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 - When legislature specifically fixes time limit within which duty with interest and penalty at 25% is to be paid for availing incentive, it would neither be open to appellate authority nor any other authority to permit assessee to pay 25% penalty at any time other than time prescribed under Section 11AC: Bombay: HC

SUBSTANTIAL question of law before the High Court was: -

"Whether the CESTAT was justified in directing the assessee to pay 25% of the penalty levied under Section 11AC within 30 days from the date of communication of the order passed by the Tribunal, when the first and second proviso to Section 11AC specifically provide that the benefit of reduced penalty at 25% shall be available only if the duty determined under Section 11A(2), interest payable thereon under Section 11AB and penalty at 25% of the duty determined under Section 11A(2) has been paid within thirty days from the date of communication of the order of the Central Excise Officer determining duty payable under Section 11A(2) of the 1944 Act?"

Income Tax

Whether pre-operative legal expenses incurred for expansion of same line of business but with new production facility can be said to be revenue in nature - YES: ITAT

THE issues before the Tribunal are - Whether pre-operative legal expenses incurred for expansion of the same line of business but with a new production facility can be said to be revenue in nature - Whether expenditure incurred on product Registration, Trade-mark Registration fees and Patent Registration creates any intangible asset and hence it is capital in nature not allowable as deduction u/s 37(1) – Whether clinical trial expenditure incurred by the assessee is eligible for weighted deduction u/s 35(2AB) even if it was incurred outside the approved R&D facility - Whether, for the purpose of deduction u/s 80IC, the profit of the eligible Undertaking has to be worked out by excluding the indirect cost incurred towards exploitation and free usage of the marketing network established by the assessee over a number of years and also the value of the self-generated brand and allocating such cost to the said Unit. And the verdict partly goes against the assessee.

Service Tax

Appellant borrowing funds under scheme of External Commercial Borrowing from foreign lenders - commitment charges, up-front fee, arrangement fee, agency fee etc. whether chargeable to Service Tax under reverse charge mechanism - Stay granted and matter referred to CBEC Chairman for opinion: CESTAT

THE appellant had borrowed funds under the scheme of External Commercial Borrowing (ECB) from various foreign lenders including International Finance Corporation (IFC) and Asian Development Bank (ADB) to augment fund requirement for its upcoming UMPP at Mundra. In respect of the loans taken from ADB and IFC apart from the payment of interest, the appellant also made certain other payments i.e commitment charges, up-front fee, arrangement fee, agency fee and out of pocket expenses to the lenders.

It is the stand of the department that as per the provisions of section 68 of the Finance Act, 1994 in relation to the payments made towards commitment charges, up-front fee, arrangement fee, agency fee and out of pocket expenses paid to ADB and IFC, the appellant had not discharged their service tax liability on import of service under the category “Banking and Financial Services” on reverse charge mechanism.

See our columns Tomorrow for the judgements