Jurisprudentiol - Wednesday's cases

By Vijay Kumar

Legal Corner Icon — the image was hosted by the publisher and was not captured.CENVAT Credit

By no stretch of imagination, playing cards can be construed as an input for manufacture of spray guns; playing cards cannot be construed as ‘input service' as they are goods: CESTAT

THE appellant are manufacturers of spray gun and spares falling under chapter 84 of the CETA, 1985. As a marketing gimmick, along with spray guns they supply playing cards as free gift. They procured playing cards on payment of excise duty and took CENVAT credit thereon. While discharging central excise duty on spray guns, they included the cost of the playing cards in the assessable value even though they claimed that playing cards are supplied free.

Income Tax

Whether when assessee pays commission to its Director, who holds 1% equity, for services rendered, such sum can be said to be in lieu of dividend and to be treated as a ruse to minimise overall tax effect - NO, rules ITAT

ASSESSEE had claimed expenses on account of commission to director amounting to Rs. 39 lacs. Since in the opinion of AO this claim was prima-facie not allowable as per the provisions of 36(1)(ii), he required the assessee to furnish details of commission to director with the basis thereof and to also justify its allowability u/s 36(1)(ii). The assessee submitted that commission amounting to Rs. 39 lacs had been paid @ 1% of net profit. It was further pointed out that the commission was paid as remuneration for the services rendered by her for running the business and this sum was not otherwise payable as profit or dividend. The AO did not accept the assessee's contention and held that the commission of Rs. 39 lacs was not allowable as per the provisions of sec. 36(1)(ii). The CIT(A) confirmed the AO's view.

Central Excise

Notification No. 14/1997-CE (NT) dated May 3, 1997 restricting admissibility of Modvat credit for all petroleum products to extent of 10% irrespective of fact that whether inputs were manufactured in India or inputs were imported into India, is ultra vires: HC

THE objective of the amendments so made vide Notification No.14/1997 and Section 87 of the Finance Act, 1997 was to restrict Modvat credit to 10% for inputs produced and manufactured in India is thus an undisputable position. By clubbing non-APM products, i.e. inputs imported on payment of full duty at the rate of 15%, the objective was not achieved and the amendments had no rationale relation with imports of petroleum products at full rate of duty.

See our columns Tomorrow for the judgements