Business Law Semster Question &Answer-II

8/14/2019 Business Law Semster Question &Answer-II

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LOYOLA COLLEGE

DEPARTMENT OF COMMERCEFOURTH SEMISTER- APRIL 2008CO 4503 BUSINESS LAW & VAT

PROF.J.ARULSURESHM.COM.,M.PHIL.PGDCA.,MBA.,PGDCIL.

SECTION A (10X 2 = 20)

1) What are Specific goods?

These are the goods which are identified and agreed upon at the time acontract of sale is made as, for example, a specified watch, dog or horse. Goods are,however, not specific merely because the source of supply is identified, eg., 500quintals from 1,000 quintals on board.

2) What is a Way Bill?

Goods carried by air must be covered by an air way bill or an airconsignment note. Every carrier of goods has the right to require the consignor tomake out and hand over to him a document called an air way bill.

3) Who is the nominee of an insurance of policy?

The holder of a policy of life insurance on his own life may nominate theperson to whom the money secured by the policy is to be paid in the event of hisdeath. This may be done at the time before the policy matures for payment. Theperson so nominated in the policy is called the nominee.

4) What do understand by Uberrimae Fidei ?

The general rule in contract is that each party to the contract is entitled tomake the best bargain he can. But there are certain cases where the knowledge of facts is almost exclusively on one side. In such cases, the contract is vitiated by a non-disclosure of any material fact. Such contracts are known as contracts of UberrimaeFidei.


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5) Who is a Common Carrier?

A common carrier is one who undertakes for hire to transport from oneplace to another, either by land, sea or air, the goods of anyone who chooses toemploy him.6) What is the extent of Indian Railways Liability?

Whether the goods are carried at owners risk rate or railway risk rate, theliability of the railway administration for any loss of goods is within a period of sevendays after the termination of transit is that of a bailee under Sec 151, 152 and 161 of the Indian Contract Act, 1872.

7) Who is a consumer?

Consumer means any person, who buys any good for a consideration, forwhich has been paid or promised or partly paid or partly promised, or under anysystem of deferred payment.

8) What is a grievance for a consumer?

9) What is meant by cascading effect?

Cascading Effect is a minor changes or damage to a magnet over time thateventually result in a complete breakdown of the magnet's lifting capabilities.

10) What are the objectives of VAT?

It is assumed that the objective of value added Tax is to replace a complexsales tax regime with a simpler tax a percentage imposed on all goods sold.

SECTION B: (5X8=40)

11) Is a Hire purchase a sale? Give reasons.

12) Distinguish between Conditions and Warrantees as per the Sales of GoodsAct.

Condition:

Obligation which goes so directly to the substance of the contract, or in other words,is so essential to its very nature, that its non-performance may fairly be considered bythe other party as a substantial failure to perform the contract at all.


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Warranty:

Obligations which, though it must be performed is not so vital that a failure toperform it goes to the substance of the contract.

Difference as to value:

A Condition is a stipulation which is essential to the main purpose of the contract. Awarranty is a stipulation which is collateral to the main purpose of the contract

Difference as to breach:

If there is a breach of a condition, the aggrieved party can repudiate the contract of sale ; In case of breach of a warranty, the aggrieved party can claim damages only.

Difference as to treatment:

A breach of a condition may be treated as warranty. This would happen where theaggrieved party is contented with damages only. A breach of warranty, however,cannot be treated as a breach of a condition.

13)..

14) Who is a common carrier? What are his duties?

A common carrier is one who undertakes for hire to transport from oneplace to another, either by land, sea or air, the goods of anyone who chooses toemploy him. The Carriers Act, 1865 defines a common carrier as any individual, firmor company (other than the government) who or which transports goods as a businessfor money over land or inland waterways, without discrimination between differentconsignors.

Duties of Common Carrier:

1) Duty to carry goods: A common carrier is bound to carry for hire goods of allpersons who choose to employ him for the carriage of goods. He is however notbound to carry the goods if-

(i) his vehicle is already full:(ii) the consignor is not willing to pay reasonable chargers for the carriage of

goods:(iii) the goods are such as he is not accustomed to carry or cannot carry:(iv) the goods are to be carried over a route which is not his regular route:(v) the goods are such as subject to him to extraordinary risk:(vi) the goods are not properly packed:


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(vii) the consignor refuses to disclose the nature of the goods offered for carriage.

2) Duty not to deviate: He must carry the goods by his customary route and must notdeviate from it unnecessarily. He must also take all reasonable precaution for thesafe carriage of goods.

3) Duty to deliver the goods: Upon the completion of the transit, he must deliver thegoods as instructed by the consignor at the agreed time , if any, or within areasonable time. If the consignee refuses to take the delivery of the goods whentendered to him, he ceases to be liable as a common carrier, his own liability inthat case is that of bailee.

4) Duty as insurer of goods: At common Law he is an insurer of the goods in thesense that he warrants to carry the goods safely and securely.

15) What is an Average Clause in a policy? With an example illustrate it.

The subject-matter of fire insurance, i.e., property or goods, may be over-insured or under-insured. Over-insurance is automatically checked. In case of loss,the insurer is liable to pay the actual amount of loss, subject to the maximum amountfor which the policy is taken. For example, where a building worth Rs 5,00,000 isinsured for Rs 8,00,000 and is completely destroyed by fire, the insurer is liable topay only Rs 5,00,000.

