Jurisprudentiol – Tuesday's cases

By Vijay Kumar

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

Penalty imposable only to extent of CENVAT Credit held ineligible – Appellant cannot claim exoneration from penal liability: CESTAT

THIS is a Revenue appeal seeking enhancement of the penalty that was drastically (in Revenue's words) brought down by the Commissioner (Appeals).

Bench noted that insofar as eligibility of Cenvat Credit on Garden Maintenance Services is concerned, an identical issue was considered by the Bench in the case of Kirloskar Oil Engines Ltd. vs. CCE, Aurangabad (2009-TIOL-790-CESTAT-Mum), and where it was held that garden maintenance service had no nexus, even remotely, to the manufacture or clearance of excisable goods and that the service was not used, directly or indirectly, in relation to the manufacture or clearance of the goods. So saying, the CESTAT held that the appellant is not entitled to claim the benefit of CENVAT credit on garden maintenance service.

In the matter of Outdoor Catering Service, it was held that the appellant is entitled to the benefit of the Larger Bench decision in the case of CCE, Mumbai-V vs. GTC Industries Ltd. (2008-TIOL-1634-CESTAT-Mum-LB) inasmuch as the Cenvat Credit on Outdoor Catering Service was allowed.

Income Tax

Indo-Mauritius DTAA - assessee has a PE in India - deduction for travelling and entertainment expenses - Revenue applies restrictions u/s 37(2) - Since no such restrictions are in DTAA, deductions allowable; Revenue levies higher tax rate applicable to non-resident - Assessee invokes non-discriminatory clause of DTAA for lower rate - In view of Explanation 1 of Sec 90, higher rate is to be charged from non-resident: ITAT

IT is common for any business organisation to incur travelling and entertainment expenses. It is also common law that such expenses are deductible allowances for the income tax purposes. However, no blank cheque can be given to any organisation to keep such expenses under certain limits. It is also common that such expenses not directly relating to the business purpose are also often claimed as deduction. Therefore, there are restrictions provided for as per Sec 37(2) and Rule 6D of the Income Tax Act for domestic companies. But, will such restrictions also hit non-resident companies taxed as per respective tax treaty?

Customs

Import of Toys from China – If original Bill of Lading is dated 22.01.2009, IGM has got to be corrected accordingly and if in this process, the importer gets the benefit of free import of toys from China, it can't be helped – Revenue appeal along with stay application Dismissed - CESTAT.

THE respondent had imported a consignment of plastic toys from China and filed a Bill of Entry for its clearance. They also filed relevant Bill of Lading dated 22.01.2009 along with other import documents. On 13.03.2009, the shipping agent filed an application with the Assistant Commissioner of Customs (Imports) for amending the Bill of Lading date given in the IGM, which was 28.01.2009. They wanted the date to be corrected as 22.01.2009.

The Assistant Commissioner informed the party that their request for amendment could not be considered as the goods had been loaded on to the vessel abroad on 28.01.2009 and the country-of-origin certificate was issued on 23.01.2009.

See our columns Tomorrow for the judgements