Jurisprudentiol - Wednesday's cases

By Vijay Kumar

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

Inter-unit transfer of goods manufactured by a 100% EOU - No requirement to pay SAD though no sales tax is paid - demand set aside: CESTAT

NOTIFICATION No. 23/2003 CE dated 31.03.2013 exempts goods manufactured in a EOU and cleared in DTA from payment of excise duty equivalent to the Additional duty of Customs leviable under sub-section (5) of Section 3 of the Customs Tariff Act, 1975 subject to the condition that the goods cleared into the Domestic Tariff Area are not exempt by the State Government from payment of sales tax or value added tax. In case of inter-unit transfer of goods, no Sales Tax is paid as it is only a stock transfer. However, department took a view that the EOU has to pay Additional Duty of customs and confirmed demand in this case. This issue has already been decided infavour of the EOUs in case of 2014-TIOL-04-CESTAT-MUM. But, what is interesting is without making any reference to this precedent decision of the Mumbai Bench, the Ahmedabad Bench on independent analysis held that 4% duty need not be paid in case of stock transfers.

Income Tax

Whether when company had no income from its main business of money lending but had earned interest and dividend by investing in shares, loan advanced to its MD is to be construed as deemed dividend in hand of MD - YES: HC

THE assessee is an individual. In respect of AY 2003-2004, proceedings were initiated by issuing notice u/s 148. The assessee did not file any return of income. Hence, notice was issued to the assessee u/s 144. A reply was sent stating that the assessee expired on 26.5.2008 and he was represented by legal heir, who was his wife, that he had filed a return of income on 25.8.2003, which was to be treated as return for the purpose of Section 148. Thereafter, a notice u/s 143(2) was issued to the assessee. The Department had re-opened the assessment for the AY 2003-2004, observing that M/s. Thottakkad Estates (P) Ltd., Mannar, had advanced a loan to Sri. K.C. Oommen, its MD which was deemed dividend in the hands of the said K.C. Oommen u/s 2(22)(e). It was observed that the deemed dividend escaped assessment and hence the assessment was required to be re-opened.

The issue before the Bench is - Whether when the company had no income from its main business of money lending but had earned interest and dividend by investing in shares, the loan advanced to its MD is to be construed as deemed dividend in the hands of the MD. And the answer goes against the assessee.

Service Tax

Merely because adjudicating authority has given an elaborate finding, it does not mean that appellate authority need not discuss the matter and give a finding - lower appellate authority has not applied his mind at all - such an approach makes a mockery of the appeal proceedings - Order set aside and matter remanded: CESTAT

THE appellant, a co-operative bank is before the CESTAT against an order passed by the Commissioner (Appeals) upholding a Service tax demand of Rs. 7,45,060/-.

The primary submission of the appellant is that the lower appellate authority has not given any reasoning for the conclusion he has drawn except for saying that the appeal does not have much force and the adjudicating authority has given elaborate findings to hold the activity undertaken by the appellant is a taxable service. Inasmuch as it is submitted that in the absence of any reasoning and finding given by the lower appellate authority on the various contentions raised, the impugned order is not sustainable in law and needs to be remanded for consideration afresh.

The Revenue representative, apparently, did not oppose the above submission but reiterated the findings of the lower authorities.

See our Columns Tomorrow for the judgements