Where the fire causes only a partial loss to the property insured, the assuredis entitled to recover the full amount of loss provided that amount is recovered by thepolicy. For Example, where a building worth Rs 2,00,000 is insured for Rs 1,00,000and half of it is covered by the amount of the policy.

To save the premium, people generally under-insure their property. it israre in case of fire to property that the whole of it would be completely destroyed.Thus whereas the insurer would fix a relatively small premium (because of under-insurance) he would have to pay the full extent of loss in case of partial loss. Toprotect themselves against under-insurance, the insurer usually insert a subject to theaverage clause in the fire policy.

Example: property worth Rs. 1,00,000 is insured for Rs 80,000. The policycontains an average clause. If half the property is burnt down, the assured can recoveronly Rs 40,000. This is worked out as follows:

Value of policy_______ x Actual LossSum to be recovered = Full value of subject matter

_80,000_ x 50,000 = Rs 40,000.1,00,000


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SECTION C: (2X20=40)

19) Discuss the rights of an unpaid seller?An unpaid seller has two-fold rights. They are

A. Rights against goodsB. Rights against the buyer personally

Rights of an a Unpaid Seller against GoodsThis right is studied under the following two heads:

Where the ownership of the goods is transferred to the buyer. Where the ownership of the goods is not transferred to the buyer.

1) Rights of paid seller where the Ownership of the Goods is not transferred to the BuyerAccording to Sec. 46 of the Act, the unpaid seller has three distinct rights even

though property in the goods is transferred to the buyer. These rights are:i. Right of Lien

The word lien means to retain possession of. According to Sec. 47 (1) Theunpaid seller of goods who is in possession of them is entitled to retain possession of them until payment or tender of the price in the following cases, namely:(a) Where the goods have been sold without any stipulation as to credit;(b) Where the goods have been sold on credit, but the term of credit has expired;(c) Where the buyer becomes insolvent

The right of lien is one of the unpaid sellers rights against the goods, theproperty in which is transferred to the buyer. It is the unpaid sellers right to retain thegoods until the whole of the price is paid or tendered. Lien can be exercised only for non-payment of the price, and not for any other charges due against the buyer. For instance,the seller cannot claim lien for godown charges for storing the goods in exercise of hislien for the price. The lien of an unpaid sellers particular lien, it is a personal right whichcan be exercised only by him and not by his assignees or his creditors. The unpaid sellermay exercise his lien notwithstanding that he is in possession of the goods as agent orbailee for the buyer. The right of lien is linked with the possession of the goods and notwith the title of the goods.Rules Relating to Lien

(i) The seller may exercise his right of lien notwithstanding that he is inpossession of the goods as agent or bailee for the buyer.

(ii) The lien depends on actual possession of goods and not on title.(iii)Unpaid seller can exercise the lien only for the price and not for any other

charges.(iv) Where an unpaid seller has made part delivery of the goods, he may

exercise his right of lien on the remainder.(v) The right of lien is not lost, if the seller has obtained a decree for the price

of goods.


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Termination of lien . The unpaid seller of goods loses his lien on the goodswhen-

(a) he delivers the goods to a carrier or other bailee for the purpose of transmission to the buyer, without reserving the right of disposal of the goods;

(b) the buyer or his agent lawfully obtains possession of the goods as buyer;(c) he waives his right of lien on the goods. He may do this either expressly or

impliedly.

ii. Right if stoppage in transitThe right of stoppage in transit is a right of stopping the goods in transit after the

unpaid seller has parted with the possession of the goods. He has the further right of resuming possession of the goods as long as they are in the course of transit, andretaining possession until payment or tender of the price. It is available to the unpaidseller-

(1) When the buyer becomes insolvent; and(2) When the goods are in transit.

Duration of transit . Transit is an intermediate stage. Goods are in deemed to bein course of transit from the time they are delivered to a carrier, or other bailee for thepurpose of transmission to the buyer, until the buyer or his agent takes delivery of themfrom such carrier or other bailee.

When transit comes to an end ?Transit comes to an end:(1) If the buyer or his agent in that behalf obtains delivery of the goods before

they arrive at the appointed destination.(2) If, after the arrival of the goods at the appointed destination, the carrier or

other bailee acknowledges to the buyer or his agent that he holds the goods on his behalf.(3) Where the carrier or other bailee wrongfully refuses to deliver the goods to

the buyer or his in that behalf.(4) Where part delivery of the goods has been made to the buyer or his agent in

that behalf, the remainder of the goods may be stopped in transit.

How stoppage in transit is affected?The unpaid seller may exercise his right of stoppage in transit either-(1) by taking actual possession of the goods, or(2) by giving notice of his claim to the carrier or other bailee in whose

possession of the goods are.Notice of stopping the goods in transit may be given either-(1) to the person in actual possession of the goods, or(2) to his principal.


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20) Explain the salient principles of governing a contract of insurance?

