TTM » Topics » Litigation

This excerpt taken from the TTM 20-F filed Oct 7, 2009.

Litigation

The Company is involved in legal proceedings in various states in India, both as plaintiff and as defendant There are claims which management does not believe to be of material nature, other than those described below.

Income Tax

The Company has ongoing disputes with Income Tax authorities relating to tax treatment of certain items. These mainly include disallowed expenses, tax treatment of certain expenses claimed by the Company as deductions, and the computation of,

 

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or eligibility of, certain tax incentives or allowances. Some of the disputes relate to the year in which the tax consequences of financial transactions were recognized and in the event these disputes are not resolved in the Company’s favor in that year, the tax consequences can be reflected in the tax year in which it is allowed by the income tax authorities and are, therefore, timing differences.

Most of these disputes/disallowances, being repetitive in nature, have been raised by the Income Tax authorities consistently in most of the years.

The Company has a right of appeal to the High Court or Supreme Court against adverse decisions by the appellate authorities for matters involving substantial question of law. The Income Tax authorities have similar rights of appeal.

As of March 31, 2009, the income tax demands by the Income Tax authorities aggregated Rs. 1,534 million (Rs.1,540 million as of March 31, 2008), (all figures are net of consequential relief) which are being contested by the Company in appeal and in respect of which the Company expects to succeed based on favorable decisions in earlier assessment years. There are matters aggregating Rs.1,072 million as of March 31, 2009 (Rs.1,031 million as of March 31, 2008) in respect of which the Company has won in appeals which have been further contested by the Income Tax authorities before the higher appellate authorities. There are other matters/disputes pending in appeal aggregating Rs. 1,848 million (Rs.1,993 million as of March 31, 2008).

Excise Duty and Service Tax

As of March 31, 2009, there were pending litigations on various counts relating to Excise Duty and Service Tax involving demand of Rs.1,821 million (Rs.1,062 million as of March 31, 2008). These demands challenged the basis of valuation of the Company’s products and denial of the ‘Central Value Added Tax’ (“CENVAT”) on inputs. The details of the demands involving more than Rs.200 million are as follows:

The excise authorities had denied CENVAT credit of Rs. 269 million as of March 31, 2009 (Rs.143 million as of March 31, 2008) in earlier years, on certain accessories supplied with the vehicles and on other technical grounds. The matter is being contested by the Company before the appellate authorities. On the basis of judicial precedents and favorable decisions in Company’s own earlier cases, the Company believes that it has a strong case. Further, valuation dispute of Tata Motors Limited amounting to Rs.219 million includes an amount of Rs.205 million pertaining to valuation of chassis sent to body builders for building body on its enroute to regional sales offices.

The excise authorities have raised a demand of Rs 371 million as of March 31, 2009 (Rs.371 million as of March 31, 2008). This is a Classification Dispute wherein the excise department had alleged that certain models of the Company’s commercial vehicle- Tippers will attract NCCD (National Calamity Cess Duty) of 1% on the ground that there are similarities between Tippers and Dumpers. The Company is contending that there are many technical differences between the two products. The appeal is pending before the Tribunal.

Sales Tax

The total sales tax demands (including interest and penalty), which are being contested by the Company amount to Rs.5,424 million as of March 31, 2009 (Rs.3,138 million as of March 31, 2008). The details of the demands for more than Rs.200 million are as follows:

The Sales Tax authorities in certain states have raised disputes totaling up to Rs.721 million as of March 31, 2009 (Rs.529 million as of March 31, 2008), treating the stock transfers of vehicles from the Company’s manufacturing plants to sales offices and the transfers between two sales offices as sales liable for levy of sales tax.

