Jurisprudentiol – Monday's cases

By Vijay Kumar

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

Activity of conducting stability test and validation analysis of samples of goods manufactured on job work basis by assessee – 'Technical Testing and Analysis service' – Pre-deposit of Rs. 4.55 lakhs ordered : CESTAT

THE appellant was engaged in manufacture of P or P medicaments on job work basis. As a part of the manufacturing activity, the appellant conducted stability analysis and validation tests on samples and recovered ‘stability analysis charges' and ‘validation charges' separately from the principal. The original authority demanded service tax with interest and imposed penalties under sections 76 & 78 alleging that the appellant failed to follow statutory formalities for paying service tax under the head ‘Technical Testing and Analysis service'. On appeal, Appellate Commissioner sustained the demand of service tax with interest but vacated penalty imposed under section 76 of the Act. Aggrieved by this order, the appellant filed an appeal before CESTAT seeking waiver of pre-deposit and staying recovery of the dues confirmed against them.

Income Tax

Sec 145 - Whether, if there is a mismatch of modvat credit and Central Excise duty payable on closing stock, rejection of books is justifiably warranted - NO, says ITAT

THE assessee company, engaged in the business of manufacturing of aluminum conductors and trading in shares and securities, filed its income tax return, which was picked for scrutiny. During the course of proceedings the AO observed about the MODVAT credit as mentioned in the audit report under section 44AB that out of total unutilized MODVAT of Rs. 71,45,581, an amount of Rs. 21,11,596, was included in the closing stock of finished goods which implied that the balance amount of Rs. 50,33,985, was unutilized MODVAT relating to the raw material stock. However, the value of closing stock of raw material was Rs. 1,43,44,522, and the excise duty relating that closing stock included in the MODVAT account was only Rs. 9,60,366. In view of this difference the AO formed a view that the books of the assessee were not correct and accordingly he rejected the books and framed the assessment after applying gross profit rate.

Customs – Settlement Commission

Settlement Commission has the power to impose penalty wholly or in part: High Court

THE Settlement Commission has the power to decide the terms of settlement on duty, penalty or interest, which has been done in this case. While passing an order in terms of section 32F of the Central Excise Act, 1944, the Settlement Commission has the power to grant immunity from prosecution. It has the power to impose penalty wholly or in part. The petitioner's plea of error in the order imposing duty, penalty and interest as bad on the ground that the specific provision has not been referred to is a misconceived plea and not tenable in law. The discretion is left to the Settlement Commission to impose appropriate duty, penalty and interest.

See our columns Monday for the judgements