Insurance contracts are based on certain fundamental principles. Theseprinciples are common to all types of insurance-life, fire, marine and miscellaneousinsurance contracts, with the exception of the principles of indemnity which is notapplicable in case of life insurance contract because of it being a contingent contract.These principles are-1. Utmost good faith Insurance contracts are based upon mutual trust and

confidence between the insurer and insured. Utmost good faith requires each partyto tell the other the truth, the whole truth and nothing but the truth it means thatthe parties to the contract must make a full disclosure of all the material facts andinformation relating to the contract. A material fact is a fact which would influence the mind of a prudent underwriter in deciding whether to accept a risk

for insurance and on what terms .2. Insurable interest For an insurance contract to be valid, the insured should

have an insurable interest in the subject matter of insurance. The insurable interestis the pecuniary interest whereby the insured is benefited by the existence of thesubject matter and is prejudiced by the death or damage of the subject matter. Thesubject matter of insurance may be a property or life or legal liability. Theinsurable interest to be valid must be recognized as such under the law inoperation in the country.

3. Indemnity The term indemnity means making up the loss. Literally it meanssecurity against damage or loss or compensation for loss. All contracts of insurance except life and personal accident and sickness insurance are contracts of indemnity. According to this principle, the insured should be placed in the samefinancial position as far as possible after a loss as he occupied immediately beforeits occurrence. The insured will neither gain nor lose. In other words the insurerwill pay only the actual loss suffered by the insured i.e. the insurer will not paythe assured amount but only the actual loss suffered by the insured.

4. Contribution Contribution is also a corollary of the principle of indemnity.This principle applies where there is more than one policy covering the samesubject matter against the same peril for the same period and for the same insured.In such cases the insured can make claims under all policies with differentinsurers and recover pro-rata from each. Contribution is a right of an insurer whohas paid a loss under a policy to recover a proportionate amount from otherinsurers who are liable for the same loss.

5. Subrogation This principle is just a corollary of or supplement to the principleof indemnity. Subrogation means inheriting the rights available to an individual.The insurer after making good the loss is entitled to all the rights of the insuredagainst third party as regards the subject matter of insurance. Thus when the rightof the insured over the subject matter of insurance is transferred to the insurer bythe way of this inheritance, it is known as The Doctrine of Subrogation.


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6. Causa Proxima - The maxim causa proxima non remota spectature means thatproximate (nearest) cause and not the remote one is to be taken note of at the timeof determining the liability of insurer. The insurer is not liable for remote causeeven if it is one of the insured perils. Therefore, if the immediate cause is aninsured risk for the occurrence of which the insured is to be paid, the insurer isliable to make the payment of loss under the policy, otherwise not.

7. Mitigation - This principle emphasizes the duty of the insured to take all possiblesteps to minimize the loss or damage to the property covered by the insurancepolicy in case the mishap happens. This principle aims at making sure that theinsured behaves as a prudent person and does not become careless after taking apolicy to cover any risk.


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FOURTH SEMISTER- APRIL 2009CO 4503 BUSINESS LAW & VAT

SECTION A: (10X 2 = 20)

1) Give the meaning of Agreement to sell?

According to section 4(3) where the transfer of the property in the goods isto take at a future time or subject to some conditions thereafter to be fulfilled, the contractis called an agreement to sell.

2) What is Advalorem duty?

Advalorem rate of duty is entirely related to and is dependent on the value of excisable goods. Advalorem duty possesses elasticity, resulting in increase in governmentrevenue whenever costs and prices move up. Moreover advalorem duty adheres to thewell known canon of taxation.

3) Explain Condition with an example?

Fletcher Moulton L.J. in Wallis v. Pratt, (1910) 2 K.B. 1012 defined as anobligation which goes so directly to the substance of the contract, or in other words, isso essential to its very nature, that its non-performance may fairly be considered by theother party as a substantial failure to perform the contract at all.Example. By a charter party (a contract by which a ship is hired for the carriage of goods), it was agreed that ship M of 420 tons now in the port of Amsterdam shouldproceed direct to Newport to load a cargo. In fact at the time of contract the ship was notin the port of Amsterdam and when the ship reached Newport, the charter refused to load.Held, the words now in the port of Amsterdam amounted to a condition, the breach of which entitled the charterer to repudiate the contract [Behn v. Burness, (1863)].

4) What is an Auction sale?

A sale by auction is public sale where different intending buyers try to outbideach other. The goods are ultimately sold to the highest bidder. The auctioneer who sellsthe goods by auction is an agent of the seller, i.e., the owner. His relationship with theowner of the goods is governed by the general principles of the law relating to agency.

5) Who is a casual trader?


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Trader in relation to any goods means a person who sells or distributes any

goods for sale. It also includes the manufacturer of such goods. Where such goods aresold or distributed in package from, trader includes the packer thereof.

6) What is Causa Proxima?

The maxim causa proxima non remota spectature means that proximate(nearest) cause and not the remote one is to be taken note of at the time of determiningthe liability of insurer. The insurer is not liable for remote cause even if it is one of theinsured perils.

7) List the various elements in a sale under TNGST Act?

Transfer of property A transfer otherwise than in pursuance of a contract of property in any goods for cash, deferred payment or other valuable consideration.

