore Airlines (SIA) project from taking-off. But Mr Ratan Tata is an industrialist who does not believe in saying die. He has been fighting tooth and nail and chances are that the project, in one form or the other, will be a reality soon. There are two schools of thought. One is that the Tatas flying on domestic sectors will affect the national carrier. The other, perhaps more realistic, is that the competition will further help improve national carrier’s performance. A dispassionate study reveals that, following operation by private airlines, IA’s performances, including punctuality and catering service have shown remarkable improvement. Regular travellers have gone on record saying that the national carrier was far better than private operators, which have not cared much for their reputation. The scenario on domestic operations has, however, remained dismal. The fault clearly lies with the Ministry of Civil Aviation which, in a haste, granted flying licenses to Tom, Dick and Harry without ascertaining their antecedents. Many of the private operators have packed up after defaulting crores of rupees. Some of them are, however, functioning. But even their transactions and dealings need to be scrutinised by an independent body. Some of these operators have been allegedly guilty of many shady dealings. The state of affairs 400 plus airports around the country is much poorer. The report, complied by the Directorate of Air Routes and Aerodromes, shows shocking picture of the airports and the authorities that own or maintain them. The Airports Authority of India (AAI) owns 92 airports. Ten of these are abandoned or lying in disuse. The defence authorities own 136 of which 46 are not in use. The various state governments own 156 out of which 73 are not in use. What of worse is that 70 airports among 255 are non-functional. In other words, of 450 airports in the country, only 185 are functional. Can there be a worse state of health of the sector? Politicians more than bureaucrats are to be blamed for this sorry state of affairs. When ill-informed persons become ministers in their states or Centre, they want their constituency to be linked with air service. Madhavrao Scindia, for example, has been one of the most affluent and knowledgeable ministers in the country. But even a person of his vast achievements, he wanted Gwalior to have a maintenance base for large-bodied aircraft. Had he continued for another year or so as the Aviation minister his wish might have become a reality though the defence authorities opposed it. Ill-conceived
project |
IN this scientific age, there are innumerable machines and other products performing more than one function. The question of importance which arises for many assessees is: Whether a machine or any other product performing more than one function, is eligible for exemption under a customs notification which provides for exemption based on specific use or function of the said machine/item? The aforesaid issue has arisen on several occasions before the Customs, Excise & Gold (Control) Appellate Tribunal, which has crystallised the legal position. In the case of Sanghi Synthetics Pvt. Ltd. v/s Collector of Customs, Bombay reported in 1996 (82) ELT 238 (Tribunal), the imported Elastic Lace Making Machine was classified under Heading 84.37 by the Customs Authorities. There was no dispute about the classification but the department did not allow the benefit of exemption notification No. 16/85-Cus dated 1.3.85. The goods were confiscated on the ground that the machine was capable of more than one function. The Tribunal after consideration of the settled legal position held that the said machine was eligible for the exemption even though the same could perform more than one function. It was held that the eligibility for exemption is to be considered with reference to the main function of the machine and exemption cannot be denied merely because the machine can perform more than one function. It was held that the machine under consideration was specifically mentioned in the aforesaid notification. In the case of Collector of Customs v/s Office Photostat Printers reported in 1991 (54) ELT 142 (Tribunal), the respondent imported an automatic film processor used in printing industry which performed both as a film processor as well as paper processor. The question arose whether the benefit of exemption under notification No. 11/77-Cus dated 15.1.1977 was available to the respondent. It was held that the exemption could not be denied merely on the ground that the machine under consideration performed both as a film processor as well as paper processor. In the case of Modern Food Industries (India) Ltd. v/s Collector of Customs reported in 1991 (53) ELT 107 (Tribunal), the appellants were engaged in the production and marketing of “Modern Bread”. They had imported three sets of machinery consisting of slicer, bagger and tyre-bag along with spares and claimed assessment at the concessional rate under notification No. 125/86-Cus. dated 17.2.86 as amended. The Assistant Collector had given the benefit of the said notification to the Bread Bagger and rejected the claim for the other two machines on the ground that they were capable of functioning independently and do not fulfil the requirements indicated in Sr. No. 23 of the notification. On appeal before the Collector of Customs (Appeal), he gave the benefit to the twist tyre meant to close the bags and not to the slicer as according to him the slicer cuts the bread into different slices and was capable of being hooked to any standard packing machine and was not classifiable as a packing or processing machine. Therefore the notification was held not to be available to the slicer. Thus, the matter reached the Tribunal. The Tribunal noted that the appellants had imported 3 sets of each of the following machines: 1. UBE Model 90-1 = Bread
