Jurisprudentiol – Wednesday's cases

By Vijay Kumar

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

Reimbursement of advertisement expenses from raw material supplier is not a consideration flowing directly or indirectly from buyer – Not includable in assessable value: CESTAT.

THE respondents are manufacturers of film rolls. They purchase film rolls from Konica and after slitting and packing, sell the same in market on payment of central excise duty on the price charged to the buyers. They also receive certain amounts from Konica, the supplier of the film, towards reimbursement of advertisement expenses. It is the case of revenue that the advertisement charges are to be treated as additional consideration flowing directly or indirectly from the buyer to the assessee.

Central Excise

Credit availed Acetone sent to job work for blending with Ethyl alcohol and subsequently denatured spirit is cleared to assessee on payment of duty – whether credit rightly availed on Acetone – Stay granted of 'a little short' of One crore demand and out-of-turn hearing fixed: CESTAT

THE appellant, a manufacturer of Ethylene Glycol sent denaturant viz. Acetone to Ethyl Alcohol manufacturers for the job work of blending Ethyl Alcohol with Acetone during the material period. The job worker supplied the denatured spirit to the appellant on payment of duty. They (job worker) did not take Cenvat credit of duty paid on Acetone, which was supplied by the appellant. The denatured spirit received from the job worker was used as input in the manufacture of Ethylene Glycol, which was subsequently removed on payment of duty.

The question arose as to whether Cenvat credit of the duty paid on Acetone, which was procured by the appellant and supplied to their job worker, was admissible to the appellant under the provisions of Rule 4(5) read with definition of “inputs” given under Rule 2 of the Cenvat Credit Rules, 2004. This dispute made its way into a show-cause notice and eventually the Commissioner, Central Excise, Pune -III held against the appellant and confirmed the duty demand of Rs. 97.67 lakhs and imposed an equivalent penalty.

Income Tax

India-Swiss DTAA - Applicant proposes to enter into cost contribution pact with non-resident Group Co for basic R&D - also, to pay coordination fee - it is neither business income nor fee for technical services - it is also not royalty as no right or right to use is conferred on applicant but coordination fee is taxable as royalty in India: Advance Ruling

THE Applicant is incorporated in India. It belongs to a Swiss Group of Cos. It proposes to enter into cost contribution agreement with ABB Zurich undertaking basic R&D activities and also pays 'Coordination fee' for coordinating the research efforts with the research centres and all the participating group entities. Whether payments made to the non-resident Group Co amount to royalty or fees for technical services. Whether it is business income as per Article 7 of the DTAA. Whether it is mere reimbursement of expenditure incurred towards the R&D.

Today is Chaitra Sukladi, Ugadi, Gudi Padava, Chetti Chand, Navreh and Sajibu Cheiraoba – greetings from DDT

See our columns Tomorrow for the judgements