Jurisprudentiol – Tuesday's cases

By Vijay Kumar

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

Goods manufactured in Customs bonded area cannot be considered as manufactured in domestic tariff area and would not attract Central Excise duty - Revenue appeal for upholding Rs.1.23 Crores demand rejected : CESTAT

THIS case shows how the Revenue officers at the drop of a hat raise a duty demand of more than One crore and in spite of the adjudicating authority doing justice to the case by dropping the demand the higher ups pursue the case with devotion only to be shown the door.

The respondents had imported “Pipes” and “Connectors” and welded them for use by M/s ONGC for off-shore oil exploration/exploitation. The department took the stand that process of welding the connectors to the pipes in the Customs Warehouse amounts to manufacture and, therefore, the respondent should have discharged Central Excise duty on pipes, which were connected by welding the connectors.

What followed was a demand notice of Rs.1,23,92,872/-. The Commissioner, Central Excise, Belapur held that the process undertaken by the respondent did not amount to manufacture and, therefore, excise duty is not liable to be paid on the finished goods namely “Casing pipes with connectors” which is the result of welding the connectors and the pipes.

An order which drops a one crore demand is bound to send jitters and this order did so. Resultantly and coupled with the fact that there is no fee for filing an appeal before the CESTAT, a monotonously worded revenue appeal made its way to the CESTAT.

Income Tax

Reassessment - when Assessing Officer took a possible view, Commissioner exceeded his jurisdiction in seeking recourse to his power under Section 263 - order sought to be revised must be erroneous in so far as it is prejudicial to the interests of Revenue : High Court

IT is now a settled principle that where the Assessing Officer has adopted one of the courses permissible in law or where two views are possible and the Assessing Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the Assessing Officer is unsustainable in law. In the present case, two views were inherently possible and the assessee therefore, cannot be subjected to the exercise of the jurisdiction under Section 263.

Service Tax

CENVAT Credit on pipes used for laying pipeline for transportation of natural gas - Credit is prima facie admissible - Credit is also prima facie admissible on construction service and commissioning and Installation Service - pre-deposit waived : CESTAT.

THE appellant is a State Government undertaking in Guajrat, engaged in providing the service of transport of goods through pipelines. Three Stay applications have been filed by the appellant on the following issues:

1. Denial of CENVAT Credit of Rs 44 crores on pipes used for construction of the pipeline by the EPC contractor.

2. Denial of CENVAT Credit of Rs 63.70 crores on input services like, Construction Service, Commissioning and Installation Service and

3. Demand of Service tax of Rs. 34.34 crores by classifying the service under the category of Clearing and Forwarding Service, instead of under “Transport of goods through pipeline”

See our columns Tomorrow for the judgements