Jurisprudentiol - Friday's cases

By Vijay Kumar

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

Applicant clearing goods manufactured in J & K unit in terms of exemption operated through procedure prescribed in notification nos. 56/2002-CE & 57/2002-CE to Mumbai unit, availing CENVAT credit and then affixing labels on same and treating same as manufacture u/s 2(f) and clearing goods for export and claiming rebate of duty - notification 19/2004-CE(NT) governing rebate of duty clearly envisages that rebate is not admissible in such a situation - Difference of opinion - Matter referred to Third Member: CESTAT

THE applicant is procuring Cocoa Butter and Cocoa Powder from their factory at Jammu. The goods are cleared by the Jammu unit to the applicant on payment of duty and applicant took the credit of the duty so paid. The applicant also imports Cocoa Butter & Cocoa Powder on payment of duty. The applicant also takes the credit of duty paid thereon and thereafter applicant affixed two labels described as label 1 and label 2 on the goods procured by them and same were exported on payment of duty. Thereafter, the applicant filed rebate claim which were sanctioned to them.

Revenue is of the view that putting label A and label B on the boxes does not make the product marketable to the consumer.

Income Tax

Whether it is sine qua non for assessee to produce substantial materials before Court or any other authority to show that borrowed funds were not diverted for any purpose other than business - YES: Madras HC

THE assessee is engaged in the business of export of beedi leaves, food grains and also in transport contracts. On scrutiny of the return of the assessee, it was found that the assessee had advanced loan to the Directors to a sum of Rs.3.91crores as against what was given earlier at Rs.3.23crores. The AO viewed that the assessee had not utilised the borrowed funds for business purpose, but diverted the same for advancing loans to the Directors and, hence, the claim of interest payment was disallowed.

The issue before the Bench is - Whether it is incumbent upon the assessee to produce substantial materials before the Court or any other authority to show that the borrowed funds are not diverted for any purpose other than business. And the answer goes against the assessee.

Service Tax

Appellant providing shipping vessels to M/s ONGC on charter hire basis for a consideration - primary object of charter hiring vessel is for transportation of crude from place of production i.e. in High Sea to refineries in India and not for "storage and warehousing" - such services are classifiable under ‘supply of tangible goods' for use - Pre-deposit waived and stay granted: CESTAT

THE appellant had provided shipping vessels to M/s. ONGC on charter hire basis for which they were receiving consideration. The said vessels were used during monsoon period and on call out basis for storage and transportation of crude oil from Bombay High. From the agreement for charter hire it appeared that the vessel is to be used for at a particular place or site for operation and service, which indicated that the vessel is stationery and primarily not used for voyage/transport of oil. The vessel is sought to be moored to the ONGC rig and act as a mother vessel receiving oil from the rig and pumping it to other daughter vessels which does actual transporting. The vessels used as mother vessel is required to carry out ship to ship transfer of cargo to daughter vessel. Therefore, the department was of the view that the activity undertaken by the appellant in charter hiring the mother vessel was primarily for the purpose of storage of crude oil at Bombay High and the transportation was only an incidental function to the primary function of storage.

See our Columns tomorrow for the judgements