Jurisprudentiol – Tuesday's cases

By Vijay Kumar

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Prior to 31.07.1995 there was no requirement that the deposits in NRE accounts could not be made by persons other than NRE accounts holders themselves – High Court

THE issue raised in these petitions is with regard to the deposits in foreign currency made by power of attorney holders of Non-Resident Indians in whose names the Non-Resident External (NRE) Accounts stood. The question that arises for consideration is – whether, even for the period prior to 31.07.1995, such deposits in foreign currency needed to be made, necessarily, by the Non-Resident Indian account holder, in person?

Income Tax

Deduction of Interest paid on US withholding tax – Additional Grounds admitted and matter remanded –ITAT by majority (Third Member)

THE taxes paid by the assessee are not Indian taxes. The assessee has some activities in USA in the course of which it had to make payments to its employees there. From these payments the assessee was required by the US Tax Laws to deduct taxes. These are called "withholding taxes" in USA, which is the equivalent of "tax deducted at source" in India. The assessee is a custodian on behalf of the Government of USA and the taxes withheld will have to be remitted to that Government by a specified date. If it is not so remitted and there is a delay, interest is payable for the delay.

Held: the AM had rightly admitted additional grounds and rightly remanded the matter to the CIT for fresh consideration and decision.

Central Excise

If CENVAT Credit is validly taken on inputs at time of receipt, credit not required to be reversed on inputs lying in stock or in process or contained in final products when assessee avails benefit of exemption Notification 50/2003-CE – High Court

THE Revenue was in appeal before the High Court of Himachal Pradesh with the following question of law:

“Whether a manufacturer is required to reverse the Cenvat Credit taken by him in respect of inputs which are proved to have been used in the manufacture of goods which are exempted from excise duty in view of the provisions of Rule 6(1) of Cenvat Credit Rules, 2004 which provide that no credit can be taken in respect of inputs which are used in the manufacture of exempted goods."

The appellant was engaged in manufacture of SS Ingots/flats and availed benefit of CENVAT credit on inputs used in the manufacture of final products. On 11.4.2005 the assessee opted for benefit of the exemption notification No.50/2003-CE dated 10.6.2003 as amended. An amount of Rs. 2.95 lakhs of CENVAT Credit lying in its books as on date of exercising the option was reversed by the appellant. Subsequently, the assessee filed a refund claim for this amount on the ground that they were not required to reverse credit taken by them on inputs purchased prior to availing the option for benefit of exemption notification no. 50/2003-CE as amended. The original authority rejected the refund claim. However, the appeal filed by the assessee was upheld by the Appellate Commissioner. A further appeal by the Revenue against the order of the lower appellate authority was rejected by the CESTAT resulting in this appeal before the High Court.

Service Tax

Garden Maintenance services – Apex Court in Maruti Suzuki has only considered the word 'input' and there is no finding with regard to 'input service' - A good garden creates a better atmosphere and environment which increases the working efficiency – CENVAT Credit available: CESTAT

THE issue involved is whether an assessee is eligible to avail Cenvat Credit on garden maintenance service.

The appellant is before the CESTAT against the denial of the Cenvat Credit by the lower authorities.

They cited the CESTAT's decision in Millipore India Ltd. vs. CCE, Bangalore-II, [2009-TIOL-490-CESTAT-Bang] in support of their claim to the credit. One of the disputed items of credit in the Millipore case was ‘Landscaping of factory garden' .

See our columns Tomorrow for the judgements