Jurisprudentiol– Monday's cases

By Vijay Kumar

Legal Corner Icon — the image was hosted by the publisher and was not captured.Central Excise

Availment of exemption in respect of goods covered by SSI Notf 8/98-CE and availment of MODVAT benefit in respect of goods lying outside the purview of the exemption notification is not simultaneous availment of MODVAT and SSI exemption – Tribunal distinguishes Apex Court decision of Ramesh Foods

AS rightly mentioned by a leading author of books on Indirect Taxation, the SSI exemption notification 175/86-CE although meant to cater to the ‘small scale units' proved to be one of the most complicated pieces of legislation of all times. Be it the interpretation regarding what constitutes ‘brand name' or for that matter the manner of computing the ‘aggregate value of clearances', the issues always snaked its way to the Apex Court for a final say only to be “re-interpreted” by the Revenue so as to suit its stand.

Long ago, in our DDT-493 dated 17.11.2006, we had provided the following dope –

“Whether benefit of SSI exemption is available if Cenvat Credit is taken - Board wants opinion''

Commissioner ought to have examined the merits of the case rather than deciding the case on limitation – Tribunal remands matter on Revenue appeal.

THE respondents were engaged in the manufacture of pig iron. The process of manufacture involved reduction of iron ore by coke in a blast furnace, which required feeding of iron ore particles of specific size. As substantial quantity of iron ore fines were left behind in the process, the respondents wanted to set up a sinter plant for conversion of iron ore fines to agglomerated iron ore which could be used in the blast furnace for the production of the final product (pig iron). For the purpose of setting up this plant, they imported machinery and other capital goods, which were received in their factory during the period from December 1996 to January 1997. They did not initially take CENVAT credit on the capital goods, as the relevant rule, which was then in force, did not permit them to do so, as the capital goods were yet to be installed.

Income Tax

Indo-German DTAA - assessee provides consultancy through PE in India - claims deduction of expenses u/s 44DA - Application of Sec 44DA is not retrospective; Even under DTAA profit of PE is subject to domestic laws and deduction of expenses u/s 44D, a non-obstante provision, is not allowed: ITAT

AS TIOL reported last week that retrospective v prospective is a constant bone of contention between the Revenue and the taxpayers whenever a new Section is inserted or an Explanation is added vide the Finance Act. Exactly the same issue is involved in this case in which the assessee is a tax resident of Germany and provides engineering consultancy service through its PE in India. For the income generated by its PE, it wanted to claim deduction of expenses incurred and took shelter under the amended Sec 44DA vide Finance Act, 2004 which made income from royalty or fees for technical service chargeable to tax on 'net basis' after allowing expenses and not on gross basis. In other words, the assessee took the plea that the amended Section was clarificatory in nature and therefore retrospective in effect.

See our columns Monday for the judgements