Jurisprudentiol - Friday's cases

By Vijay Kumar

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

Cenvatted items after use cleared without payment of duty - Revenue demanding duty as Scrap without indicating any classification of items - For demanding duty on excisable goods, firstly same are to be classified under tariff heading and thereafter appropriate rate of duty is to be applied: CESTAT

FOR demanding duty on excisable goods, firstly the same are to be classified under a tariff heading and thereafter applicable rate of duty is to apply. In the present case, neither in the impugned order nor in the order-in-appeal there is a finding regarding the classification of items in question. Therefore, the matter requires re-consideration by the adjudicating authority to decide the matter afresh regarding the issue of classification and the applicable rate of duty. The impugned order is set aside after waiving the pre-deposit of the dues adjudged. The matter is remanded to adjudicating authority for de novo consideration.

Income Tax

Whether when assessee fails to deduct tax at source from payments made but deposits TDS due before end of FY, even then disallowance u/s 40(a)(ia) is warranted - NO: ITAT

AO observed that out of the total amount debited under the head “freight and cartage”, a sum of Rs.10,18,825 was paid to five persons exceeding the prescribed limit of Rs.50,000 on which no tax was deducted at source. According to the AO, since no tax was deducted at source, the said expenditure was not allowable. He made disallowance by invoking provisions of section 40 (a)(ia). The CIT(A) deleted the addition after having observed that there was no violation of provisions of section 194C and therefore the AO was not right in invoking the provisions of section 40 (a)(ia). The issue before the Bench is - Whether when assessee fails to deduct tax at source from the payments made but deposits the TDS sum before the end of the FY, even then disallowance u/s 40(a)(ia) is warranted. NO is the Tribunal's answer.

Service Tax

ST - Appellant borrowed money by way of 'syndicated loans' from various overseas banks for purpose of international acquisitions and capital expansions - Borrowing and lending are two sides of the same coin and one cannot exist without the other - appellant paid arrangement fees, agency fees, commitment fees or other fees for procuring lender/lender syndicate - service correctly classifiable under Banking & Financial Services - tax liability under reverse charge mechanism for the period prior to 18.04.2006 not sustainable - pre-deposit ordered of Rs. 1 Crore: CESTAT

THE appellant borrowed money by way of ‘syndicated loans’ from various overseas Banks for the purpose of international acquisitions and capital expansions. In order to procure a lender/lender syndicate, the appellant appointed various Banks abroad as Mandated Lead Arrangers (MLAs) and paid arrangement fee, which is the fee paid to procure lender/lender syndicate. The department was of the view that the appellant was liable to pay Service Tax on the fees paid to the MLAs and accordingly issued notice for recovery of Service Tax amounting to Rs.8,05,24,006/- along with interest during the period 1.10.2005 to 31.1.2007 under the category of Banking and Financial Services under the reverse charge mechanism as provided for vide Section 66A of the Finance Act, 1994.

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