Jurisprudentiol - Wednesday's cases

By Vijay Kumar

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

Appeal - Waiver of Pre-deposit - Tribunal wrong on the preposition of law that the financial difficulty is a subordinate criterion. Prima facie case is not the only criterion, but financial hardship has also to be considered side by side. : High Court

TRIBUNAL has gone wrong on the preposition of law holding that the financial difficulty is a subordinate criteria; financially undue hardship is also another criteria. It seems that the learned Tribunal was under the view that prima facie case is only the criteria to adjudge the waiver of pre-deposit issue. The relevant provision of law no way envisages making out prima facie case for waiver of pre-deposit. However, the judicial pronouncement enables the Tribunal and Court of law to decide the prima facie case for granting stay and waiver of pre-deposit in a fit case. The Supreme Court construed such undue hardship to be of financial hardship, but at the same time the interest of the Revenue has also to be safeguarded. Therefore, a fair balancing exercise has to be worked out while passing the order of waiver of pre-deposit. This has been explained by the Supreme Court in clear terms in the case of Benara Valves Limited . The impugned judgment and order is completely contrary to the provisions of law as well as the principle laid down by the Supreme Court in the aforesaid case. Tribunal directed to reconsider the issue of financial hardship taking note of the audited balance sheets of the appellant of the relevant time and also by following the Supreme Court guidelines.

Income Tax

Whether booking rights or right to purchase apartment is also a transferable capital asset - YES: Delhi High Court

THEassessee is an individual. He alongwith his wife had booked an apartment, by payment of a booking amount of Rs. 2,00,000/-on 3.08.2004 and consequently, it was claimed, acquired rights or interests in the same. The builder DLF Universal Limited ("DLF") issued a letter dated 6.08.2004 provisionally allotting the apartment and two parking spaces, stating specifically the receipt of Rs. 2,00,000/-. Consequent to this, regular payments were made per the payment plan of the builder. A buyer's agreement was executed on 4.11.2004 between DLF and the allottees. As per the payment schedule, a total payment of Rs. 87,12,500/- was made towards the purchase of apartment. Following this, the appellant and his wife entered into an agreement to sell dated 2.11.2007 to sell their booking rights/rights or interest in the apartment for a sum of Rs. 1,44,87,500/-.

The issues before the Bench are - Whether booking rights or rights to purchase the apartment or rights to obtain title to the apartment are also capital assets that is transferable; Whether the booking rights to a property sold can accrue to the assessee on the date of application for allotment/confirmation of allotment; Whether in case there is no intention of the builder of the property to convey any rights to the assessee, it can be assumed that "booking rights" emanated from the confirmation letter given by the said builder and Whether in such case the date of execution of the agreement to sell by the assessee to a subsequent buyer would be considered as the date of transfer of "Booking Rights". And the verdict goes against the assessee.

Central Excise

Manufacture - s. 2(f) of CEA, 1944 - Imported plywood subjected to a process of dipping into a boiling hot chemical solution consisting of sodium bicarbonate, boric acid and copper sulphate mixed in water and thereafter kept for drying - it cannot be said that the process amounts to manufacture - Demands set aside & appeals allowed: CESTAT

THE appellants are importing plywood. At the time of import these are being classified under heading 4412 3110 and being cleared on payment of Customs duty including CVD. After import of the said goods, these are subjected to a process of manually dipping them individually in a tank containing a solution of chemicals namely Sodium Bicarbonate, Boric Powder and Copper Sulphate mixed in water. The solution is heated to boiling point and thereafter imported plywood is removed and kept for drying. The original plywood gets coated with the chemicals. Thereafter appellant puts labels, stickers on the plywood indicating it as "Marine Plywood" and sell in the market.

Revenue's contention is that the imported goods are Decorative Plywood while the final product is marine plywood and which is classifiable under 4412 3140 if meeting ISI specification. However, since the plywood in this case is not meeting the Indian Standards Specification, these are classifiable under 4412 3190. According to Revenue the final product is "marine plywood" and since a new commodity with different name, character and use has emerged, activity of the appellant amounts to manufacture and final product is chargeable to excise duty.

See our Columns Tomorrow for the judgements