Jurisprudentiol – Monday's cases

By Vijay Kumar

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

Penalty is not automatic - For Penalties under Sections 76, 77 and 78 of Act, not only ingredients of those Sections should exist, but also there should be absence of reasonable cause for said failure: High Court

(1) THE imposition of penalty under the Act is not automatic. The ingredients mentioned in the Section should exist. In respect of Sections 76, 77 and 78 of the Act, not only the ingredients of those Sections should exist, but also there should be absence of reasonable cause for the said failure.

(2) Sections 76 and 78 are mutually exclusive. If penalty is payable under Section 78, Section 76 is not attracted. Therefore, no penalty can be imposed for the same failure under both the provisions.

(3) Even if the ingredients stipulated in Sections 76 and 78 of the Act are established, if the assessee shows reasonable cause for such failure, then the authority has no power to impose penalty in view of Section 80 of the Act.

(4) Even after holding that the ingredients stipulated in Sections 76 and 78 exist, and there is no reasonable cause shown for failure to comply with the said provisions, the authority has the discretion regarding the quantity of the penalty to be imposed. However, the penalty to be imposed cannot be less than the minimum, or more than the maximum prescribed under the statute.

(5) The minimum penalty to be imposed is Rs.100/- and not Rs.100/- per day.

(6) If the penalty imposed is not less than the minimum prescribed under law, the revisional authority has no power to enhance the amount of penalty on the ground that it is less.

(7) When the assessing authority, in its discretion has held that no penalty is leviable, by virtue of Section 80 of the Act, the revisional authority cannot invoke its jurisdiction and impose penalty for the first time.

Income Tax

Whether when services are yet to be given and assessee is under obligation to provide services over a period of time, entire sum received cannot be taxed on receipt basis - YES, rules ITAT

ASSESSEE is engaged in providing services to Holiday Resort Companies for which it received service charges. It entered into agreements with PHRC which was in the business of property development and developing resorts and formed a club whose object was to secure for its members exclusive rights of occupation of certain apartments fully furnished at various locations in India for specified period each year for 78 years. Assessee acted as intermediary between the property developers and the members, who had acquired time share in Holiday Resort Companies. For the services rendered, the assessee was paid a onetime Administration / Contract Fee per member and an annual fee per villa and annual inspection charges plus travel expenses over the total period of the time share, which was of 78 years. The assessee was recognizing as revenue only 25% of the Administration / Contract Fee in the year of receipt and the balance 75% was recognized as revenue spread over the remaining period of the time share. AO held that the assessee had deferred revenue recognition of 75% of these Administration / Contract Fees from members over the remaining portion of the time share period to a maximum period of 78 years in order to reduce its tax liability in the year of reoperative receipt and rejected the assessee's claim and treated the entire amount as income in the initial year of receipt.

Central Excise

"ATM PIN mailer" is printed continuous computer stationery which is further used by Bank in dot-matrix printer to print PIN number of their customers - Prima facie classifiable under Chapter 48 of the CETA, 1985 and not chapter 49 - pre-deposit ordered: CESTAT

THE applicants are engaged in the manufacture of personal identification number (PIN) mailer stationery and other stationery items like airway bills, application forms, stickers, dockets, pre-printed bills, challans etc. The applicant claimed classification of the products in dispute under Chapter 49 of the Central Excise Tariff whereas the Revenue confirmed the demand after classifying the same under Chapter 48 of the Tariff.

Out of the total demand of Rs.99,00,281/- confirmed by the Commissioner of Central Excise, Nashik, the demand of more than Rs.73 lakhs pertains to the product, "pin mailer". The assessee is before the CESTAT with a Stay application.

See our columns Monday for the judgements