Jurisprudentiol – Thursday's cases

By Vijay Kumar

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

CENVAT Credit – Inputs used for generation of electricity cleared outside the factory – not entitled for credit – Supreme Court

The definition of "input" brings within its fold, inputs used for generation of electricity or steam, provided such electricity or steam is used within the factory of production for manufacture of final products or for any other purpose. The important point to be noted is that, in the present case, excess electricity has been cleared by the assessee at the agreed rate from time to time in favour of its joint ventures, vendors etc. for a price and has also cleared such electricity in favour of the grid for distribution. To that extent, assessee was not entitled to CENVAT credit. In short, assessee is entitled to credit on the eligible inputs utilized in the generation of electricity to the extent to which they are using the produced electricity within their factory (for captive consumption). They are not entitled to CENVAT credit to the extent of the excess electricity cleared at the contractual rates in favour of joint ventures, vendors etc., which is sold at a price.

Income Tax

TDS on payments to non-resident - if payee has paid tax then AO is not justified to raise demand for short deduction; Assessee's default comes to end when payee pays tax for payments received from deductor - It is not expected from deductor to decide tax status of payee: ITAT

The issue as to under which head the income is to be taxed is between the payee and the Assessing Officer having jurisdiction over the payee. Tax is to be paid by the payee and the deductor is only facilitating in the collection of such tax. The deductor can raise a ground in respect of his bona fide belief for short deduction of tax at source but he cannot step into the shoes of the Assessing Officer having jurisdiction over the payee to decide the head under which such income is to be taxed.

Service Tax

Security Services provided to Director at his residential bungalow, Repair & maintenance of guest house and garden – Prima facie there is nothing to show that there was any connection, directly or indirectly in or in relation to manufacture or clearance of finished products – Pre – Deposit ordered - CESTAT

The lower authorities denied CENVAT Credit amounting to Rs.3,61,193 /- in respect of the following three Services –

+ Repair and Maintenance of guest house and garden;

+ Security service provided to a Director of the company at his residential bungalow;

+ Outdoor Catering Service, and also imposed equal amount of penalty on the party under section 11AC of the Act.

See our columns Tomorrow for the judgements