Jurisprudentiol - Monday's cases

By Vijay Kumar

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

Project Import - materials imported for one unit of a specified project cannot be used elsewhere in any other unit or in any other project - Benefit of concessional rate of duty not available - Appeal dismissed: CESTAT by Majority

THE appellants imported CRGO electrical steel sheets and electrolytic copper rods for the manufacture of transformers under Project Import Regulations, 1986 under heading No. 98.01 of the 1st Schedule to the Customs Tariff Act. The appellant also procured the same materials without payment of Customs duty under Duty Exemption Entitlement Scheme and also on payment of appropriate Customs duty. The appellant had undertaken 16 projects under which they imported the aforesaid raw materials on concessional rate of duty under heading 98.01 of the Customs Tariff as per the Project Import Scheme during 1995-99. In respect of imports under 4 projects, the assessment had been finalised. However, in respect of 12 projects, the assessments were provisional and were pending finalization.

An investigation was undertaken into the project imports which revealed that the appellant had imported raw materials in excess of the quantity required by them for manufacture of transformers for the specified project.

Income Tax

Whether expenditure incurred by assessee company on foreign studies of Director's son working as employee and furnishing bond to work for longer period after studies are over, is business expenditure u/s 37 - YES: High Court

THE assessee is an investment company. It had filed its return declaring loss at Rs. 2,08,72,440/- under the normal provisions and book profit at Rs. 1,35,42,270/- u/s 115JB. In the Profit and Loss Account annexed to the return of income, assessee had claimed a sum of Rs. 23,16,942/- as expenses incurred under the head “Education & Training Expenses”. These expenses had been incurred by the assessee on higher education of ShriDushyantPoddar, an employee of the company, who happens to be the son of the Directors ShriLalitPoddar and SmtSarojPoddar, for undertaking an MBA Course in the U.K.

The issues before the Bench are - Whether the expenditure incurred by the assessee company on foreign studies of its Director's son working as an employee and furnishing bond to work for longer period after studies are over, is allowable as per provisions of Sec 37; Whether such expenditure is allowable even if higher studies are pursued in a different subject from that of the business of the assessee and Whether the burden of showing that expenditure is incurred wholly and exclusively for the purpose of business u/s 37(1) is on the assessee. And the verdict goes in favour of the assessee.

Central Excise

Plastic films, polyester films, BOPP films are subjected to printing using rotogravure cylinders - Later, these printed materials are laminated by binding of two or more layers of same or different substrates with help of bonding agent and the laminates so obtained are then taken for slitting process to get proper size in form of coils -process amounts to manufacture: CESTAT

THE appellants are engaged in manufacturing of packaging material falling under Chapter 39 and other final products, falling under Chapters 47,48, 74, 76 and 84 of the Central Excise Tariff Act, 1985. They also avail CENVAT Credit of duty paid on the inputs/raw materials and capital goods used in or in relation to the manufacture of the above final products.

The appellant have been clearing the aforementioned packaging materials pursuant to manufacture on payment of excise duty under sub-heading 39.20 and 39.21 for about two decades. The products manufactured by the appellant firm were packing materials for their buyers. Some of these products are used by buyers as wrappers for their products and the rest would be used for making pouches for packing of the other products.

See our Columns Monday for the judgements