Jurisprudentiol – Monday's cases

By Vijay Kumar

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

Cutting and slitting of Jumbo rolls of Al film - respondent paying duty by taking CENVAT credit of duty paid on Jumbo Rolls - Revenue alleging that since activity does not amount to manufacture credit cannot be availed - in view of notfn. 24/2012-CE(NT) issued u/s 5B of CEA, 1944 appellant not required to reverse CENVAT credit: CESTAT

THE respondents are engaged in the manufacture of HG Capsules and they have packing films division and capsules division in their factory, where they undertake cutting and slitting of jumbo rolls of aluminium foil rolls into smaller rolls. Under the bonafide belief that cutting and slitting of jumbo rolls amounts to manufacture, the respondent discharged excise duty liability thereon and also availed CENVAT Credit of the CVD paid on jumbo rolls.

On the ground that the activity of cutting and slitting of Jumbo rolls into smaller rolls did not amount to manufacture, a demand notice was issued to the appellant requiring reversal of CENVAT Credit amounting to Rs.1,54,33,170/-. The proceedings were dropped by the Commissioner holding that the activity amounts to manufacture and, therefore, the appellant has rightly availed the CENVAT Credit.

Income Tax

Whether activity of blending and mixing of reactive dyes amounts to manufacture and same is eligible for Sec 80IC benefits - YES: ITAT

THE assessee is engaged in the business of manufacturing of reactive dyes in notified industrial area in the state of Sikkim. Assessee claimed exempt u/s 80IC. AO noticed that assessee achieved a huge turnover within a very short time of two and half months and the turnover was out of the production of two machineries which was used for mixing and grinding of materials. Assessee had shown G.P of 71.38% and N.P. of 70.42%, which according to him was not possible in normal course of business.

The issues before the Bench is - Whether the activity of blending and mixing of reactive dyes amounts to manufacture and the same is eligible for Sec 80IC benefits. And the answer of the Tribunal is YES.

Service Tax

Tax saving bond is Government security - Logic contained in Board Circular dated 10/08/2010 clarifying that there is no ST liability on underwriting fee/commission received by dealers for dealing in Govt. securities would apply in respect of brokerage received for sale of tax savings bonds: CESTAT

THE appellant undertook sale of Bonds issued by the RBI, notified as Issuance of 6.5% Savings Bond, 2003 (Non-taxable) vide Notification No. F.4/(9)-W&M/2003 dated 13/03/2003. These bonds were to be purchased by individuals and HUF and the bonds were exempted from income tax and wealth tax issued at par. The RBI authorised the appellant bank to sell these bonds and paid a brokerage @ 0.50 paisa per Rs.100/- in terms of Notification dated 13/03/2003 issued by the Government of India, Ministry of Finance and Company Affairs (Department of Economic Affairs).

For the service rendered, the appellant bank received brokerage from the RBI and it is on this amount the Service Tax demand of Rs.1.53crores has been confirmed with penalties and interest by CCE, Belapur holding that the said services rendered comes under the category of Banking and Financial Services.

See our Columns Monday for the judgements