Under the notification issued by the sales tax authority, Jharkhand, the rate of sales tax was reduced to 4%. Consequently, the interstate sales tax also became 4% and since it was not concessional rate against a Declaration Form, the collection of Declaration Forms was not mandatory. However, the Jharkhand sales tax authorities raised the demand aggregating Rs.909 million, on the ground that Declaration Forms were not collected. The Company on the above notification has a strong case. The notification was valid until May 10, 2002. In addition to the above issue, the sales tax authorities have raised demands aggregating Rs.123 million as of March 31, 2009 (Rs.74 million as of March 31, 2008), for Non-Submission of Declaration Forms at various locations. The Company is confident of getting relief in appeal on submission of Forms.

 

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Sales tax demand aggregating Rs.2,473 million as of March 31, 2009 (Rs.626 million as of March 31, 2008) has been raised by Jamshedpur Sales Tax authorities disallowing the purchase of raw material from Jharkhand vendors at concessional rate of 2% in case the final product is stock transferred for sale outside the state. The Sales Tax authorities are relying on a notification issued by the Jharkhand Government which is not applicable on the Company’s transactions.

Other Taxes and Dues

Other amounts for which the Company may contingently be liable aggregating Rs.2045 million as of March 31, 2009 (Rs.1,208 million as of March 31, 2008) include the following cases involving more than Rs. 200 million:

The municipal authorities in certain states levy octroi duty (a local indirect tax) on goods brought inside the municipal limits at rates based on the classification of goods. Demands aggregating Rs.572 million as of March 31, 2009 (Rs.496 million as of March 31, 2008) have been raised demanding higher octroi duties on account of classification disputes relating to components purchased for the manufacture of vehicles. The dispute relating to classification is presently pending before the Supreme Court and the other dispute is pending before the Bombay High Court on remand by the Supreme Court.

This excerpt taken from the TTM 20-F filed Sep 30, 2008.

Litigation

The company is involved in legal proceedings in various states in India, both as plaintiff and as defendant There are claims which management does not believe to be of material nature, other than those described below.

Income Tax

The Company has ongoing disputes with Income Tax authorities relating to tax treatment of certain items. These mainly include disallowed expenses, tax treatment of certain expenses claimed by the Company as deductions, and the computation of, or eligibility of, certain tax incentives or allowances. Some of the disputes relate to the year in which the tax consequences of financial transactions were recognized and in the event these disputes are not resolved in the Company’s favour in that year, the tax consequences can be reflected in the tax year in which it is allowed by the income tax authorities and are, therefore, timing differences.

Most of these disputes/disallowances, being repetitive in nature, have been raised by the Income tax authorities consistently in most of the years.

The Company has a right of appeal to the High Court or Supreme Court against adverse decisions by the appellate authorities for matters involving substantial question of law. The Income Tax authorities have similar rights of appeal.

As of March 31, 2008, the income tax demands by the Income Tax authorities aggregated Rs. 3,714 million (Rs.1,540 million, net of consequential relief) which are being contested by the Company on appeal and in respect of which the Company expects to succeed based on favourable decisions in earlier assessment years. There are matters aggregating Rs.1,175 million (Rs 1,031 million, net of consequential relief) in respect of which the Company has won in appeals which have been further contested by the income tax department before the higher appellate authorities. There are other matters/disputes pending in appeal aggregating Rs. 2,130 million (Rs.1,993 million ,net of consequential relief) which includes Rs 1,298 million pertaining to the former Tata Finance Limited.

Excise Duty & Service Tax

As of March 31, 2008, there were pending litigations on various counts relating to Excise Duty and Service Tax involving demand of Rs. 1,062 million. These demands challenged the basis of valuation of the Company’s products and denial of the ‘Central Value Added Tax’ (“CENVAT”) on inputs. The details of the demands involving more than Rs. 50 million are as follows:

Excise demands amounting to Rs 193 million mainly relating to denial of CENVAT credit on various technical grounds, where the Company had won the appeals, have been further contested by the excise authorities.

The Excise authorities had denied CENVAT credit of Rs. 143 million in earlier years, on certain accessories supplied with the vehicles and on other technical grounds. The matter is being contested by the Company before the appellate authorities. On the basis of judicial precedents and favorable decisions in Company’s own earlier cases, the Company believes that it has a strong case.

