Jurisprudentiol - Thursday's cases

By Vijay Kumar

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

Whether once Sec 35AB comes into play, then Sec 37 has no application for claiming deduction of expenditure incurred on transfer of technical knowhow - YES: SC

ASSESSEE Company manufactures equipments which were used for mining. It entered into an Agreement with an American company under which the American company was required to transfer technical know-how to the assessee for a consideration of USD 2,25,000/- to be paid in three instalments. The first instalment in convertible Indian currency amounting to Rs.17,49,889/- was paid. Subsequently, disputes arose between the contracting parties and the know-how was not transferred by the American company. The question which arose for determination was whether the amount of Rs.17,49,889/- could be claimed by the assessee as a deduction u/s 37. The claim of the assessee u/s 37 was rejected by the Department. However, the Department allowed the expenditure to be amortized u/s 35AB. Assessee contended that Section 35AB was not applicable to this case.

Service Tax

For levy of service tax under category of Tour Operator Service, tour is to be operated in tourist vehicle having any permit permissible under Motor Vehicle Act/Rules: CESTAT

APPELLANT are neither holding tourist permit nor having tourist vehicles, therefore, they are not liable to pay service on their activities for the period prior to 10/09/2004 - for the activity of Bus Reservation Agreement wherein the vehicles have been provided to other commercial concern/schools, etc. the appellants are liable to pay service tax for the normal period of limitation since issue involves interpretation - appellants are directed to pay service tax for their activity of BRA other than ITDC on their own computation for the normal period of limitation with a detailed chart within 30 days and the same to be submitted before the adjudicating authority for verification - since issue involved is of interpretive nature, no penalty is warranted.

Central Excise

Valuation - Tooling advance and value of inputs received free of cost is required to be included in the AV of goods supplied to M/s M & M - although rule 6 of Valuation Rules, 2000 is correct rule to be applied adjudicating authority has confirmed duty u/r 11 - such an invocation can be termed superfluous: CESTAT

(1) THE amount of tooling advance received by the appellant from M/s Mahindra & Mahindra is includible in the assessable value of the goods supplied to them in terms of Section 4(3)(d) of the Central Excise Act itself. Merely because, the demand has been confirmed under rule 11 read with section 4 (3) (d), it does not become infructuous.

(2) The value of inputs received free of cost by the appellant from M/s Mahindra & Mahindra is required to be included in the assessable value of goods supplied to them and the extended period for demand of differential duty has been rightly invoked.

(3) The extended period of time has been correctly invoked to demand ineligible CENVAT credit taken in respect of inputs found short, which have been written off in the books of accounts.

Central Excise - Valuation - ‘marker', ‘test kit' and ‘IAS column' are different items used for different purposes - As Test kit and IAS column are traded items, same cannot be considered as part of manufactured goods i.e Marker so as to add their value in AV of ‘Marker' - pre-deposit of adjudged dues in excess of Rs.1.62crores waived and stay granted: CESTAT

IN the present case, the marker is used for mixing in the kerosene by the Petroleum companies and the ‘test kit' and ‘IAS column' are used for checking the adulteration in other petroleum product such as petrol and diesel. The Revenue relied upon the decision of Hon'ble Supreme Court in the case of Frick India Ltd. and Siddhartha Tubes Ltd. where the bought out item is cleared as parts of the manufactured goods. The facts of the present case are different as the ‘marker', ‘test kit' and ‘IAS column' are different items used for different purposes. The marker is mixed with kerosene oil and test kit and IAS column are used for finding out any adulteration in the petroleum products. Therefore, the ratio of the relied upon judgments by the Revenue is not applicable to the facts of the present case. As the test kit and IAS column are traded item, the same cannot be considered as a part of the manufactured goods i.e. marker. Therefore, the applicant had made out a strong case for waiver of pre-deposit of dues adjudged

See our columns Tomorrow for the judgements