Jurisprudentiol – Thursday's cases

By Vijay Kumar

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

CENVAT - Conclusion by the CESTAT that claim of department in demanding reversal of CENVAT credit is premature since inputs were damaged in transit is erroneous as it is vital fact that on account of damage caused, inputs cannot be used in manufacture of final product - moreover, assessee had claimed insurance on damaged inputs - Tribunal directed to reconsider matter afresh: HC

THE respondent availed CENVAT credit on imported capital goods. It is the case of the Revenue that the credit availed in respect of the goods damaged during transit is not in order since the respondents claimed the money from the Insurance Company. On the ground that the inputs were not at all used in the manufacture of final product a demand was raised to recover Rs.46,56,143/- for the period from January 1997 to November 2000. The case was adjudicated by confirming the demand and a penalty of Rs.8,43,509/- was also imposed u/s 11AC of the CEA, 1944 and a penalty of Rs.50,000/- u/r 173Q of CER, 1944.

The CESTAT had allowed the appeal on the ground that even though the goods are damaged such goods were still in the factory and it cannot be concluded that the damaged goods cannot be repaired and the possibility of using the inputs for manufacturing the final product cannot be ruled out. Holding that the claim made by the Revenue was premature, the Bench set aside the order and allowed the appeal.

Income Tax

Whether activities of assessee engaged in certifying standards for seeds to be used by farmers are to be construed as in relation to any trade, commerce or business and thus not body for charitable purpose - YES: HC

THE petitioner is the Andhra Pradesh State Seed Certification Agency, a society registered in 1976 under the AP (Telangana Areas) Public Societies Registration Act, 1350 Fasli with registration No.334 of 1976 as per Certificate of Registration dated 22-04-1976. The petitioner is established to act as a certification agency u/s 8 of the Seeds Act, 1966 and it certifies seeds which meet the minimum seed certification standards as per the Indian Minimum Seeds Certification Standards, 1988. It is asserted by the petitioner that its basic duty is to see that quality seeds are supplied to agriculturists; that it is a non profit, self sustaining organization created by the Government and is surviving on the certification charges levied for the technical and scientific services rendered by it to the seed producers/growers and agriculturists. The issues before the Bench are - Whether the activities of the assessee engaged in certifying standards for seeds are to be construed as in relation to any trade, commerce or business and thus not a body for charitable purpose - Whether the proviso to the section 2(15) would come into operation in such a case and Whether, therefore, the CIT is justified in rejecting the application of the petitioner for approval u/s 10 (23C) (iv) of the Act. And the verdict goes against the assessee.

Service Tax

Commercial Coaching Service - Benefit of Exemption under Notification No.12/2003-S.T for sale of study material to students - Appellant providing coaching classes to prepare students to take entrance examinations for medical and engineering colleges as well selling study material for such examinations - Prima facie, argument that scope of exemption under Notification 12/2003-ST cannot be whittled down by clarification, appears to be legal - The Appellants seems to be having proof enough to contest that value of services was not transferred to cost of books sold - The amount of Rs.8,98,512/- already deposited in this case is adequate to admit appeal - Waived pre-deposit of balance dues: CESTAT

THE Appellants were registered with service tax authorities and paying Service Tax under the head for Commercial Coaching and Training. But it was found by Revenue that they were not paying service tax on the full amounts received from students but were paying tax on part of the amounts received. Revenue took the total receipts as per their Profit and Loss account and demanded service tax of Rs.1,58,99,518/- on the receipts for which service tax was not paid. The adjudicating authority gave relief on account of many items like value of school fees, kit, blazers, bags etc sold to students, fee deposits which were returned, franchisee deposits returned etc. and confirmed the demand of Rs.47,16,921/- along with interest and penalties. Aggrieved by the above order, the appellants filed appeal.

See our Columns Tomorrow for the judgements