 

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The Excise Authorities have raised a demand of Rs 371 million. This is a Classification Dispute wherein the Department had alleged that certain models of company’s commercial vehicle- Tippers will attract NCCD (National Calamity Cess Duty) of 1% on the ground that there are similarities between Tippers & Dumpers. The company is contending that there are many technical differences between the two models. The appeal is pending before the Tribunal.

The Excise Authorities have raised demand of Rs. 103 million in HVAL denying the CENVAT credit of Rs. 52 million availed on inputs sold to Tata Motors Ltd. and demanding consequential penalty of an equal amount. HVAL is contending that CENVAT credit cannot be denied on the inputs sold to Tata Motors as duty has been paid on the final product, i.e. Axles using the subject inputs on the assessable value including the materials consumed.

The total amount of Service tax demand, included in above, is Rs. 50 million in relation to Tata Motor Finance, a division of Tata Motors Limited and Tata Technologies Ltd.

Sales tax

The total sales tax demands (including interest and penalty), which are being contested by the Company amount to Rs. 3,138 million as of March 31, 2008. The details of the demands involving more than Rs. 50 million are as follows:

The sales tax authorities in certain states have raised disputes totaling up to Rs. 529 million as of March 31, 2008, treating the stock transfers of vehicles from the Company’s manufacturing plants to sales offices and the transfers between two sales offices as sales liable for levy of sales tax.

Under a notification issued by the State Government of Rajasthan, vehicles having gross weight of more than 8,000 kgs were classified for certain tax rate. The sales tax authorities had raised demand of Rs. 121 million on the ground that the Company’s bare chassis weight being less than 8,000 kgs, it does not fall under relevant tax entry. The gross vehicle weight of the vehicle was not considered by the sales tax authorities.

Sales tax demand aggregating Rs. 194 million as of March 31, 2008, were raised by the sales tax authorities on interest/hire premium charges and other issues relating to the use of Trademarks and denial of resale claims on the vehicles sold under hire purchase. The interest/ hire premium charges are in the nature of Service charges and hence should not be liable to sales tax.

Under the notification issued by the Sales Tax authority, Jharkhand, the rate of sales tax was reduced to 4%. Consequently, the interstate sales tax also became 4% and since it was not concessional rate against a Declaration Form, the collection of Declaration Forms was not mandatory. However the Jharkhand Sales tax authorities raised the demand aggregating Rs. 909 million, on the ground that Declaration Forms were not collected. Based on the above notification, the company has a strong case. The notification was valid until May 10, 2002. In addition to the above issue, the Sales tax authorities have raised demands aggregating Rs. 74 Million as of March, 31, 2008, for Non-Submission of Declaration Forms at various locations. The Company is confident of getting relief in appeal on submission of Forms.

Sales Tax demand aggregating Rs 626 million as of March 31,2008 has been raised by Jamshedpur Sales Tax authorities disallowing the purchase of raw material from Jharkhand vendors at concessional rate of 2% in case the final product is stock transferred for sale outside the state. The Sales Tax Department is relying on a notification issued by the Jharkhand Government which is not applicable on the Company’s transactions.

Sales tax demand aggregating Rs. 81 million as of March 31, 2008, has been raised by the Jaipur sales tax authorities. Certain vehicles sold by the Company to Indian Infrastructure equipment Ltd (IIEL) against the Declaration Form have been rejected by the Department on the ground that the Notification issued by the State Government of Rajasthan under which IIEL has been granted concession is in dispute. The original demand has been raised on IIEL and hence demand on the company is not sustainable as such demand cannot be raised on two assesses on the same issue. The company has filed the rectification application before the Assessing authority which is pending.

 

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Enhanced rate of sales tax were demanded by Sales Tax authorities aggregating Rs 51 million on vehicles sold to customers but lying in the yard undelivered alleging that the sale is not complete & charging sales tax at higher rate on actual subsequent dispatches. Under the Sale of Goods Act, the sale is complete when the goods are appropriated or identified for a particular customer and title of goods passes to the buyer by raising invoices. The Company had won the appeals which have been further contested by the Sales tax authorities.

