Jurisprudentiol–Wednesday's cases
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Base Paint sold to customers after mixing with colourant at dealers' premises is assessable under Section 4A of Central Excise Act: CESTAT
THE issue has a very interesting back-drop. The assessee is a paint manufacturer and has been clearing Base Paint by paying Central Excise duty on the basis of MRP . The base paint is mixed with the colourants at the dealers' premises as per the choice of the customers. As per the revenue, the Base Paint is not covered under the Packaged Commodity Rules, 1977 and has to be assessed under Section 4 of the Central Excise Act, 1944. The stay applications against the demand came up before the West Zonal Bench and the appellants were directed to pre-deposit Rs 2.5 crores as no prima facie case was made out against the demand. (). After nearly three months, the issue came up before the South Zonal Bench in respect of the same assessee. This time, complete waiver was granted as prima facie case was made to assess the goods under Section 4A. () While granting stay, the SZB observed that the permission granted by the Central Government to clear base paint in non-standard quantities and the subsequent amendment to the Third Schedule to the PC Rules were not brought to the notice of the Bench.
After obtaining stay at SZB , the appellant filed application for modification of Stay before the WZB for waiving the pre-deposit of Rs 2.5 crores. However the WZB refused to modify the earlier order. ()
And the SZB has passed the final order on the issue setting aside the demand of duty under Section 4.
Income Tax
Microsoft subsidiary files return - claims business profits but no PE in India - Intimation u/s 143(1) - AO treats it as royalty and raises demand - Revenue cannot change character of income while acting u/s 143(1) - it can be done only during course of regular assessment: ITAT
SECTION 143(1) of the Income Tax Act is for sending an intimation to the assessee. But, can Revenue change the character of an income and demand tax? Every income has a character and it falls under a particular head like capital gains, business profit, salary etc. While deciding the mega demand case of Microsoft Regional Sales Corporation (MRSC), a non-resident company, having no PE in India, the Tribunal has held that the AO cannot change the character of the income returned and create a demand while acting under Sec 143(1). In this case the AO had raised demand by treating the returned income as royalty under Article 12(7) of the India-USA DTAA as against the business profit claimed by the assessee by simply issuing an intimation u/s 143(1). The ITAT is of the view that crating any demand in such a manner is beyond the scope of Sec 143(1). Such demands can be raised only during the course of regular assessee u/s 143(3).
Service Tax
CENVAT Credit not available on Security services, Rent-a-cab services, Mobile Telephony services as appellants have not adduced evidence to establish the nexus, if any, between the “services” and the manufacture/clearance of the final products – CESTAT
Sections 11A and 11AB will be applicable where the CENVAT credit in question has been utilized for payment of duty of excise on final products whereas sections 73 and 75 of the Finance Act are applicable where the credit has been utilized for payment of service tax on output services.
Until Tomorrow with more DDT
Have a nice day.
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