Jurisprudentiol–Wednesday's cases

By Vijay Kumar

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

No jurisdiction with authorities to impose penalty lesser than mandatory penalty, which has to be co-extensive with duty payable – SC orders in Dharamendra Textile case and Rajasthan Spinning & Weaving Mills followed: Bombay High Court

THE question, therefore, of having paid the amount before issuance of the show cause notice or after issuing the show cause notice cannot result in holding that there is no requirement of determination. That argument, therefore, must be rejected.

Income Tax

Cash payments in excess of Rs 20,000 made to employees working in rigs - covered by exceptions provided in rule 6DD(j) and not liable to be disallowed under section 40A(3): ITAT

There is no dispute that all the employees in the present case were posted for a continuous period of 28 days on Rigs, which was more than the minimum period of 15 days stipulated in rule 6DD(j) and they were not maintaining any bank there. As such, considering all the facts of the case, the payments in question made by the assessee-company in cash in excess of Rs. 20,000 were duly covered by the exceptions provided in rule 6DD(j) and this being so, the same were not liable to be disallowed under section 40A(3).

Service Tax

Construction service – Service to self not taxable – No tax on ‘works contract’ prior to 1.6.2007 – matter remanded: CESTAT

Appellants employed its own labour for execution of the various projects and are not a contractor doing construction work for another person. In respect of constructed property sold by the appellants to various buyers it cannot be held that PFL rendered ‘commercial or industrial construction service’ and ‘construction of complex service’ to the buyers. Appellants rendered such services to itself.

No tax on ‘works contract’ prior to 1.6.2007 – Appellants carried out the construction activity, finishing work etc., in respect of which demands have been raised, in execution of works contracts. ‘Works contract service’ was brought under tax net on 1.6.2007, after the impugned activities were undertaken by PFL. As rightly argued by the appellants, the Tribunal had held in Diebold Systems case that activity such as erection/commissioning forming part of a works contract could not be taxed under erection/commissioning service prior to 1.6.2007. The contracts basic to the construction of commercial premises/residential premises were indivisible and involved a service element. In view of the ratio of the decision of the Tribunal, prima facie, the impugned demand is not sustainable.

See our columns Tomorrow for the judgements