Jurisprudentiol – Wednesday's Cases

By Vijay Kumar

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

Credit taken on capital goods cannot be denied on ground that same was used for processing of input/semi process goods on job work basis (under Rule 57F(4) of CER, 1944) which are exempted under notification No.214/86-CE – Revenue appeal dismissed: High Court

THE Respondent manufactured parts and accessories of motor vehicles and they had been availing MODVAT facilities under Rule 57Q of the CER, 1944. They had filed a declaration under Rule 57T(1) declaring that the said capital goods shall not be used for manufacture of excisable goods which is either exempted from payment of duty by notification or chargeable to nil rate of duty. The credit on capital goods was availed in the month of July, 1997.

It is the case of the department that records maintained by the respondent indicated that they were not receiving raw material for production of any dutiable excisable goods, but the capital goods were being used exclusively for processing of input/semi process goods on job work basis under Rule 57F(4) of the said Rules which are exempted under notification No.214/86-CE.

Income Tax

Whether an authority which has been established to promote development of all or, any of areas comprised in 'urban area' and vested with all powers to hold, acquire, dispose of property or frame schemes, can be considered as 'Municipality' within Section 2(14) of Act - YES: High Court

THE issues before the Bench are - Whether an urban area developed by Haryana Urban Development Authority forms part of the Municipality - Whether land acquired by notification issued under the Land Acquisition Act, which falls within 5 kms of Haryana Urban Development Authority, can be considered as capital asset; Whether an authority which has been established to promote and secure the development of all or, any of the areas comprised in an ‘urban area' and vested with all powers to hold, acquire, dispose of property or frame schemes, can be considered as 'Municipality' within Section 2(14) of the Act; Whether the expression 'Municipality' in Section 2(14) of the Income Tax Act is restricted to a Municipality constituted under the relevant Municipal Laws and cannot include any other area known by any other name; Whether local authority in terms of Section 3 (31) of the General Clauses Act means a 'Municipality' - Whether the nature of land whether it is agriculture or not is not relevant, if the land is within municipal limits and Whether the expression 'by any other name' appearing in Item (a) of clause (iii) of Section 2 (14) has to be read ejusdem generis with the earlier expressions i.e. municipal corporation, notified area committee, town area committee, town committee. And the verdict goes in favour the Revenue.

Service Tax

Appellant is not merely acting as a Commission Agent but does something much more than that i.e., designing, managing and operating a showroom, receiving goods on stock on transfer basis, undertaking sales promotion activities and collecting sale proceeds on behalf of the principal – such activities do not come within the purview of "Commission agent' as defined in notification no. 13/2003-ST hence benefit of exemption correctly denied – Order upheld and appeal dismissed: CESTAT

THE appellant owns a premium showroom and have been discharging service tax liability since November 2005 under the category of "Business Auxiliary Service". Scrutiny of the records of the appellant revealed that the appellant has entered into a Management Agent agreement dated 23/09/2005 with M/s. Titan Industries Ltd. (TANISHQ). As per the agreement, it has been made a Principal to Agent basis where the appellant shall display, stock and sell jewellery products to customers through the showroom managed and operated by the agent on a stock transfer basis. The appellant agent is required to ensure that the showrooms are best designed, maintained and operated and shall be responsible for the upkeep and maintenance of the showrooms. The appellant agent is also required to insure the premises, furniture and fittings and allied services to the satisfaction of the principal. The agent is further required to stock, display and sell the products in the showroom in the name of Titan Industries Ltd. and the cash memos issued for sale shall also carry the name of Titan Industries Ltd.

See our Columns Tomorrow for the judgements