As per the then Bihar Industrial Policy, Tata Cummins Ltd was entitled to sales tax exemption given for new industrial units. Such exemption was denied by the Sales Tax Department. Hon’ble Supreme Court had allowed the sales tax exemption on an appeal filed by Tata Cummins Ltd. The State Government in the modification petition had sought clarification whether the exemption applied also to Additional sales tax and surcharge thereon. The Company is liable for Rs. 92 million on account of Additional Sales Tax & Rs 71 million surcharge thereon.

In respect of matters pertaining to the erstwhile Tata Finance Ltd now merged with Tata Motors Limited, Sales Tax authorities at Bangalore, pursuant to a Karnataka High Court decision, passed revision orders demanding tax of Rs. 61 million on hire purchase and lease transactions, which were accepted as exempt during regular assessments. The Supreme Court has allowed the appeal and set aside the order of the Karnataka High Court. Applications have been filed to the sales tax authority along with a copy of the Supreme Court Order for passing of a rectification order dropping the demand

Other taxes and dues

Other amounts for which the Company may contingently be liable aggregating Rs. 1,208 million as on March 31, 2008 include the following cases involving more than Rs. 50 million:

The municipal authorities in certain states levy octroi duty (a local indirect tax) on goods brought inside the municipal limits at rates based on the classification of goods. Demands aggregating Rs. 496 million have been raised demanding higher octroi duties on account of classification disputes relating to components purchased for the manufacture of vehicles and on retrospective demand of octroi at enhanced rate. The dispute relating to classification is presently pending before the Supreme Court and the other dispute is pending before the Bombay High Court on remand by the Supreme Court.

The motor vehicles taxation authorities have demanded Road Tax aggregating Rs. 85 million as of March 31, 2008, on vehicles stored inside the Company’s manufacturing plants. The Company has filed appeal before the Supreme Court in the matter, which is pending for disposal. The contention of the Company is that the vehicles are subjected to tax when put on the road and the law does not have a provision for double taxation. Moreover, the definition of “Dealer” under the said Act does not include a manufacturer of the vehicles.

As of March 31, 2008, Property Tax amounting to Rs. 124 million has been demanded by Pimpri Chinchwad Municipal Corporation (PCMC) on vacant land in possession of the Company. The Company filed an SLP (Special Leave Petition) before the Supreme Court against an unfavorable decision of the Bombay High Court. The Supreme Court has disposed of the SLP and remanded the matter back to PCMC for fresh adjudication.

Regional Provident Fund Commissioner (RPFC) at Jamshedpur had demanded payment towards Provident Fund amounting to Rs. 153 million treating the convoy drivers appointed by Telco Transporters Convoy Driver’s Association (TTCA) as employees of the Company. The Company filed a Writ Petition in the High Court against the order, which was admitted.

 

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Other claims

There are other claims against the Company, majority of which pertain to motor accident claims (involving third parties getting affected in accidents while the Company’s vehicles were being transferred from the Company’s manufacturing plants to regional sales offices or from one sales office to the other) and consumer complaints. Some of the cases also relate to replacement of parts of vehicles and/or compensation for deficiency in the services by the Company or its dealers.

This excerpt taken from the TTM 20-F filed Sep 27, 2006.

Litigation

Tata Motors is involved in legal proceedings in various states in India, both as plaintiff and as defendant There are claims which management does not believe to be of material nature, other than those described below.

Income Tax

The Company has ongoing disputes with Income tax authorities relating to tax treatment of certain items. These mainly include disallowed expenses, tax treatment of certain expenses claimed by the Company as deductions, and the computation of, or eligibility of, certain tax incentives or allowances. Some of the disputes relate to the year in which the tax consequences of financial transactions were recognized and in the event these disputes are not resolved in the Company’s favour, the tax consequences can be reflected in the tax year allowed by the income tax authorities and are, therefore, timing differences.

