Jurisprudentiol - Friday's cases

By Vijay Kumar

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

Hot Melt unit is used for packing finished goods and being in nature of incidental or/and ancillary to main manufacturing activity, assessee was rightly held entitled to claim MODVAT credit: HC

“HOT Melt Unit" was admittedly used by the assessee while packing their finished goods - "welding electrodes". Since packing is held to be one of the essential components of the manufacturing process of the finished goods and being in the nature of incidental or/and ancillary to the main manufacturing activity, the assessee in this case was rightly held entitled to claim modvat credit on the item - "Hot Melt Unit" treating the same as capital goods under the Rule 57-Q ibid for claiming benefit.

Income Tax

Whether deduction can be claimed for an expense incurred for purpose, which constitutes an offence - NO: HC

APPELLANT is a financial enterprise engaged in accepting fixed deposits and pays interest. During assessment, AO had made an addition on account of an amount which was claimed as interest paid to the depositors. It was disallowed on the basis that the maximum rate of interest payable under the Kerala Money Lenders Act was 14%. The amount, which was disallowed, represented the amount paid in excess of the legal limit. On appeal CIT(A) and Tribunal confirmed the AO's order. THE issues before the Bench are - Whether deduction can be claimed for an expense incurred for the purpose which constitutes an offence - Whether deduction can be claimed beyond the express provisions of the Act and Whether the expenditure incurred by way of payment of interest in excess of the limit imposed under the State Money Lenders Act, is allowable as business expenditure. And the verdict goes against the assessee.

Service Tax

Appellant undertakes processing of data and which are exported electronically by transmitting to server of telecom authorities in India and thereafter uplinked/transmitted to foreign service recipient - dedicated telecom lines are essential for this purpose & is to be considered as Input Service - ST paid on leased telecom lines is available as CENVAT credit - matter remanded: CESTAT

THE claims were rejected by the lower authorities on the following three grounds -

+ a part of the amount on which CENVAT credit was taken was distributed by their Head Office as Input service distributor and at the relevant time the Head Office was not registered as an input service distributor and, therefore, they could not have distributed the input service tax credit.

+ the other part of the refund claim was rejected on ‘directly availed services' on the ground that the service provided by the telecom service providers who leased the telecommunication lines to the appellant and charged service tax on the same, is not an eligible input service.

+ and that the appellants have not directly exported the output service from their premises but have routed the same through telecom authorities located in India and, therefore, the definition of export is not satisfied.

See our columns Tomorrow for the judgements