Jurisprudentiol – Monday's cases

By Vijay Kumar

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

Appellant is engaged in providing transport service and initial service of temporary storage of vehicles at or near railway sidings, which is eventually for a few days subject to availability of rail rakes, will not render appellant to fall under category of ‘Clearing & Forwarding Agent' - Appeal allowed: CESTAT

THE appellant is engaged in the business of transportation of vehicle of M/s. Tata Motors. The appellant entered into an agreement with M/s. Tata Motors for transporting their vehicles by railway rakes. Under the aforesaid agreement, the appellant are required to carry out following functions:

(a) To transport cars/vehicles from the premises of Tata Motors to Railway sidings for the purpose of loading into railway rakes. The appellant gives trust receipt to Tata Motors for having received cars/vehicles under bailment for the said cars and vehicles given for transportation.

(b) To load vehicles on to railway rakes

(c) To pay freight to railways

(d) To unload the vehicles from the railway rakes at the destination stations and to transport the same to the dealers premises.

(e) To ensure that no damage is caused to the vehicles during transportation

(f) To establish and maintain the stockyards at various places to stock the vehicles pending availability of rakes at Pune and pending transfer of cars/vehicles to the dealers yard at the destination.

(g) To obtain a receipt from the concerned dealer for delivery of vehicles and submit the same to Tata Motors.

SCNs were issued demanding Service Tax under the category ‘Clearing and Forwarding Agent Service' for the period April, 2001 to March, 2005 and the same were confirmed along with penalties and interest and were also upheld by the lower appellate authority.

Income Tax

Whether when assessee is an astrologer and receives certain payments from political leaders for making precise predictions on outcome of elections, such receipt is to be taxed as business income - YES: HC

THE assessee, an individual, is an Astrologer by profession. He had filed return of income disclosing a turnover of 2,67,430/-. After claiming various expenses, he returned an amount of 1,89,751/- as income from his profession. In the statement of affairs as on 31.3.2002, it had shown 10,00,000/- being contribution from certain persons and claimed that the said sum had been exempted. During assessment, the AO rejected the said contention. An appeal was filed before the Tribunal and the Tribunal concurred with the view expressed by the lower authorities. Before the HC, the assessee's counsel contended that the amount of 10,00,000/- was received from some persons who had given confirmation letters. In the confirmation letters they indicated that the contributions were paid by them since they were happy on account of the assembly election results of Tamil Nadu in the year 2001.

The issue before the Bench is - Whether when the assessee is an astrologer and receives certain payments from political leaders for making precise predictions on the outcome of elections, such receipt is to be taxed as business income. And the answer is YES.

Central Excise

Valuation - although drilling rigs have necessarily to be used in conjunction with bought out items, these do not constitute parts of such machines as they are complete items in themselves - as they are not integral parts of drilling machines but are in nature of tools and other equipment, their value is not required to be added in AV - Appeal allowed: CESTAT

THE appellant is engaged in the manufacture of Drilling Rig. They also purchased and sold certain goods which were used in conjunction with the rigs. These are drill pipes, drill bits, substitutes, slips, spiders/spider bushings, drill collars, casing elevators, fishing tools, traveling blocks, generator/welding sets etc.

The same were separately invoiced by the appellant to the buyer as drilling accessories and were not included in the invoice for the rig. The said drilling rigs were commercially complete, marketable and were bought and sold in the market without the said bought-out items. Most of the said bought-out items form part of what is known as the drill string assembly. Customers purchasing rigs from the appellant were not under any obligation to purchase the said bought out items from the appellant and were free to procure the same from other suppliers. The appellant has also occasionally supplied such items on their own to buyers and not along with the supply of such rigs.

The appellant did not include the value of these items in the assessable value of the said rigs while paying excise duty on the ground that the said bought-out items did not amount to parts of the said rigs.

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