1. Work contract A transfer of property in goods involved in the execution of aworks contract.

2. Hire purchase A delivery of goods on hire purchase or any system of paymentby installments.

3. Right to use A transfer of rights to use any goods for any purpose for cash,deferred payment or other valuable consideration.

4. Supply of goods by unincorporated association - Supply of goods by anunincorporated association or body of persons to a member thereof for cash,deferred payment or other valuable consideration.

5. Supply of food as part of any service A supply by way of or as part of anyservice or in any other manner what so ever, of goods, being food or any otherarticle for human consumption or any drink where such supply or service is forcash, deferred payment or other valuable consideration.

8) What is a turnover under CST Act?

Turnover used in relation to any dealer liable to tax under CST Act means theaggregate of the sale prices received and receivable by him in respect of sale of anygoods in the course of interstate trade or commerce made during any prescribed period.

9) Define excisable goods?

Excisable goods means goods specified in the First Schedule to the central ExciseTariff Act, 1985 as being subject to a duty of excise and include salt.

Goods that is not excisable1. Goods not mentioned in the schedules to the Tariff Act.2. Goods though mentioned in the schedules to the Tariff Act, are such that they

cannot be moved or marketed.


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10) What is group insurance?

Group insurance plans are meant to provide life insurance protection to group of people. The group may be:

(i) Employer- employee group;(ii) Labor union group;(iii) Creditor Debtor group; or(iv) Voluntary group like that of teachers, doctors or lawyers.

SECTION-B (5X8=40)

11) Eluminate the rules to delivery of goods under sale of goods act?

1. Mode of delivery (sec.33) - Delivery should have the effect of putting thegoods in the possession of the buyer or his duly authorized agent. Delivery of goods may be (1) actual, (2) constructive, or (3) symbolic.

2. Delivery and payment- concurrent conditions. Delivery of goods andpayment of the price must be according to the terms of the contract, delivery

and payment are concurrent conditions, the seller shall be ready and willing togive possession of goods to the buyer in exchange for the price and vice versa.

3. Effect of part delivery - A delivery of part of the goods in progress of thedelivery of the whole has the same effect, for the purpose of passing theproperty in such goods, as a delivery of the whole.

4. Buyer to apply for delivery - Apart from any excess contract, the seller of goods is not bound to deliver them until the buyer applies for delivery(sec.35). Unless otherwise agreed, the buyer has no cause of action against theseller if he does not apply for delivery.

5. Place of delivery - Where the place at which the delivery of goods is to takeplace is specified in the contract, the goods must be delivered at that placeduring business hours on a working day.

6. Time of delivery - Where under the contract of sale the seller is bound to sendthe goods to the buyer, but no time for sending them is fixed, the seller isbound to send them within a reasonable time [Sec.36(4)]


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7. Goods in possession of third party - When at the time of sale the goods arewith a third party, there is no delivery by the seller to the buyer until suchthird party acknowledges to the buyer that he holds them on his behalf.

8. Cost of delivery - Unless otherwise agreed, all expenses of and incidental tomaking of delivery are borne by the seller, but all expenses of and incidentalto obtaining of delivery are borne by the buyer [Sec.36 (5)]

9. Delivery of wrong quantity. (Sec. 37) -The delivery of the quantity of goodscontracted for should be strictly according to the terms of the quantity of goods contracted for should be strictly according to the terms of the contract.A defective delivery entitles the buyer to reject the goods. The three differentcontingencies which may arise in case of a defective delivery, i.e., delivery of wrong quantity, are:

(1) Delivery of goods less than contracted for: Where the seller delivers to thebuyer a quantity of goods less than he contracted to sell the buyer may rejectthe goods. If he accepts them, he shall pay for them at the correct rate [Sec.37 (1)]

(2) Delivery of goods in excess of quantity contracted for: Where the sellerdelivers to the buyer a quantity of goods larger than he contracted to sell, thebuyer may either accept or reject the whole quantity.

(3) Delivery of goods contracted for mixed with other goods: Where the sellerdelivers to the buyer the goods he contracted to sell mixed with goods of adifferent description.

10. Installment deliveries (Sec. 38) - Unless otherwise agreed, the seller is notentitled to deliver the goods by installments and if he does so, the buyer is notbound to accept the goods [Sec. 38(1)].

11. Delivery to a carrier or wharfinger (Sec. 39) - Where in pursuance of acontract of sale, goods are delivered to a carrier for the purpose of transmission to the buyer or to a wharfinger for safe custody, delivery of goods to them is prima facie deemed to be a delivery of the goods to the buyer[Sec. 39(1)].

12) Distinguish between Sale and agreement to sell?

1. Transfer of property - In a sale, the property in the goods passes from the sellerto the buyer immediately so that the seller is no more the owner of the goods sold.In the sense, a sale is an executed contract and an agreement to sell is anexecutory contract.


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2. Type of goods -A sale can only be in case of existing and specific goods only. Anagreement to sell is mostly in case of future and contingent goods although insome cases it may refer to unascertained existing goods.

3. Risk of loss -In a sale, if the goods are destroyed, the loss falls on the buyer eventhough the goods are in the possession of the seller. In an agreement to sell, if thegoods are destroyed, the loss falls on the seller, even though the goods are in thepossession of the buyer.

