Jurisprudentiol - Wednesday's cases

By Vijay Kumar

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

Applicant, job worker, receiving compensation on termination of contract with principal - since applicant were paying CE duty at same price at which principal was selling goods, it cannot be said that ‘termination proceeds' is an additional consideration - Pre-deposit waived and Stay granted: CESTAT

THE applicant is undertaking job-work of M/s Dystar India Pvt. Ltd. So as not to have any problems on the valuation front, the applicant was paying duty at the same price at which M/s Dystar India was selling the goods. But if you are destined to receive a demand, you will receive one. Upon termination of the contract, the applicant received an amount of Rs.2.20 Crores from M/s Dystar India. Revenue was of the opinion that this termination proceeds is a new modus operandi of undervaluing the goods - So, a demand was raised alleging that this amount is an "additional consideration" and the same has to be included in the assessable value of the goods cleared.

Income Tax

Whether while computing exemption u/s 10B, loss arising from non-eligible unit can be adjusted against profits arising on eligible unit - NO: ITAT

ASSESSEE, a partnership firm, is engaged in manufacture and export of ready-made garments. Assessee had three units. Unit-I was not entitled to any exemption. Unit II and Unit III were 100% EOU eligible for exemption u/s 10B. Assessee set off losses of eligible units (Unit-II and III) against the profits of Unit-I. AO held that income of eligible units that were entitled to exemption u/s 10-B would not form part of the total income under Chapter-III and therefore they would not enter the computation of total income at all and therefore the set off of income of non-eligible unit against the loss of the eligible unit could not be allowed.

Service Tax

Club or Association Service - Applicant charging one-time registration fee and also recovering annual subscriptions from members for providing services of general guidance on business matters and representation of members problems at local/state and Central government level etc. - Since they themselves are paying service tax on club or association service w.e.f. 1.4.2009 there is no prima facie case in their favour - Pre-deposit ordered of Rs.5 lakhs: CESTAT

THE applicant has relied on the decision of the Jharkhand High Court in the case of Ranchi Club Ltd. , The High Court has held that service tax is not liable on the members of the club as the club is giving service to its member and club is formed on the principle of mutuality and, therefore, any transaction by the club with its member is not a transaction between two parties. In a Member's Club when club is disbanded, the members of the club have rights on the assets of the club. The applicant has not been able to give any evidence to prove that applicant is a Member's club and there is mutuality between club and the members. Therefore, in the absence of any such evidence the ratio of the Ranchi Club Ltd. case cannot be applied in the present case.

See our Columns Tomorrow for the judgements