Jurisprudentiol – Friday's cases

By Vijay Kumar

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

Appellant could not use certain quantity of Naphtha imported since they found generation of electricity not viable by use of Naphtha - it is not case of levy or non-levy of duty by reason of misstatement or suppression of facts etc. but a case of not fulfilling end use condition of exemption notification, therefore, confiscation u/s 111 (o) and penalty u/s 114A of Customs Act, 1962 is not justified-: CESTAT

THE appellant has a power plant with an integrated facility for power generation. They were importing "Naphtha" by availing benefit of Notification NO. 21/2002-Cus dated 01.03.2002 as amended. The appellant submitted End Use Certification for the period 20.11.2006 to 31.05.2007 and informed that out of total imported quantity of 388542.793 they had consumed 380946 MT Naphtha resulting in a closing balance of 8050 MT of Naphtha lying unutilized.The Asst. Commissioner confirmed the duty of Rs.7.92 Crores along with interest by disallowing the aforesaid exemption notification.

In appeal, the Commissioner (A) directed the appellant to either utilize the Naphtha or dispose it off as per law before 30.06.2011. The appellant informed the AC that it was not viable for them to utilize the balance quantity of Naphtha and requested more time for payment of duty and interest. Later, they informed that they had reconciled the quantities of Naphtha and resultantly they have unutilized quantity of 41993.6 MT. The department employed the services of an independent surveyor and came to the conclusion that since the appellant failed to declare the actual quantity of Naphtha in the end use certificate, the excess quantity of 34696.73 MT was detained.

Income Tax

Whether when employees are paid LTA and medical allowance as advance even before bills are submitted for reimbursement, any TDS obligation arises for employer u/s 192 - NO: ITAT

IN survey proceedings, AO observed assessee as assessee in default u/s 201(1) in respect of medical allowance, LTA, Fuel reimbursement, conveyance, telephone, car maintenance and meal vouchers item of ‘salary' payments made to its employees. The CIT (A) deleted the demand observing that in respect of non-deduction of tax for medical reimbursement the employees are paid up-to Rs.15000/- per annum split into monthly disbursements. This amount is treated as exempt under the provisions of I.T. Act only if supported by bills. No instance had been brought on record to suggest that, in the case of any employee, the benefit or allowance has been allowed without TDS during the financial year, if it is not backed by actual expenditure.

THE issue before the Bench is - Whether when the employees are paid LTA and medical allowance as advance even before bills are submitted for reimbursement, any TDS obligation arises for the employer, and the answer goes against the Revenue.

Service Tax

Authorized Service Station - Cost of spare parts sold during rendering of service cannot form part of transaction value - Board Circular dated 23/08/2007 also confirms this position - Matter remanded: CESTAT

THE appellant is engaged in the business of providing services of Authorized Service Station for Maruti brand vehicles and they are also registered with department under the category of "Authorized Service Station" and "Business Auxiliary Service". During the course of rendering the services, the appellant also sells spare parts for the vehicles on which they discharge Sales Tax/VAT liability. The bills issued by the appellant gives details of spare parts sold both in terms of quantity and value and also the service charges for the services rendered. The VAT/Sales Tax liability on the spare parts sold is also separately indicated and the Service Tax liability on the services rendered is also separately indicated. The department was of the view that the appellant is liable to discharge Service Tax liability on the whole of the amount charged and not on the services portion alone.

See our Columns tomorrow for the judgements