Jurisprudentiol – Friday's cases

By Vijay Kumar

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

Clandestine clearances - Mere reliance on note books/diaries or statements cannot justify finding of clandestine manufacture and clearance - There should be tangible evidence of clandestine manufacture and clearance and demand cannot be confirmed merely on inferences or unwarranted assumptions - CESTAT.

THE Tribunal formulated the following requirements to sustain the demand of clandestine removals:

(i) There should be tangible evidence of clandestine manufacture and clearance and not merely inferences or unwarranted assumptions;

(ii) Evidence in support thereof should be of:

(a) raw materials, in excess of that contained as per the statutory records;

(b) instances of actual removal of unaccounted finished goods (not inferential or assumed) from the factory without payment of duty;

(c) discovery of such finished goods outside the factory;

(d) instances of sale of such goods to identified parties;

(e) receipt of sale proceeds, whether by cheque or by cash, of such goods by the manufacturers or persons authorized by him;

(f) use of electricity for in excess of what is necessary for manufacture of goods otherwise manufactured and validly cleared on payment of duty;

(g) statements of buyers with some details of illicit manufacture and clearance;

(h) proof of actual transportation of goods, cleared without payment of duty;

(i) links between the documents recovered during the search and activities being carried on in the factory of production; etc.

Income Tax

Whether provisions of section 194A are applicable to interest paid to company whose shares are held by either Central or State Government - NO: ITAT

ASSESSEE, a JV assessed in the status of AOP, was engaged in the business of execution of civil contract works. It had entered into an agreement with Konkan Railway Corporation Ltd., a government of India undertaking for executing BG Single Line Tunnels works under the Udhampur - Srinagar-Barmulla Rail Link Project by M/s. Konkan Railway Corporation Ltd.

The issues before the Bench are - Whether the provisions of section 194A are applicable to interest paid to a company whose shares are held by either Central or State Government; Whether in case interest on mobilisation advance is recovered by the contractee from running bills before releasing the contract charges to the assessee, it can be said that assessee has credited the interest paid or payable to the account of the assessee and Whether in such case it can be said that there is a violation of provisions of section 194A of the Act. And the verdict favours the assessee.

Service Tax

S.67 of FA, 1994 provides for payment of ST on gross amount - in present case, service is supply of manpower and there are no such expenses like travel cost, hotel stay, transportation etc. -: CESTAT

THE appellants undertook the activity of supply of manpower to various clients and service tax liability on the same is not disputed. However, the appellants were paying service tax on the gross amount received from their clients except in the case where the manpower is supplied to textile mills and Maharashtra State Secondary School of Certificate Board, Aurangabad (SSC Board) i.e. they are paying service tax only on the portion of the service charges retained by the appellants, i.e. without taking into consideration the labour wages and other amount received from the textile mills and SSC Board.

See our Columns Tomorrow for the judgements