Most of these disputes/disallowances, being repetitive in nature, have been raised by the department consistently in most of the years.

The Company has a right of appeal to the High Court or Supreme Court against adverse initial assessments by the appellate authorities for matters involving question of law. The income tax authorities have similar rights of appeal.

As of March 31, 2006, the income tax demands by the Income Tax authorities aggregated Rs. 701 million, which are being contested by the Company on appeal in respect of which the company expects

 

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TATA MOTORS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

to succeed based on decision in earlier assessment years. There are matters aggregating Rs. 599 million in respect of which the Company has won the appeals that have been further contested by the income tax department before the higher appellate authorities. There are other matter/disputes pending in appeal aggregating Rs. 1,536 million, which includes Rs. 1,309 million pertaining to erstwhile Tata Finance Limited.

Excise Duty

As on March 31, 2006, there were pending litigations on various counts involving demand of Rs. 479 million. These demands challenged the basis of valuation of the Company’s products and denial of the ‘Central value added tax’ (“CENVAT”) on inputs. The details of the demands involving more than Rs. 50 million are as follows:

Included in Rs. 479 million are excise demands of Rs. 171 million, raised by the excise authorities, where the Company had won the appeals that have been further contested by the excise authorities.

The Excise authorities have denied CENVAT credit of Rs. 161 million on certain accessories supplied with the vehicles and on other technical grounds. The matter is being contested by the Company before the appellate authorities. On the basis of judicial precedence and favorable decision in the Company’s prior case, the matter is likely to be decided in favour of the Company.

Sales tax

The total sales tax demands (including interest and penalty), which are being contested by the Company amount to Rs. 1,907 million as at March 31, 2006. The details of the demands involving more than Rs. 50 million are as follows:

The sales tax authorities have demanded sales tax aggregating Rs. 184 million on export sales on the ground that these exports are not direct exports and are made through the Company’s agent Tata International Limited. Under Sales tax law, exports sale made either directly or through an agent are exempt from tax. The company is confident of getting the relief in Appeal.

Under the sales tax laws applicable in different States of India, different rates of sales tax are applicable on sales of vehicles. The sales tax authorities in certain states have raised disputes totaling up to Rs. 193 million treating the stock transfers of vehicles from the Company’s works to sales offices and the transfers between two sales offices as sales liable for levy of sales tax.

Under the Notification issued by the State Government of Rajasthan, vehicles having gross weight of more than 8,000 kgs were classified for certain tax rate. The sales tax authorities have raised demand of Rs. 121 million on the ground that our bare chassis weight being less than 8,000 kgs do not fall under relevant tax entry. The Gross Vehicle Weight of the vehicle was not considered by the sales tax authorities.

Enhanced rate of sales tax were demanded by the sales tax authorities aggregating Rs. 66 million on vehicles sold to the customers but lying in the yard undelivered alleging that the sale is not complete and charging sales tax at higher rate on actual subsequent despatches. Under the Sale of Goods Act, the sale is complete when the goods are appropriated or identified for a particular customer and title of goods passes to the buyer by raising Invoices. The Company is confident of getting relief in appeal.

 

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TATA MOTORS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

Sales tax demand aggregating Rs. 183 million were raised by the sales tax authorities on interest/hire premium charges and other issues relating to use of Trade Marks and denial of resale claims on the vehicles sold under hire purchase. Under the sales tax laws, such interest charges collected from the customer are not eligible to sales tax.

Under the notification issued by the Sales Tax authority, Jharkhand, the rate of tax was reduced to 4%, and therefore the submission of concessional Form was not mandatory for a certain period of time till the year 2002. Sales tax authorities have demanded tax Rs. 739 million for failure to submit the declaration forms pertaining to the period prior to 2002. The Company is confident of getting relief in appeal.

The sales tax authorities at Kolkata raised demand of Rs. 104.8 million by making a best judgement assessment. The company has filed appeal against the order before the appellate authorities. The company is confident of getting relief in appeal.

