Jurisprudentiol–Monday's cases

By Vijay Kumar

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

Whether CENVAT Credit can be denied on ground of short receipt of inputs? Matter referred to Larger Bench

IT is not uncommon that when the inputs are received in the factory, the manufacturers check the quantity of the material received vis-à-vis the quantity shown in the invoices. This is to ensure that that the supplier has loaded correct quantity as shown in the invoice and there is no pilferage during transportation. However, the weight always do not tally exactly with the quantity shown in the invoice due to various reasons like taking weight at different weighbridges etc which are acceptable to the parties as long as they are in tolerable limits. But, what about the CENVAT Credit? Do the manufacturer need to take credit proportionality? This is a fertile area for audit objections and there is no uniformity in the decisions of the Tribunal also. Recently this issue came up before the Tribunal and this time, due to different decisions in favour and against the assessee, the matter was referred to the Larger Bench.

Income Tax

Provision for a liability is amenable to a deduction if there is an element of certainty that it shall be incurred and it is possible to estimate the liability: once spares are considered as emergency spares required for plant and machinery as found by the Tribunal, the assessee was entitled to seek capitalization of the entire cost of spares: High Court

IT is well settled that if a liability arises within the accounting period, the deduction should be allowed though it may be quantified and discharged at a future date. Therefore, the provision for a liability is amenable to a deduction if there is an element of certainty that it shall be incurred and it is possible to estimate the liability with reasonable certainty even though the actual quantification may not be possible as such a liability is not of a contingent nature. Provision made in the profit and loss account for the estimated present value of the contingent liability properly ascertained and discounted on an accrued basis as falling on the assessee in the year of account could be deductible either under Section 28 or section 37 of the Act. (it was made on the basis of actuarial valuation)

Customs

Shipping line loading cargo without having Let Export Order - Such offence may have grave consequences where narcotics and explosives can be exported outside without Customs knowledge because of sheer negligence of the shipping lines – Tribunal orders pre-deposit of penalty

Prima facie the shipping line has committed an offence of loading the goods without Let Export Order and even if they were misinformed by the CHA, it was their statutory duty to see that the goods are not loaded without customs examination and Let Export Order.

See our columns Monday for the judgements