4. Consequences of breach -In a sale, if the buyer fails to pay the price of the goodsthe seller can sue the buyer. In an agreement to sell if there is a breach of contractby the buyer, the seller can sue only for damages.

5. Right to re-sell -In a sale the seller cannot re-sell the goods except in certaincases. In an agreement to sell in case of resale, the buyer, who takes the goods forconsideration and without notice of the prior agreement, gets a good title.

6. General and particular property -A sale is a contract plus conveyance, andcreates jus in rem. An agreement to sell is merely a contract, pure and simple, andcreates jus in personem.

7. Insolvency of buyer - In a sale if the buyer becomes insolvent before he pays forthe goods, the seller, in the absence of a lien over the goods, must return them tothe Official Receiver or Assignee.

8. Insolvency of seller - In a sale if the seller becomes insolvent, the buyer, being theowner, is entitled to recover the goods from the Official Receiver or Assignee. Inan agreement to sell, if the buyer, who has paid the price, finds that the seller hasbecome insolvent, he can only claim a rate able dividend and not the goodsbecause property in them has not yet passed to him.

13) State and explain the principles of insurance?

Insurance contracts are based on certain fundamental principles. Theseprinciples are common to all types of insurance-life, fire, marine and miscellaneousinsurance contracts, with the exception of the principles of indemnity which is notapplicable in case of life insurance contract because of it being a contingent contract.These principles are-

1) Utmost good faith Insurance contracts are based upon mutual trust andconfidence between the insurer and insured. Utmost good faith requires eachparty to tell the other the truth, the whole truth and nothing but the truth itmeans that the parties to the contract must make a full disclosure of all thematerial facts and information relating to the contract. A material fact is a fact which would influence the mind of a prudent underwriter in deciding whether toaccept a risk for insurance and on what terms .

2) Insurable interest For an insurance contract to be valid, the insured shouldhave an insurable interest in the subject matter of insurance. The insurableinterest is the pecuniary interest whereby the insured is benefited by theexistence of the subject matter and is prejudiced by the death or damage of the


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subject matter. The subject matter of insurance may be a property or life or legalliability. The insurable interest to be valid must be recognized as such under thelaw in operation in the country.

3) Indemnity The term indemnity means making up the loss. Literally it meanssecurity against damage or loss or compensation for loss. All contracts of insurance except life and personal accident and sickness insurance are contractsof indemnity. According to this principle, the insured should be placed in thesame financial position as far as possible after a loss as he occupied immediatelybefore its occurrence. The insured will neither gain nor lose. In other words theinsurer will pay only the actual loss suffered by the insured i.e. the insurer willnot pay the assured amount but only the actual loss suffered by the insured.

4) Contribution Contribution is also a corollary of the principle of indemnity.This principle applies where there is more than one policy covering the samesubject matter against the same peril for the same period and for the sameinsured. In such cases the insured can make claims under all policies withdifferent insurers and recover pro-rata from each. Contribution is a right of aninsurer who has paid a loss under a policy to recover a proportionate amountfrom other insurers who are liable for the same loss.

5) Subrogation This principle is just a corollary of or supplement to the principleof indemnity. Subrogation means inheriting the rights available to an individual.The insurer after making good the loss is entitled to all the rights of the insuredagainst third party as regards the subject matter of insurance. Thus when theright of the insured over the subject matter of insurance is transferred to theinsurer by the way of this inheritance, it is known as The Doctrine of Subrogation.

6) Causa Proxima - The maxim causa proxima non remota spectature means thatproximate (nearest) cause and not the remote one is to be taken note of at thetime of determining the liability of insurer. The insurer is not liable for remotecause even if it is one of the insured perils. Therefore, if the immediate cause isan insured risk for the occurrence of which the insured is to be paid, the insureris liable to make the payment of loss under the policy, otherwise not.

7) Mitigation - This principle emphasizes the duty of the insured to take all possiblesteps to minimize the loss or damage to the property covered by the insurancepolicy in case the mishap happens. This principle aims at making sure that theinsured behaves as a prudent person and does not become careless after taking apolicy to cover any risk.


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14) Write a note on (a) remission of excise duty (b) objectives of VAT.

(a) Remission of excise duty -Goods manufactured or produced attract excise duty. The excise duty

liability is to be discharged at the time of removal. The duty is liable on the entire goodsmanufactured and removed. Remission is necessary for any shortagesExample

An assessee manufactures 2000 units in February 2004 and removes them inJanuary 2005. The quantity available for removal is 1950 units. The shortage is neitherdue to theft nor removal by the assessee stealthily. The deficiency in quantity may be dueto natural causes. The Central Government is empowered to make rules for the remissionof excise duty.

The remission is given by the central government on the basis of the followingnorms:

1. Nature of excisable goods manufactured/produced.2. The nature of processing undergone by the manufactured or produced goods.3. Shortage period.4. Transit period.5. Other relevant considerations.6. Bona fides of flaws

(b) Objectives of VAT The main objectives of VAT are enumerated below:

1. Simple tax system To have a relatively simple tax system to administer and toachieve compliance of books of accounts.

2. Uniform tax base To implement a uniform tax base throughout the country.3. Mechanism to collect taxes To provide a mechanism to collect taxes with

reference to locations of economic activity.4. Uniform rule of taxation To have uniform roles of taxation on international flow

of goods across the nation.5. Audit trial To facilitate tax enforcement by providing audit trial through

different stages of production and sales.

