Jurisprudentiol–Wednesday's cases

By Vijay Kumar

Legal Corner Icon — the image was hosted by the publisher and was not captured.Service Tax

Producing products containing alcohol – whether Service Tax liability under Business Auxiliary Service–pre-deposit of entire amount of Service Tax demand and interest ordered - CESTAT

THE issue is more than a year old and everyone felt that the Board Circular 249/1/2006- CX.4 dated 27.10.2008 had laid the matter to rest. In fact, we had in our column DDT-987 jocularly remarked that the Advocates could simply place the Board's letter before the CESTAT and laugh their way to the banks. As they say in a T20 cricket match, the winner cannot be decided until the last ball is bowled. The present case appears to be moving in a similar direction.

Central Excise

Whether Cement used for foundation or supporting structure for machinery is eligible for credit as capital goods? - Matter referred to President for constitution of Larger Bench

THE assessee is a sugar manufacturing unit and availed CENVAT Credit on Cement used for construction of civil foundation as structural support for plant and machinery while undertaking modernisation and expansion of their chemical plant. The revenue denied the credit as the same cannot be considered as capital goods as defined under the CENVAT Credit rules and also as cement is not used either directly or indirectly in the manufacture of final products. On appeal by the assessee, the Commissioner (Appeals) allowed the credit.

Income Tax

Non-resident company provides services in oil extraction - reimbursement for loss of tools by Indian company and insurance - capital receipts are not taxable u/s 44BB : ITAT

SECTION 44BB is a special provision in the Income Tax Act for taxing receipts of non-resident companies providing services and facilities for exploration and extraction of mineral oil. Under this Section Revenue taxes all sorts of receipts @ 10 per cent and the Revenue's right to tax all payments, including reimbursements of expenses, has been upheld by superior courts. But the issue in this case is that can Revenue also tax capital receipts or a reimbursement for loss of tools under this Section? The Revenue believes all sorts of reimbursements irrespective of the nature of the receipt are taxable. But the Tribunal does not think so and has held that the reimbursement to compensate the non-resident company for having lost tools in the hole are not covered under the Sec 44BB, and thus is not taxable.

See our columns Tomorrow for the judgements