Jurisprudentiol - Thursday's cases

By Vijay Kumar

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

Refund - Export of Services by SEZ Unit - unutilized credit of ST paid on input service claimed as refund u/r 5 of CCR, 2004 rejected by Commissioner (A) on ground that SEZ being under administrative control of Development Commissioner, CCR, 2004 and notification issued there under are not applicable - Order set aside and Matter remanded: CESTAT

THE appellant is a unit in the Special Economic Zone and is registered as a service provider under the category of "Business Auxiliary Services". They exported taxable output service under the Export of Service Rules, 2005 without payment of service tax. This resulted in accumulation of unutilized credit of service tax availed on input service for which they filed a refund claim for Rs.5,63,332/- for the period October to December, 2010 in terms of Rule 5 of the CCR, 2004 r/w Notf. No. 5/2006-CE(N.T). The lower adjudicating authority opined that the input service procured by the appellant from the Domestic Tariff Area were exempted unconditionally vide Notification no. 9/2009-ST dated 03.03.2009 and, therefore, the appellant should not have paid any duty. Holding that seeking refund of input service tax credit for the activities undertaken within the SEZs is not consistent with the scheme of refund under rule 5 of the CENVAT Credit Rules, 2004, the refund claim was rejected.

Income Tax

Whether before invoking provisions of Sec 179 against Director of a Pvt Company it is necessary for Revenue to establish that tax due cannot be recovered from company - YES: Gujarat HC

THE issues before the Bench are - Whether in order to invoke the provisions of section 179 against a director of a private limited company, the Department must first establish that tax dues from the company cannot be recovered; Whether under section 179 of the Act, the Department could only recover tax due from the director of a private limited company and not interest or penalty and Whether on the facts and in the circumstances of the case, the Department is not justified in seeking recovery of the dues against the petitioner on the ground that there was no gross negligence on part of the petitioner to which non recovery can be attributed. And the verdict goes in favour of the assessee.

Central Excise

Valuation - Sale of Digital Loop Carriers (DLC) Equipment and related Operation Software on Separate Invoices - There is no justification for including value of such software in value of DLC equipments: CESTAT.

THE appellant is engaged in the manufacturing of LED Display Boards, Line Telephony Equipment and related software, etc. In the year 2002, orders were placed by M/s Bharat Electronics Ltd., (BEL) on the appellant for manufacture and supply of Digital Loop Carriers (DLC). The orders were placed for supply of Hardware and also the operating software and spare parts. BEL, in turn delivered the goods to M/s. MTNL for their ultimate use. The invoice raised for supply of the goods to BEL, indicates the value of Hardware and Software separately. The Hardware was cleared on payment of applicable rate of duty, whereas software was cleared at NIL rate of duty. It appears that there was correspondence in February 2003 regarding the supply of software by the appellant and the department. Further, the audit of the appellant's factory was conducted during December 2003. A SCN dated 05.07.2007 demanding an amount of Rs.2,12,23,061/- was issued alleging that the software supplied along with DLC was not a software of its own but an integral part of the DLC; that the software was not distinct and separate product from the equipment; that the value of software should be included in the value of hardware cleared and supplied to BEL. The Commissioner confirmed the total duty as proposed in the SCN along with interest and imposed penalties.

Sarasvati namastubhyam varade kamarupini Vidyarambham karishyami siddhirbhavatu me sada.

Tomorrow is a Holiday - Vijaya Dasami