Other taxes and dues

Other amounts for which the Company may contingently be liable for amounts aggregating Rs. 836 million include the following cases involving more than Rs. 50 million:

The municipal authorities in certain states levy octroi duty (a local indirect tax) on goods brought inside the municipal limits at rates based on the classification of goods. A demand of Rs. 534 million is currently pending before the High court in connection with the higher octroi duties claimed on account of classification disputes relating to components purchased for the manufacture of vehicles. The Company based on the opinion from the legal counsel is of the view that the probability of the claim succeeding is remote.

The motor vehicles authorities have demanded Road tax aggregating Rs. 93 million on vehicles stored inside the works. The Company is confident of getting relief in appeal since vehicles are subjected to tax when put on road and the law does not have a provision for double taxation.

Other claims

There is a pending counter claim for approximately £4.4 million (Rs. 343 million), by Motor Vehicles Industries Limited, in connection with legal proceedings brought by Tata Motors and Tata International Limited, Mumbai in respect of alleged breaches of a distributorship arrangement. Leeds District Registry has passed order in favour of the Company and has initiated proceedings to wind down Motor Vehicles Industries Limited.

Apart from the above, there are claims against the Company below Rs. 50 million, the majority of cases pertain to motor accident claims (involving vehicles that were damaged in accidents while being transferred from the Company’s manufacturing plants to regional sales offices) and consumer complaints. Some of these cases relate to replacement of parts of vehicles and/or compensation for deficiency in the services by the Company or its dealers. Management believes that none of these claims or actions individually or in the aggregate will have a material adverse effect on the business or financial condition or results of operations.

 

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TATA MOTORS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

This excerpt taken from the TTM 20-F filed Sep 28, 2005.

Litigation

 

Tata Motors is involved in legal proceedings in various states in India, both as plaintiff and as defendant. In respect of claims against the Company below Rs. 50 million, the majority of cases pertain to motor accident claims (involving vehicles that were damaged in accidents while being transferred from the Company’s manufacturing plants to regional sales offices) and consumer complaints. Some of these cases relate to replacement of parts of vehicles and/or compensation for deficiency in the services by the Company or its dealers. Management believes that none of these claims or actions individually or in the aggregate will have a material adverse effect on the business or financial condition or results of operations.

 

The Company is also defending other claims that are above Rs. 50 million in value but which management does not believe to be of material nature, other than those claim described below.

 

Income Tax

 

The Company has ongoing disputes with Income tax authorities relating to tax treatment of certain items. These mainly include disallowed expenses, tax treatment of certain expenses claimed by the Company as deductions, and the computation of, or eligibility of, certain tax incentives or allowances. Some of the disputes relate to the year in which the tax consequences of financial transactions were recognized and in the event these disputes are not resolved in the Company’s favour, the tax consequences can be reflected in the tax year allowed by the income tax authorities and are, therefore, timing differences.

 

Most of these disputes/disallowances, being repetitive in nature, have been raised by the department consistently in most of the years.

 

The Company has a right of appeal to the High Court or Supreme Court against adverse initial assessments by the appellate authorities for matters involving question of law. The income tax authorities have similar rights of appeal.

 

As of March 31, 2005, the income tax liabilities on the deductions disallowed by the Income Tax authorities aggregated Rs.315 million, which are being contested by the Company on appeal. There are matters aggregating Rs. 651 million in respect of which the Company has won the appeals that have been further contested by the income tax department before the higher appellate authorities. There are other matter/disputes pending in appeal aggregating Rs. 190 million.

 

Excise Duty

 

As on March 31, 2005, there were pending litigations on various counts involving demand of Rs. 1,231 million. These demands were raised challenging the basis of valuation of the Company’s products and denial of the ‘Central value added tax’ (“CENVAT”) on inputs. The details of the demands involving more than Rs. 50 million are as follows:

 

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Included in Rs. 1,231 million are excise demands of Rs. 204 million, raised by the excise authorities, where the Company had won the appeals that have been further contested by the excise authorities.

