Jurisprudentiol - Thursday's cases

By Vijay Kumar

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

Conversion work done through a job-worker would not, prima facie, constitute transfer of the imported raw materials - CESTAT order directing applicant to make a pre-deposit of Rs.1 Crore quashed: High Court

THE assessee is engaged in the manufacture of angles, flat bars of Iron and Steel etc. On the basis of the prior exports effected the assessee was granted advance licences under which the assessee was entitled to import raw materials viz. prime steel billets without payment of duty under Notifications 51/2000-Cus and 43/2002-Cus.The assessee had purchased billets from Maharashtra Steel Rolling Mills Private Limited (MSRM) another manufacturer-exporter on High sea sale basis and on arrival cleared the same without payment of duty by availing the benefit under the impugned notifications.These duty free billets were sent to MSRM for conversion into angles on job work basis as per the Memorandum of Understanding entered into by and between the assessee and MSRM.

Income Tax

Whether when assessee receives interest from subsidiary, and latter also receives interest from former, under two independent contracts, provisions of Sec 10(23G) require any netting of such payments - NO: High Court

The Assessee had received interest from DHIL, a wholly own subsidiary of the Assessee and had credited the same to its profits and loss account. The Assessee was also paying interest to DHIL in respect of an entirely different contract/ transaction from the one in respect whereof DHIL paid interest to the respondent. The AO held that exemption u/s 10 (23G) can be allowed only on the net interest received. The CIT (A) held that subject to necessary approval from the Central Government, the deduction u/s 10(23G) ought to be allowed without adjusting interest paid by the respondent. The Tribunal upheld the order.

Service Tax

Contention that since appellants were paying VAT on charges of repair and maintenance they were not required to pay Service Tax is without any merit: CESTAT

THE appellants entered into a contact with M/s Hindustan Zinc Ltd. for maintaining and repairing their heavy dumpers for a period of five years. As per the contract, they were charging consideration under two heads-one charging for manpower and logistics and other charging for maintenance and repair. The appellants were paying service tax on consideration received under the former head but were not paying service tax on the latter head.

The reason given for not paying service tax on maintenance and repair charges is that they were paying VAT on such charges. It is also their contention that consideration received under the contract for maintenance and repair is towards cost of spare parts and which charges they recovered irrespective of the fact whether spare parts were actually supplied or not, because according to them maintenance and repair charges were fixed on average basis taking into consideration the life of the dumper and life of spare parts.

Central Excise

When there is a specific exclusion on availment of input credit, the submission that there was no suppression of this fact just because there was no column in ER-1 or no specific requirement of intimating the department or submitting invoice is not acceptable: CESTAT

THE appellant during the period September 2004 to May 2005 had availed cenvat credit on ineligible inputs namely, Light Diesel Oil amounting to Rs. 4,40,046/-. Proceedings were initiated which culminated in confirmation of demand with interest and penalty under Rule 15 of CCR, 2004 r/w s. 1AC of CEA, 1944.

Before the CESTAT, the appellant submitted that the Show Cause Notice dated 01.12.2008 while seeking to invoke the extended period of limitation alleges that they had suppressed the fact of availment of CENVAT credit on LDO, since it was never declared to the department either in ER-1 returns or by any other way and also the documents on which the CENVAT credit was availed were never submitted to the department. It is further submitted that there is no statutory requirement for submission of invoices on the basis of which CENVAT credit has been taken nor there is any requirement to indicate the details of CENVAT credit taken as well as the details of inputs in the return filed and in this scenario suppression of facts could not have been alleged.

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