Jurisprudentiol – Thursday's cases

By Vijay Kumar

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

Valuation - Principal to principal sale - no job work - Rule 10A of Valuation Rules not applicable: CESTAT

IF any assessee manufacture final products, independently procuring inputs, paying for the same, utilizing his own manpower and sells the finished products to a purchaser based upon the price agreed between them, the said transaction will be covered by Section 4(1)(a) of the Central Excise Act, 1944. Trying to bring such type of transactions under provisions of Rule 10A of Valuation Rules, is not in consonance with the settled law, even if the finished products are sold at higher price by the buyer. We find that the application of Valuation Rules, 2000 need to be done in sequential manner and specific Rule needs to be applied. By applying such norm, rule 6 of the Valuation Rules should be the correct Rule, as it is more specific rule than the Rule 10A, for the purpose of valuation of the goods manufactured and cleared.

Income Tax

Sec 68 - Whether when assessee has filed returns of subscriber companies and also their bank statements and balance sheets in addition to confirmation letters from them, assessee can be considered to have discharged burden of proof - YES: HC

THE issues before the Bench are - Whether mere furnishing of the bank statements of the share subscribers without any explanation for the deposits in the accounts can meet the requirements of Section 68; Whether to establish the creditworthiness of the investors, is it necessary to know the business activities of the share-subscribers and also the repaying capacity, in case the amount has been borrowed for making the investment; Whether when the assessee has filed the income-tax returns of the subscriber companies as also their bank statements and balance sheets in addition to the confirmation letters from the said two companies, the assessee can be considered to have discharged the burden of proof and Whether once the assessee has established its case, the AO cannot shift the burden back onto the assessee without the AO producing any tangible material to doubt the veracity of the documents furnished by the assessee. And the verdict goes in favour of assessee.

Service Tax

Appellant employing personnel belonging to their German company - salary of 75% was paid by group company in Germany and thereafter debit notes were raised on appellant - merely because payment has been made through German entity, activity cannot prima facie be held to be taxable as "Manpower Supply or Recruitment Agency Service" - Pre-deposit waived and stay granted: CESTAT

THE appellant employed personnel belonging to their group company in Germany for a specific period. During this period, the appellant entered into agreements with the personnel for their employment. Since the personnel employed were foreign nationals, about 25% of the salary was paid in India in Indian currency and the balance 75% was paid by the group company in Germany to the credit of accounts of the personnel employed and thereafter, debit notes were raised on the appellant by the foreign entity towards reimbursement of the salary paid in Germany. For the income earned in India by the personnel, the appellant also discharged the Income Tax liability showing the personnel employed as their own employee.

The Central Excise department was of the view that the transaction involved comes within the purview of ‘Manpower Supply or Recruitment Agency services'.

See our Columns Tomorrow for the judgements