Jurisprudentiol – Thursday's cases

By Vijay Kumar

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

Central Excise duty paid on imported Modems supplied to BSNL by availing CENVAT Credit of Additional duty of Customs and SAD paid on import - No case for imposing equal penalty under Section 11 AC - CESTAT by Majority.

THE appellants imported different varieties of ASDL Modems in response to the tenders floated by BSNL for Dataone scheme. After importation, the appellants paid central excise duty on the Modems supplied to BSNL by utilizing the CENVAT Credit of additional duty of customs and SAD paid at the time of import by treating the post import activities as amounting to manufacture. It is the case of the department that no manufacturing activity was undertaken by the appellants on the imported Modems and the payment duty was not correct. On being pointed out by the revenue, the appellants reversed the remaining CENVAT Credit lying in balance after payment of duty on the Modems supplied to BSNL. In addition to demand of interest on the CENVAT Credit, equal penalty was also imposed under Section 11 AC read with Rule 15(2) of the CENVAT Credit Rules, 2004. Personal penalties were also imposed on the directors.

Income Tax

When assessee takes a house on lease for its Chairman and pays huge security deposit, whether notional interest on such deposit is to be treated as a sum liable to FBT - NO, rules ITAT

ASSESSEE Company provided residential accommodation to its chairman and mentioned the monthly rent in the return of FBT - During the course of assessment proceedings the AO observed that for this accommodation the assessee had given huge amount of security, observing this security the AO asked the assessee to explain why interest attributable to security should not be considered for FBT. In response, it was mainly stated that the security deposit was paid for taking the above said flat on lease basis which was provided to Chairman & Managing Director of the company. The AO, observed that according to section 115WB(1), ‘fringe benefit' means any privilege, service, facility or amenity, directly or indirectly, provided by an employer, whether by way of reimbursement or otherwise, to the employees, and accordingly taxed the notional interest attributable to this security in the hands of the assessee - CIT(A) affirmed the order of the AO.

Central Excise

Plastic bottles manufactured from raw materials supplied by M/s Marico Ltd. and cleared on payment of duty to M/s Aero Pharma for packing hair oil under brand name - Assessable Value correctly arrived on the basis of cost of raw materials plus job charges - no cause for applying rule 8 or rule 10A of Valuation Rules, 2000: CESTAT

THEY make the rules but are unsure how to apply it. So they issue demand notices and expect the CESTAT to settle the issue. In the process, they learn and with them a lot many high profile Audit objections fade into oblivion.

The present case is a classic example of misapplication of the Central Excise Valuation Rules, 2000 by the lower authorities. Fortunately, the Bench is more than happy to explain to the department, in a lucid manner, the provisions of the Valuation Rules 8 & 10A and the circumstances as to when it can be applied.

See our columns Tomorrow for the judgements