Bagger with discharge Conveyor The machines were assessed under heading 8422.40 as “other packing or wrapping machinery.” The notification No. 125/86-Cus Sl. No. 23 related to: “Aseptic packaging machinery which may also perform one or more of the following processes in addition to packaging:— Pre-sterilising, pasteurising, comprising, forming, filling, sealing, coding, marking.” The Tribunal delved into an Encyclopedia of packing technology and the notes of HSN to conclude that while in the process of wrapping or packing, any secondary function like cutting butter or margarine into blocks would also get covered by heading 8422.40. The Tribunal held that if a machine which undertakes the packing of bread, incidentally, has to slice the bread before packing, it has to be considered as an integrated unit, especially when the entire process i.e. slicing, bagging and tying is done in one single operation. The slicer which combined its operation with the packing of bread has to be taken as a part of the entire process. It is not a single machine imported but it is a set combined with the other machines which performed the operation of slicing, bagging and tying. Slicing of the loaf is for the convenient presentation in the commercial market. The view held by the revenue that each machine can function independently and therefore the benefit of the notification cannot be allowed, was rejected by the Tribunal on the ground that the entire operation is done by synchronising each of the machines in the set to achieve the single object of aseptic packaging and therefore the benefit of the concession under the notification held allowable. However, where the
notification itself bars the exemption to a machine
performing more than one function and/or restricts the
benefit to a machine having a specific use/function only
and none other, than the aforesaid decisions would not
apply. The essence of the matter is that the machine or
product seeking exemption must come within the ambit of
the notification. |
Q: What is your opinion about the future prospects of Cadbury? —
Maninder Singh, Patiala A: Incorporated in 1948, Cadbury India Ltd is a dominant player in the chocolate and malt food segment. The company has several reputed brands such as Dairy Milk, Eclairs, Perks etc. due to which it dominates the chocolate segment with a market share of 70 per cent. In the chocolate-based drinks segment, its brand Bournvita enjoys over a 50 per cent market share. On the financial front the company’s performance has been satisfactory. The company has set up new processing plants at Pune for crumb, chocolate making and moulding capacity expansion for wafer products. Cadbury is one of the leading advertisers and its brands enjoy tremendous visibility and recognition. The company’s latest launch of Picnic in the chocolate segment has been well accepted and the company’s entry into sugar Confectionary with a accepted and the company’s entry into sugar confectionary with a national launch of Googly has a larger market than the market for chocolates. This is mainly due to the parent company’s strong position in this field. On the whole, the future prospect of the company appear to be fairly secure. Q: Do you recommend holding on to or selling the shares of BASF India? —Harjeet
Bagga, Ambala Ans:- BASF India, which is a 50 per cent subsidiary of BASF Aktiengesellschaft of Germany, is a diversified company producing a wide range of chemicals that find application in various user industries. It is a leading producer of leather chemicals and auxiliaries which contribute nearly one-third of the company’s turnover. Besides crop protection, chemicals are the other major source of revenue for the company. The other two sectors in which BASF India operates are expandable polystyrene used in packaging as thermocole and different types of colours and dispersions. Though the product profile is wide, the backing of parental technology has been a major boon. The Foreign major is one of the largest chemical companies in the world focussing on leather chemicals, plastics, dyestuffs and agrochemicals. During the year that ended in March’ 98, the company posted sales of Rs. 294.22 crore and net profits of Rs. 16.88 crore, yielding an EPS of Rs. 10.48. The company has not lined up any major expansions in the immediate future, but the expansions