Jurisprudentiol - Thursday's cases

By Vijay Kumar

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

Denial of CENVAT - Merely because they have not paid duty on the sacks which were manufactured in factory of job worker, there is no justification for denial of credit on inputs which have gone into packing materials - The order of Commissioner (Appeals) is legal and proper: CESTAT.

IT is not in dispute that the impugned inputs for making packing materials have been sent to the job worker under Rule 4(5) of the CCR - The goods manufactured by the job worker have been returned to the respondents without payment of duty - Apparently such clearances have been permitted at the hands of the job worker by allowing the benefit of Notification No.214/86 - It is not in dispute that the respondents have received the goods viz. sacks and utilized the same for packing their final product sugar on which duty has been paid - Merely because they have not paid the duty on the sacks which were manufactured in the factory of the job worker, there is no justification for denial of credit on the inputs which have gone into the packing materials

Income Tax

Whether expression 'business of the undertaking' is wider in ambit than words ‘profit of undertaking' used in Section 10B - YES: ITAT

THE issues before the Bench are - Whether the words 'business of the undertaking' are wider in ambit than the words ‘profit of the undertaking' used in Section 10B; Whether determination of quantum of profits derived by 100% E.O.U. from the relevant exports, has to pass through multiple steps as prescribed u/s 10B, for being eligible for deduction; Whether the word 'derived' in section 10B would continue to control or guide the word 'profits' in the deduction provision; Whether when receipt is intimately and inextricably connected with the 'business of the undertaking', it can be excluded in reckoning the eligible profits u/s. 10B(1); Whether the word 'of' in the expression of 'profits of the business of the undertaking' signifies a relationship of first degree, i.e., flows from the economic activity comprising the same and Whether decisions rendered in the context of pre-amended Section 10B, other than sub-section 4 of Section 10B, cannot hold good, although the section has been cast in almost the same terms vide Finance Act, 2000. And the verdict partly goes in favour of the assessee.

Service Tax

Board had clarified that if main service provider is discharging Service Tax liability then sub-contractors to main service provider need not pay service tax on same activity - this position changed after extension of CENVAT credit to service tax sector and was clarified by Board Circular dated 23/08/2007 - dropping of penalty u/s 80 of FA, 1994 by Commissioner (A) is proper - Revenue appeal dismissed: CESTAT

IT is a fact that prior to extension of CENVAT credit scheme to service tax, the Board on a number of occasions had clarified that if the main service provider is discharging service tax liability then the sub-contractors to the main service provider need not pay service tax on the same activity. That was the practice which continued since the introduction of service tax. Only after the extension of CENVAT credit scheme to the service tax sector, this position changed and the Board again clarified the matter vide Circular dated 23/08/2007. Therefore, it cannot be alleged that the sub-contractor was not discharging service tax liability deliberately with an intention to evade service tax. That was the reason why the lower appellate authority has dropped the penalty proceedings against the appellant subject to their payment of service tax along with interest thereon by invoking the powers under Section 80.

See our Columns Tomorrow for the judgements