Jurisprudentiol - Wednesday's cases

By Vijay Kumar

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

CENVAT -A buyer can take steps which are in their control and he cannot be expected to verify records of the supplier's broker to check whether in fact supplier has paid duty on goods supplied by him or not - as long as bona fide nature of consignee transaction is not doubted, credit should not be denied - Revenue appeals rejected: CESTAT

IT is not only possible but impractical also for an assessee to further check the records maintained by the first stage dealer and to verify correctness of the same. It is sufficient if the assessee buys the goods from first stage dealer whose status he has checked and verified. There is no dispute in the present case that M/s. M K Steels was registered as a dealer with the Revenue and the invoices issued by him reflected his registration number.

Income Tax

Whether depreciation is allowable even if machinery is not put to use due to paucity of raw materials - YES: HC

THE issues before the Bench are - Whether depreciation can be claimed when business is a going concern and the machinery could not be put to use due to raw material paucity and Whether the word "used" in Section 32 should be understood in a wider sense so as to embrace passive as well as active use. And the verdict goes against the Revenue.

Service Tax

GTA Service - CENVAT Credit can be used to pay Service Tax by recipient of service: HC

THE assessee is engaged in manufacture of yarn of different kinds. The assessee holds Service Tax Registration for the Service Goods Transport Agency ("GTA"). During the period between 1.1.2005 and 30.9.2005, the assessee had paid the service tax due on the GTA service by utilizing the CENVAT Credit availed on inputs and capital goods. The adjudicating authority viewed that such adjustment of the CENVAT Credit towards the liability on Service tax was contrary to the Rule. It was held that the CENVAT Credit could be utilised only in respect of "input service" as per definition of 2(l) of CENVAT Credit Rules, 2004. Thus, utilisation of CENVAT Credit for payment of service tax due was improper and consequently show cause notice was issued, proposing to demand service tax on GTA under Section 73 of Chapter V of Finance Act, 1994 along with interest under Section 75 of the Finance Act, apart from proposing levy of penalty under Section 76 of the Act.

See our Columns Tomorrow for the judgements