undertaken thus far can be expected to bear fruit this year. Hence, one could consider holding on to the shares of this company. Q: Would you recommend holding on to the shares of Berger Paints or should I book profits and consider a switchover to another promising scrip? — Suneet Chadda, Ludhiana A: With its long years of experience in the Indian paints segment, Berger Paints stands at the third position in terms of market share. The company operates in four segments, the foremost being decorative paints used mainly for architectural purposes. This segment contributes almost 75 per cent of the company’s sales turnover. Over the years the company has acquired second position in this segment following Asian Paints. The remaining 25 per cent earnings for the Berger comes from industrial paints segment. Herein, the company is operating in three market segments: Automobiles, Powder Coatings and Protective Coatings. During the financial year 1997-98, the company’s sales amounted to Rs. 348.59 crore, and its net profits stood at Rs 18.23 crore, thus yielding an EPS of Rs. 15.58. Berger Paints recently celebrated its platinum jubilee year by rewarding its shareholders with a 1:1 bonus. However, it must also be noted that the equity capital, which had already increased from Rs. 5.87 crore to Rs. 11.70 crore, would now be doubled to Rs. 23.40 crore ex-bonus. Servicing an equity base of this size would not be easy, particularly when the paint industry itself is not exactly on the right side of a growth curve. Hence, one could consider booking profits at the moment and re-enter this scrip at lower levels after a year or so. Q: Do you recommend an investment in the shares of ITC at the current price level? —
Marianne Roy, Chandigarh. Ans:- ITC Ltd, is recognised as the leader in the domestic industry and commanded a market share of 67 per cent in volume terms and 74 per cent in value terms in the last year. The company boasts of one of the largest distribution networks in the country. which has enabled it to reach out to even the remote corners of the country, Of the six top brands in the Indian industry, ITC owns five. Thus, the company has a virtual free run in the premium segment. In fact its future plans include the launching of some premium brands of its parent company in India and agreements therefore have been made. The financial track record of the company indicates a fairly consistent performance over the years. During the year that ended in March 1997, its sales and net profit amounted to Rs. 5862.77 crore and Rs. 337.08 crore respectively, which translated into an EPS of Rs. 13.7. The corresponding figures for 1997-98 were Rs. 3074.85 crore, Rs. 526.20 crore and Rs. 21.4. Despite the disposal of ITC Classic and ITC Agro-Tech, both of which have been expensive for the company, the company’s interests remain greatly diversified with its sustained interests in hotels, packaging and printing, speciality paper and international export business. In addition, it also has subsidaries in the paper, hotels, infotech and seeds segments. Although the Budget provisions have expectedly been unfavourable for ITC, the demand for its cigarettes has invariably grown, offsetting the increased excise duty, which in any case will invariably be passed on to consumers. Hence, a long term investment in the shares of this company can be considered. Q: My broker recommends an investment in the shares of Kerbbs Biochem. Would you kindly comment on the advisability of making an investment at the current price level? —Ishween Anand, Chandigarh. Ans:- With a virtual monopoly in the anti-asthmatic products segment viz, ephedrine and pseudoephedrine, Kerbs Biochem is riding the ongoing boom in its segment. This company initially started off as a 100 per cent EOU, before starting to cater to the domestic market. The company is also working toward achieving the US FDA approval standards in the manufacturing segment, and once it achieves this goal, not only with the demand for its products increase, but they would also be able to improve upon it margins, as it can command a premium over non-FDA products. This is all the more important, as more than 90 per cent of its exports reach the US market, with the rest going to Canada, Hong Kong, Thailand, Ghana, Japan etc. Although this
company will be adversely affected by the 4 per cent
surcharge on imports levied in the latest Union Budget,
and the non-utilisability of the 5 per cent Modvat
credit, its high level of exports should compensate for
the same, especially in the light of the recent
depreciation of the value of the rupee. Finally, one must
also note that this company is engaged in a highly
competitive segment, where margins are getting thinner by
the day. Hence, though an investment in this scrip is not
inadvisable, it should ideally be done at price declines. |
|
Inflation Yen |
 |
 |
 |
| Nation
| Punjab | Haryana | Himachal Pradesh | Jammu & Kashmir | | Chandigarh | Editorial | Stocks | Sport | | Mailbag | Spotlight | World | 50 years of Independence | Weather | | Search | Subscribe | Archive | Suggestion | Home | E-mail | |
