Jurisprudentiol – Monday's cases

By Vijay Kumar

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

Central Excise - Deterrent action - imposition of restriction on facilities of payment of duty is more in nature of a penal action on a prima facie finding of "knowingly involved in committing offence": High Court

“KNOWINGLY” is often used as synonymous with “intention". The said attribute as to the knowledge will arise only when the person is conscious of the consequences of his conduct.

The High Court had no hesitation in accepting the plea of the petitioner that on the plain terms of the notification, in the absence of any material to attribute any motive to the petitioner, the penal restrictions consequent on the violations given under the notification will not be applicable to the petitioner's case.

Income Tax

Does Sec 80IA(5) create a legal fiction which renders redundant income from other sources and hence unabsorbed depreciation cannot be set-off: ITAT

ASSESSEE claimed deduction of section 80IA(5), on the income earned from windmill. AO disallowed the same on the same on the ground that wind mill is not separate. AO further took the view that in view of provision of section 80IA(5) the unabsorbed depreciation cannot be allowed to be setoff with any other business income and the same is required to be setoff with the income eligible for deduction u/s 80IA. CIT(A) relying on the decision of Mohan Breweries decided the issue in favour of the assessee.

Service Tax

Trading activity is not an exempted service - rule 6 of CCR, 2004 does not apply – there is no provision in Cenvat Credit Rules, 2004 to cover such situations - only obvious solution which is legally correct is to ensure that once in a quarter or once in a six months, quantum of input service tax credit attributed to trading activities according to standard accounting principles is deducted - Matter remanded for quantification: CESTAT

WE have a situation where an assessee would not be eligible to take input service tax credit on an output which is neither a service nor excisable goods and at the same time there is no provision to cover situations where an assessee is providing a taxable service and is undertaking another activity which is neither a service nor manufacture. In such a situation the only correct legal position appears to be that it is for the appellant to choose and segregate the quantum of input service attributable to trading activity and exclude the same from the records maintained for availment of credit. Naturally this cannot be done in advance since it may not be possible to forecast what would be the quantum of trading activity and other activity which is liable to service tax.

See our columns Monday for the judgements