15) Discuss the different types of levy payable under TNGST Act.

1. Levy based on classification of goods This levy is based on classificationaccording to schedules to the TNGST Act 1959 as follows

a. First schedule This schedule contains goods such as spares, componentsand accessories in respect of which single point tax is leviable.


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b. Second schedule This schedule contains declared goods such as rice,paddy, wheat, cotton etc. in respect of which a single point tax only isleviable under section 4

c. Third schedule Goods under this schedule come under goods of specialimportance.

d. Fourth schedule This schedule consist of levy of tax on the transfer of goods involved in works contract.

e. Fifth schedule - This schedule consist of levy of sales tax on sale of cement

f. Sixth schedule - This schedule consist of levy of sales tax on alcoholicliquors, except foreign liquors.

g. Seventh schedule - This schedule consist of goods coming from outsidethe state and pass through the state to obtain a transit pass in the prescribedform

h. Eighth schedule - This schedule consist of levy of tax on sale of goods forinstallation in the factory site in the state for manufacture of any goods.

i. Ninth schedule - - This schedule consist of levy of tax on hotels,restaurants and sweet stalls, dealers in jewellery, dealers on compoundingbasis.

j. Tenth schedule - This schedule consist of payment of compoundedamount by dealers in lottery tickets.

k. Eleventh schedule - This schedule consist of levy of tax on goods such asbitumen, aviation gasoline, kerosene, diesel oil, lubricating oils, whitekerosene, alcoholic liquors of all kinds purchased or procured fromoutside and foreign liquors imported from abroad.

2. Compounded levy Compounded levy is an option given to every dealer whosetotal turnover is not less than one lakh but not more than two lakhs rupees. TheCompounded levy is to pay tax at the rates U/s 7(1). Following are the conditionsfor Compounded levy:

a. Dealers other than a casual dealer and a non-resident dealer are capable o comingunder Compounded levy. The additional condition total turnover is not less thanone lakh but not more than two lakhs rupees.

b. The dealer opting for compounded rate shall intimate to the department of hisintention within 30 days from commencement of his business or before April 30.

c. Under the Compounded rate of levy the dealer is not allowed to collect the taxbecause he has to pay it out of his own pocket.

d. The dealers are not required to maintain product-wise books of accounts.e. When the dealer prefers to go for the normal rate of levy in the subsequent

financial year he has to intimate the same to the sales tax authority.

16) When is sale said to be inter-state sale under CST Act?

As per section 3, sale or purchase of goods is said to take place in the courseof inter-sale trade or commerce in the following situations:


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A sale or purchase of goods shall be deemed to take place in the course of inter-saletrade or commerce if the sale or purchase-

(a) Sale occasions the movement of goods from one state to another [sec. 3(a)]It is an inter state sale. The essential conditions for sale to be in the course of

inter-state trade are: Completed sale of goods: Transfer of property in goods by one person to

another. The contract of sale to provide that goods be moved from one state to

another.Sale to include agreement to sell

Where there is a stipulation regarding the movement of the goods from one stateto another, in pursuance of which the goods have actually moved, and sale ultimatelytakes place in the state to which goods are sent.

Situations where there is no inter state sale: In the following cases, there is no inter state sale since goods move from one

state to another not in pursuance to a contract for sale or purchase.i. Goods sent by a dealer from head office/factory to a branch in another

state.ii. Goods sent to commission agent in another state for an account sale.

iii. Goods sent to a dealer in another state on consignment basis.iv. Goods imported by a dealer on behalf on another dealer.

(b) Is effected by a transfer of documents of title to the goods during theirmovement from one state to another [Sec. 3 (b)] Inter state sale also occurs byeffecting it through transfer of documents of title to the goods. Essential conditions totreat transfer of documents of title to the goods as seen in the course of inter state tradeare as under:

Movement of goods from one state to another. The property in goods should pass by transfer of documents of title after

commencement of the movement of goods but before its conclusion. Documents of title: (a) Railway receipts (RR); (b) Lorry receipts (LR); (c)

Airways bill (AB); (d) Bill of lading (BL).

17) Explain the different kinds of excise duty leviable under Central Excise Act.

Excise Duty is of five types:a. Basic Excise Duty - Basic Excise Duty is otherwise called CENVAT, being

levied under section 3(1) of the central Excise Act, 1944 on Excisable goodsmanufactured or produced in India at the rates specified in the excise Tariff Act,1985.

b. Special Excise Duty Special Excise Duty is otherwise known as auxiliaryduties is a regulatory duty levied as a percentage of the basic excise duty, similarto surcharge in the Income Tax Act, 1961. It is levied on goods specified inschedule II to the central Excise Tariff Act, 1985. The rate s specified generally inthe Finance Act each year.

c. Additional Excise Duty in order to curb the demand of certain undesirablegoods, a duty of excise called Additional duty is levied in addition to the basic


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Excise Duty and Special Excise Duty. While levying such duty, the governmentwill also consider the ability of the commodity to bear additional burden of dutyfor the time being, the necessity of the commodity, etc.

d. Cess cess is explained as a tax imposed for specific purpose with reference tosome specific class of goods by Madhya Pradesh High court in Mata Prasad vs.Election Officer.

e. Finance Act 2004 has introduced Education Cess at the rate of 2% on all taxeslevied like excise duty, income tax, custom duty, service tax etc.

f. Cess is collected separately and the collecting authority is under obligation toutilize the same for specific purpose only.

g. National Calamity Contingent Duty Finance Act, 2001 brought out a duty inthe nature of surcharge with effect from 1 st march 2001 called National CalamityContingent Duty.It is levied on goods appearing in the seventh schedule to the Finance Act.

