Jurisprudentiol – Thursday's cases

By Vijay Kumar

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

Valuation of goods - provisions of CAS-4 will apply not only prospectively but also for period prior to issue of Board Circular dated 13.02.2003 since it only lays down principle of computing cost of production in case of captive consumption: CESTAT

SINCE the assessee had not included in the assessable value the expenses on account of corporate head office, advertising, marketing and financial costs , the department was of the view that they have under valued the products and accordingly differential duty to the extent of Rs.1,23,63,238.66 is liable to be recovered on the clearances of automobile parts for the period from December 1997 to June 2000 and, accordingly, a show-cause notice dated 2.1.2003 was issued to the party invoking the extended period of time.

Income Tax

Whether when company's Board Resolution allows wife of Managing Director to accompany him on foreign tour to take care of reciprocity in international business, Revenue can sit in judgement and disallow it as not incurred for business purposes - NO, rules High Court

THE key questions before the High Court are - Whether, as per the provisions of the I-T Act, business expenditure is limited to the expenditure incurred for an employee only; Whether when Board Resolution allows the wife of the managing director to accompany him on his official foreign tour so that reciprocity of international business is taken care of, Revenue can sit in judgement of such a decision and disallow the same as not incurred for business of the company and Whether when the company's Board Resolution is silent on spending for foreign tour of the wife of Dy MD, even then such expenditure can be claimed as allowable. The final verdict partly goes in favour of the assessee.

Service Tax

Service Tax paid on Banking and Other Financial Services being advisory and placement charges in connection with private placement of preferential equity shares is an activity related to business and is an Input Service – Prima facie case – Stay ordered: CESTAT

WE are prima facie of the view that the services of banking and other financial service received by the party in respect of their private placement of preferential shares for raising the capital is an activity related to the business and, hence, eligible for Cenvat credit as per the definition of input service given in the Cenvat Credit Rules, 2004. We are of the view that merely because the invoice has been raised on the head office, the credit cannot be denied to the factory of the assessee in the instant case. Thus, a prima facie case has been made out by the assessee for stay of the recovery of the demands towards Cenvat credit, interest and penalty…

See our columns Tomorrow for the judgements