Jurisprudentiol – Thursday's cases

By Vijay Kumar

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

Recovery of arrears – Central Excise dues cannot have precedence over claims made by Banks: HC

THE oft-repeated dispute of whether the tax dues to the Government have the precedence over the secured creditors like banks and other financial institutions has been resolved again by the High Court of Andhra Pradesh while disposing of a bunch of Writ Petitions filed by the Financial Institutions / Banks and the Department.

Section 12 of the Central Excise Act enables Government to make applicable the provisions of the Customs Act relating to various aspects of levy and collection of Customs duty etc and when Section 12 is silent as to the procedure of recovery of sum due to government under the Customs Act, vires of notification No.68/63 is doubted. The Bench, however, decided the case on the assumption that Section 11 of the Central Excise Act, 1944 read with Notification No 68/63 CE(NT) enables the empowered officer to recover the excise dues also by attachment and sale of movable or immovable property as the vires of notification No.68/63 was not specifically challenged.

Income Tax

Income tax - Whether when assessee incurs certain expenditure on abandoned project, even if such expenses are pre-operational in nature, it is to be allowed as revenue expenditure - YES: HC

THE issues before the Bench are - Whether the expenses on lease-rent can be claimed as revenue expenditure when lease agreement has all the features of a hire-purchase agreement; Whether when there is a binding obligation on the hirer to ultimately purchase the leased asset, it is a case of hire purchase; Whether there is any difference between the 'lease' and 'hire purchase' transactions and Whether when the assessee incurs certain expenditure on abandoned project, even if such expenses are pre-operational in nature, it is to be allowed as revenue expenditure. And the verdict goes against the Revenue.

Service Tax

Appellants engaged in brand promotion of ‘INTEL' and ‘MICROSOFT' for which commercial considerations were being paid by both brand owners periodically - Matter referred to third Member: CESTAT

THE appellants are engaged in brand promotion of ‘INTEL' and ‘MICROSOFT' for which commercial considerations were being paid by both the brand owners periodically. It appeared that the services provided by the appellants are taxable under ‘Business Auxiliary Service' as per Finance Act, 1994 effective from 01.07.2003. It was found that the appellants were not discharging their service tax liability on the commercial considerations received by them from the two brand owners.

Member (Judicial) held: the appellants are engaged in the activity of promoting the brand of Intel/Microsoft consequently, the activity of ‘promotion or marketing of logo or brand' does not cover under the category of Business Auxilliary Service by relying on the judgment of Jetlite (India) Ltd.

Member (T) held: the appellants are engaged in the activity of promoting the branded goods of Intel/Microsoft, therefore, the judgment of Jetlite (India) Ltd., (supra) is not applicable to the facts of this case and the demands are rightly confirmed under the category of Business Auxilliary Service and the extended period of limitation has rightly been invoked.

Matter referred to Third Member.

See our columns Tomorrow for the judgements