Jurisprudentiol – Tuesday's cases

By Vijay Kumar

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

Whole basis of the impugned show cause notice and the adjudication order is that the petitioner manufactures blank CDs/DVDs at an intermediate stage - When this assumption is nothing but a mere ipse dixit on the part of the revenue, without any foundation, the show cause notice as well as the adjudication order do not have any legs to stand on and are quashed - Writ Petitions allowed: High Court

IT is absolutely clear that at no point of time in the manufacturing process employed by the petitioner, does a blank CD/DVD come into existence. The very first test of manufacture is not satisfied in the present case. When no such product comes into existence at all, then, obviously, the second test of marketability cannot also be satisfied. Consequently, no excise duty can be demanded from the petitioner for blank CDs/DVDs. The entire show-cause notice as also the adjudication order is, therefore, without any substance

Income Tax

Whether transfer of leasehold rights attracts application of provisions of section 50C - YES: ITAT

ASSESSEE had taken a plot of land on lease from Maharashtra Industrial Development Corporation (MIDC) in the year 1967 for a lease of 95 years commencing from 1st January, 1967. Assessee had also paid premium to MIDC as per their rules prevalent at that time. In the previous year 2007-08 assessee entered into a MOU for transfer of part of the said land on 9th April 2007, received an advance of Rs.30lacs and applied to MIDC for their consent. MIDC gave their consent on 25/1/2008 for two different plots sub divided from the original one and accordingly the transfer of the lease was affected by agreement dated 7th March, 2008. At the time of entering into MOU an advance of Rs.30lacs was obtained by assessee and subsequently the two plots together with Building thereon were transferred for a total sum of Rs.2,01,57,606. Assessee worked out capital gain of Rs.1,60,38,687 after deducting the value of building at Rs.14,30,220/- and the market value as on 1/4/1981 increased by indexation cost to Rs.26,88,699. The AO applied Sec. 50C of the Income tax Act and considered the market value of the plot of land at Rs.2,39,91,000 and considered this as long term capital gain for the purpose of computation of income. While taking this view the AO did not allow any cost as deduction and also did not exclude the value of building standing on the plots of land which was valued at Rs.14,30,220 and adjusted in the block of assets while computing depreciation under the Income tax.

Service Tax

While framing charges adjudicating authority has not specified specifically under which part of the IPR definition the applicant is covered - demand of Rs.18 Crores not sustainable - Prima facie case in favour - pre-deposit waived and stay granted: CESTAT

THE appellant is a manufacturer of Ion exchange resins. M/s Purolite International Ltd. filed a suit in the USA court and the applicant was charged with using the trade secret of M/s Purolite International Ltd. Court proceedings were initiated against the applicant.Not to escalate the matter further and be saddled with damages of astronomical proportions, the applicant entered into an agreement with M/s Purolite International Ltd., to settle the dispute out of court. As per the settlement, they paid consideration for the use of trade secret and became the co-owner of the Purolite's technology and information transferred by ShriNarender Singh to the applicant.

Revenue found this "out of court settlement" and took a view that the consideration paid by the applicant to Purolite is covered under Intellectual Property Service under reverse charge mechanism and, therefore, the applicant is liable to pay service tax on the entire consideration.

Proceedings were initiated and this resulted in a confirmation of demand of Service tax of Rs.18,05,50,717/- along with imposition of equivalent amount of penalty under section 78 of the FA, 1994 by the CCE, Pune I .

See our Columns Tomorrow for the judgements