Jurisprudentiol – Thursday's cases

By Vijay Kumar

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

Shower Gel, Roll on, Shampoo/Conditioner shampoo, Shaving Gel, Hair Cream, Body Cream and Scented Spray are 'cosmetics' covered by term 'Substances' mentioned at Entry no. 1 in Schedule ‘D' of Rule 132 of Drugs & Cosmetics Rules, 1945 and can be imported from any port – Absolute Confiscation of goods set aside – CESTAT

THE appellant sought clearance of imported cosmetics described as "Shower Gel, Roll on, Shampoo/Conditioner shampoo, Shaving Gel, Hair Cream, Body Cream and Scented Spray" and filed Bill of Entry. The appellant sought assessment of the above said goods as cosmetics under chapter 33 of the Customs Tariff Act, 1975. A show cause notice was issued stating that in terms of Rule 133 of Drugs and Cosmetics Rules, 1945, import of cosmetics is allowed only through the points of entry specified under Rule 43A of Drugs and Cosmetics Rules and since the appellant had violated the said provisions, the goods were absolutely confiscated by the Commissioner of Customs, Marmagoa.

Income Tax

Sec 80P - Cooperative society invests surplus funds in short-term deposits and securities - claims deduction for interest income - Since such income is not operational profits eligible for deduction, it falls under head 'income from other sources' u/s 56 and is taxable: Supreme Court

KEEPING in mind the objectives of cooperative societies, the Government has given deduction to their income earned from the activities prescribed in the relevant Section 80P. However, there are situations when a cooperative society has surplus fund (it may even be a liability for the assessee) which is not required for the regular business immediately. And such funds are commonly invested in short-term bank deposits or securities for quick bucks. But what would be the tax treatment to the interest income earned on such surplus funds? Are they eligible for deduction under the main Section 80P? The AO says NO as such an income is not operational profits of the assessee which alone can be deducted from the gross profits. And the Supreme Court has also agreed with the AO like the Tribunal and the High court. The Apex Court has held that such an interest income would fall under the head 'income from other sources' under Sec 56 and is taxable.

Customs

Drawback on sesame seeds - the Petitioner failed to produce proof of payment of customs duty on Sesame seeds, claimed to have been imported by DTA suppliers - If agricultural inputs that are in fact not imported, do not otherwise suffer incidence of excise duty, question of fixing an AIR for such commodity cannot arise - no legal infirmity in the impugned decisions taken by Respondents to withdraw deemed export duty drawback granted to Petitioner: High Court

THERE is no estoppel against an illegality. If the Petitioner was in fact not entitled in law to claim deemed export duty drawback they cannot prevent the Respondents from taking corrective steps to recover the amounts wrongly released to the Petitioner. The petitioner, a 100% EOU was challenging the recovery of drawback of around 3 crore rupees paid to it on Sesame seeds. Para 6.12(a) of the Exim Policy provides that " supplies from DTA to EOU shall be regarded as deemed exports. The EOU, on production of disclaimer certificate from the DTA supplier, can claim the entitlements under Chapter 8 of the policy. Accordingly the EOU had applied for fixation of drawback on sesame seeds to the Deputy Commissioner, Noida SEZ.

See our columns Tomorrow for the judgements