 

A demand of excise duty and penalty of Rs. 847 million have been made by the excise authorities denying the CENVAT credit on inputs relating to transfer of business to its subsidiaries. The case is pending before the Tribunal. The Company has been advised that on the basis of legal position and judicial precedence, the case is likely to be decided in favor of the Company.

 

The Excise authorities have denied CENVAT credit of Rs. 54 million on certain accessories supplied with the vehicles. The matter is being contested by the Company before the appellate authorities. On the basis of judicial precedence and favorable decision in the Company’s prior case, the matter is likely to be decided in favour of the Company.

 

Sales tax

 

The total sales tax demands (including interest and penalty), which are being contested by the Company amount to Rs. 3,842 million as at March 31, 2005. The details of the demands involving more than Rs 50 million are as follows:

 

The sales tax authorities have demanded sales tax aggregating Rs. 1,815 million on export sales on the ground that these exports are not direct exports and are made through its agent Tata International Limited. Under Sales tax law, exports sale made either directly or through an agent are exempt from tax. The company is confident of getting the relief in Appeal.

 

Tata Cummins Limited (“TCL”) is an affiliate of Tata Motors, manufactures internal combustion engines and sells them principally to Tata Motors Ltd. Sales tax authorities have denied exemption of Rs. 1,218 million claimed by TCL from sales tax on finished products and from the purchase tax on raw materials, being incentives given by a state government to new industries set up in specified area, which TCL had passed on to Tata Motors. TCL’s claim has been upheld by the High Court in August 2003. An appeal filed by the state government against this decision is pending before the Supreme Court.

 

Under the sales tax laws applicable in different States of India, different rates of sales tax are applicable on sales of vehicles. The sales tax authorities in certain states have raised disputes totaling up to Rs. 334 million treating the stock transfers of vehicles from the Company’s works to sales offices and the transfers between two sales offices as sales liable for levy of sales tax.

 

Under the Notification issued by the State Government of Rajasthan, vehicles having gross weight of more than 8,000 kgs were classified for certain tax rate. The Jaipur sales tax authorities have raised demand of Rs. 121 million on the ground that our bare chassis weight being less than 8,000 kgs do not fall under relevant tax entry. The Gross Vehicle Weight of the vehicle was not considered by the sales tax authorities.

 

Enhanced rate of sales tax were demanded by the sales tax authorities aggregating Rs. 66 million on vehicles sold to the customers but lying in the yard undelivered alleging that the sale is not complete. Under the Sale of Goods Act, the sale is complete when the goods are appropriated or identified for a particular customer and title of goods passes to the buyer by raising Invoices. The Company is confident of getting relief in appeal.

 

Sales tax demand aggregating Rs. 78 million were raised by the sales tax authorities on interest/hire premium charges on the vehicles sold under hire purchase. Under the sales tax laws, such interest charges collected from the customer are not eligible to sales tax.

 

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Other taxes and dues

 

Other amounts for which the Company may contingently be liable for amounts aggregating Rs. 876 million include the following:

 

The municipal authorities in certain states levy octroi duty (a local indirect tax) on goods brought inside the municipal limits at rates based on the classification of goods. A demand of Rs. 534 million is currently pending before the High court in connection with the higher octroi duties claimed on account of classification disputes relating to components purchased for the manufacture of vehicles. The Company based on the opinion from the legal counsel obtained in September 2001, is of the view that the probability of the claim succeeding is remote.

 

The motor vehicles authorities have demanded Road tax aggregating Rs. 77 million on vehicles stored inside the works. The Company is confident of getting relief in appeal since vehicles are subjected to tax when put on road and the law does not have a provision for double taxation.

 

Other claims

 

There is a pending counter claim for approximately £4.4 million (Rs. 364.7 million), by Motor Vehicles Industries Limited, in connection with legal proceedings brought by Tata Motors and Tata International Limited, Mumbai in respect of alleged breaches of a distributorship arrangement. Leeds District Registry has passed order in favour of the Company and has initiated proceedings to wind down Motor Vehicles Industries Limited.

 

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