Jurisprudentiol – Wednesday's cases

By Vijay Kumar

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

Settlement - A course of settlement under Act is available only where petitioners on their own want to make clean breast of their affairs and not where petitioner wants to resist notices by challenging several statements relied upon by revenue - process contemplated by petitioner would require adjudication i.e. resolving a lis - In such case the petitioner would be well advised to seek remedy under the Act in adjudication process -: HC

THE counsel submitted that there has been a failure of justice in view of the fact that after the hearing before the Settlement Commission on 28 September 2012 they were able to obtain documents/inspection reports in respect of six earlier consignments carried out by the Customs department which would indicate that goods imported were only cutlery as declared in the bills of entry. Consequently, by letters dated 19 October 2012, 22 October 2012 and 31 October 2012 the petitioners requested the Commission to grant an additional hearing so as to provide further clarification in the matter.

They, therefore, seek that the impugned order be set aside and the Commission be directed to consider further documents which are now in their possession before deciding upon the petitioners' application for settlement.

Income Tax

Whether return of fund received by assessee from Central Govt towards equity but no shares allotted and interest was paid on same, can be construed as business expenditure - YES: Delhi HC

ASSESSEE a public limited company is a joint venture enterprise of the Central Government, the State of Andhra Pradesh and the State Transport Service Operator and Infrastructure Leasing and Financial Services Ltd. It was set up in the financial year 1993-94 to undertake comprehensive mobility studies and consultancy to the State Government and local bodies, aimed at restructuring and reforming public transport delivery system. It received an advance for equity to the extent of Rs. 7 Crores from the Central Government and started its business in the year 1994. The amounts given by the Central Government were deployed in investments. There was no dispute that the corresponding income was taxed in the earlier AYs. The Central Government insisted for return of its contribution of the share application during the FY 2006-07 (AY 2007-08) and as a result the assessee repaid the amount together with the interest earned from the investments.

The issues before the Bench are - Whether the return of the fund received by the assessee from the Central Govt towards equity but no shares were allotted and interest was paid on same, can be construed as business expenditure and Whether the nomenclature of the amount paid as compensation, return or interest can affect its allowability. And the verdict goes against the Revenue.

Service Tax

Activity of site formation and clearance, excavation of top soil and overburden has to be treated as an activity ancillary to mining and since overall contract is for mining and as such it is an indivisible contract, entire contract has to be treated as mining contract - Demand for period 16/6/05 to 31/5/07 set aside: CESTAT

THE appellant are engaged in business of mining and related works. They are registered with Service Tax Department since 06/4/09 for payment of service tax. The appellant also provide services to M/s Rajasthan State Mines and Minerals Ltd., a Government of Rajasthan Enterprise [RSMML] in relation to mining of lignite. In this regard the appellant entered into an agreement with RSMML on 16/1/03. In terms of the agreement, the appellant's job was clearing the site for mining, excavation of top soil and it's dumping at a specified place, removal of the overburden and raising of saleable lignite from Matasukh Mines located at Rajasthan. The payment for the services provided by the appellant, in terms of Section VII of the agreement, was on the basis of per M.T. of saleable lignite mined by them.

Inquiry in respect of their activity was initiated by the Department sometime in the year 2007 and the appellant under their letter dated 09/3/07 informed the Department about their activity, pleading that the services provided by them were not taxable services. In their letter to the Department, they emphasized that they receive payment from RSMML in terms of their agreement for the quantity of lignite mined and not for other activities like removal of over burden or excavation of top soil.

Subsequently, the Department taking a view that the activity of the appellant was taxable as 'cargo handling' service till 15/06/05 and thereafter from 16/06/05 to 31/05/07 their activity was taxable as 'site formation and clearance, excavation and earth moving service' and w.e.f. 01/6/07 their activity was taxable as 'mining service' issued a show cause notice dated 29/9/08 to them for demand of service tax amounting to Rs. 1,63,14,265/- alongwith interest and penalty.

See our Columns Tomorrow for the judgements