Jurisprudentiol – Tuesday's cases

By Vijay Kumar

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

Once an appeal is filed by an aggrieved person against original order, it is mandatory requirement under provisions of Customs Act to pay amount ordered by original authority, as condition precedent for taking up appeal - CESTAT after having taken into account all legal principles was lenient in ordering only 20 lakhs as pre-deposit - attitude of petitioner cannot be appreciated - Petition is not sustainable: HC.

IT is to be noted that when once an appeal is filed by an aggrieved person against the original order, it is mandatory requirement under the provisions of the Customs Act to pay the amount ordered by the original authority, as a condition precedent for taking up the appeal. Law is well settled that the capacity of a party to pay the pre-deposit amount had to be noticed and the financial burden and undue hardship for the party to resort to claim waiver of the pre-deposit, have also to be considered. The cardinal principle of consideration of the waiver of pre-deposit is based on undue hardship, prima-facie case, balance of convenience, financial burden and other difficulties expressed by the party before taking the matter on appeal and these factors have to be weighed in relevant circumstances, taking into account all the material factors, which alone can come to the wisdom of the authority to give certain waiver of pre-deposit to the party who is on appeal.

Income Tax

Whether transaction of sale of merchant banking business to an erstwhile global accountancy firm can be considered as colourable device, although payments were made only for transfer of business and contracts - NO: ITAT

THE issues before the Bench are - Whether a transaction of sale of merchant banking business to an erstwhile internationally acclaimed accountancy firm can be considered as a colourable device; Whether only when the document is not bona fide nor intended to be acted upon, but is only used as a cloak to conceal a different transaction, a transaction can be regarded as a sham or colourable; Whether consideration received by the assessee for transfer of its sole merchant banking business, which was discontinued thereafter, is in the nature of capital receipt; Whether any amount is received as compensation or damages for any wrong done which does not affect any capital asset or the capital structure of the assessee's business, but causes injury to the assessee in its trade, will normally constitute a trading receipt - Whether it is beyond the purview of the Revenue to question the adequacy of the consideration involved in a transaction; ………

Service Tax

‘Mithi' is a river and not a storm water drain - from Tender Notice and work awarded to appellant, it is clear that work pertains to Widening and Deepening depth of Mithi river - Thus, the contract awarding authority as well as appellant, the contractor, understood work as pertaining to dredging of river and not as anything else - Demand upheld: CESTAT

DURING the period 05/05/2006 to 31/07/2007, the appellant had undertaken dredging of 'Mithi River ' under a contract entered into with Mumbai Municipal Regional Development Authority (MMRDA, for short). The CCE, Thane-II demanded service tax of Rs.91.23 lakhs from the appellant on the total amount collected from MMRDA for the work of dredging done in 'Mithi River'. But naturally, the appellant had to shift his attention from Mithiriver to the CESTAT. The case of the appellant is that 'Mithi River' is not a river but only a 'storm water drain'. It is submitted that dredging of a drain is not taxable under Chapter V of the FA, 1994 inasmuch as the definition of 'dredging' given under section 65(36a) does not apparently include dredging of any body or stream of water other than river, port, harbour, backwater or estuary.

See our Columns Tuesday for the judgements