18) Describe the basis for levy of excise duty.

Excise duty is levied on the following basis:a. Specific duty In this case the basis of levy is specific quantity of goods such

as weight, length, volume, number of units produced, etc. Thus specific rate of duty has no relevance to the selling price of goods.

b. Advalorem value In this case the basis of levy is the value of goods. Thus,it is necessary to determine the value of excisable goods and then apply thisrate of duty, which is a fixed percentage of value say 10% Advalorem.

c. Tariff valuation Section 3(2) of the Central Excise Act gives the CentralGovernment two powers:

1. To fix tariff Value2. To alter tariff value already fixed

These powers have to be excised through a notification in the official gazetteThe tariff value can be fixed for any of the goods enumerated, either

specifically or under general headings, in the Istschedule or/and IInd schedule to the central excise tariff act 1985.

d. Maximum retail price valuation (MRP) MRP valuation is adopted in caseof notified commodities or goods. The notification issued in this behalf indicates the extent of Abatement to be allowed for arriving at the assessablevalue. Notified goods are always covered by standard weights and measuresact. That is to say that they are sold in a prepacked condition.

e. Transaction value It means the price actually pain or payable for the goods,when sold. It includes, in addition to the amount charged as price:Any amount that the buyer is liable to pay by himself or on behalf of theassessee, by reason of or in connection with the sale whether payable at thetime of sale or at any other time, including, but not limited to any amountcharge for or to make provision for (a) Advertising or publicity, (b) marketingand selling (c) organization expenses, (d) storage (e) outward handling, (f)servicing (g) warranty (h) commission or (i) any other matter.


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SECTION C: (2X20=40)

19) Discuss the rights of an unpaid seller ?

An unpaid seller has two-fold rights. They areC. Rights against goodsD. Rights against the buyer personally

Rights of an a Unpaid Seller against GoodsThis right is studied under the following two heads:

Where the ownership of the goods is transferred to the buyer. Where the ownership of the goods is not transferred to the buyer.

1) Rights of paid seller where the Ownership of the Goods is not transferred to the BuyerAccording to Sec. 46 of the Act, the unpaid seller has three distinct rights even

though property in the goods is transferred to the buyer. These rights are:ii. Right of Lien

The word lien means to retain possession of. According to Sec. 47 (1) Theunpaid seller of goods who is in possession of them is entitled to retain possession of them until payment or tender of the price in the following cases, namely:(a) Where the goods have been sold without any stipulation as to credit;(b) Where the goods have been sold on credit, but the term of credit has expired;(c) Where the buyer becomes insolvent

The right of lien is one of the unpaid sellers rights against the goods, theproperty in which is transferred to the buyer. It is the unpaid sellers right to retain thegoods until the whole of the price is paid or tendered. Lien can be exercised only for non-payment of the price, and not for any other charges due against the buyer. For instance,the seller cannot claim lien for godown charges for storing the goods in exercise of hislien for the price. The lien of an unpaid sellers particular lien, it is a personal right whichcan be exercised only by him and not by his assignees or his creditors. The unpaid sellermay exercise his lien notwithstanding that he is in possession of the goods as agent orbailee for the buyer. The right of lien is linked with the possession of the goods and notwith the title of the goods.Rules Relating to Lien

(i) The seller may exercise his right of lien notwithstanding that he is inpossession of the goods as agent or bailee for the buyer.

(ii) The lien depends on actual possession of goods and not on title.(iii)Unpaid seller can exercise the lien only for the price and not for any other

charges.(iv) Where an unpaid seller has made part delivery of the goods, he may

exercise his right of lien on the remainder.(v) The right of lien is not lost, if the seller has obtained a decree for the price

of goods.


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Termination of lien . The unpaid seller of goods loses his lien on the goodswhen-

(a) he delivers the goods to a carrier or other bailee for the purpose of transmission to the buyer, without reserving the right of disposal of the goods;

(b) the buyer or his agent lawfully obtains possession of the goods as buyer;(c) he waives his right of lien on the goods. He may do this either expressly or

impliedly.

ii. Right if stoppage in transitThe right of stoppage in transit is a right of stopping the goods in transit after the

unpaid seller has parted with the possession of the goods. He has the further right of resuming possession of the goods as long as they are in the course of transit, andretaining possession until payment or tender of the price. It is available to the unpaidseller-

(1) When the buyer becomes insolvent; and(2) When the goods are in transit.

Duration of transit . Transit is an intermediate stage. Goods are in deemed to bein course of transit from the time they are delivered to a carrier, or other bailee for thepurpose of transmission to the buyer, until the buyer or his agent takes delivery of themfrom such carrier or other bailee.

When transit comes to an end ?Transit comes to an end:(1) If the buyer or his agent in that behalf obtains delivery of the goods before

they arrive at the appointed destination.(2) If, after the arrival of the goods at the appointed destination, the carrier or

other bailee acknowledges to the buyer or his agent that he holds the goods on his behalf.(3) Where the carrier or other bailee wrongfully refuses to deliver the goods to

the buyer or his in that behalf.(4) Where part delivery of the goods has been made to the buyer or his agent in

that behalf, the remainder of the goods may be stopped in transit.

How stoppage in transit is affected?The unpaid seller may exercise his right of stoppage in transit either-(1) by taking actual possession of the goods, or(2) by giving notice of his claim to the carrier or other bailee in whose

possession of the goods are.Notice of stopping the goods in transit may be given either-(1) to the person in actual possession of the goods, or(2) to his principal.


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20) Explain the rights, duties and liabilities of a common carrier?

Rights of a common carrier:1. Right to get remuneration - A common carrier is entitled to the agreed

remuneration, if any, for his work. He can also demand payment in advance and if he isnot paid he may refuse to carry. If the charges have not been agreed, he is entitled toreasonable charges.

2. Right of lien - He has a lien on the goods carried for his charges which he canenforce against both the consignor and the consignee, but as a rule this lien is only aparticular lien. He can refuse to deliver the goods until his charges are paid.

3. Right to recover damages - He can recover damages from the consignor if thegoods are of a dangerous character or if the goods are not properly packed and the carriersuffers injury there form.

4. Right to limit his liability - He can limit his liability under certain circumstances bya contract with the consignor.

5. Right to recover expenses - He can, if the consignee refuses to take delivery of thegoods, take all such steps as a reasonable under the circumstances. He can also recoverreasonable expenses from a consignor in such a case.

6. Right to refuse to carry g oods- He is not bound to carry goods of all types underall circumstances.

Duties of a common carrier :

1. Duty to carry goods - A common carrier is bound to carry for hire goods of all personwho choose to employ his for the carriage of goods. He is however not bound to carry thegoods if-

(a) his vehicle is already full;(b) the consignor is not willing to pay reasonable charges for the carriage of goods;(c) the goods are such as he is not accustomed to carry or cannot carry;(d) the goods are to be carried over a route which is not his regular route;(e) the goods are such as subject him to extraordinary risk;(f) the goods are not properly packed;(g) the consignor refuses to disclose the nature of goods offered for carriage.

2. Duty not to deviate - He must carry the goods by his customary route and must notdeviate from it unnecessarily.3. Duty to deliver the goods - Upon the completion of the transit, he must deliver thegoods as instructed by the consignor at the agreed time, if any, or within a reasonabletime.4. Duty as insurer of the goods - At Common Law he is an insurer of the goods in thesense that he warrants to carry the goods safely and securely.

Liability of a common carrier :


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According to the English Common Law, a common carrier of goods is an insurer of thegooda carried. He is bound to make good to the consignor the loss of damage to thegoods in the course of carriage whether occasioned by his negligence or not.

21) Briefly explain the various types of insurance policies?

There are various types of policies of life insurance. These are issued to meet thevarying and special needs of the community. The main and important types are asfollows:

1. Endowment policy - It provides for payment of the sum assured at the end of aspecified term of years or at death should it occur sooner. This is the most popular formof life insurance. It may also be taken to ensure for the education of the children.2. Whole-life policy - Under this policy, premiums are payable throughout the life time of the life assured. The sum assured becomes payable only on the death. It is the cheapestform of policy.3. Limited-payment life policy - In this case premiums are payable for a selected periodof years or until death if it occurs within this period. The assured knows how muchamount he will be required to pay, no matter how long he lives. This policy resemblesendowment policy as regards payment of premiums, the term being fixed in both thecases.4. Joint life policy - The sum assured under a joint life policy is payable at the end of theendowment term or on the first death of any of the lives assured if earlier. Partnershipfirms usually go in for such policies to provide for the return of the capital of thedeceased partner.5. Convertible whole life policy - This policy is designed to meet the needs of youngpersons who are on the threshold of their career and have prospects of increase in incomeafter some years. In the earlier years the premiums are payable at a lower rate.6. Anticipated policy - This is a policy which provides for the payment of the sumassured at the end of specified intervals, say 20% at the end of first five years, 20% at theend of next five years and the balance at the end of the term of the policy.7. Annuity policy - This is a policy under which the amount is payable by the insurer nitin one lump-sum, but by monthly, quarterly, half yearly or annual installments after theassured attains a certain age. The assured may pay the premiums regularly over a certainperiod or he may pay a certain premium at the out set.8. Sinking fund policy - This policy is very useful for companies for redeeming thedebentures or paying of their loans. A fixed amount is paid as premium annually. It goeson accumulating at a certain rate of interest.9. Janta policy - It is a policy which covers risk of death by accident for one year only.The premium charged is very nominal and in case of death by accident a fixed amount ispayable.

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