Jurisprudentiol - Monday's cases

By Vijay Kumar

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

Valuation - buyer agreed to provide interest free advance to assessee to help him set up factory with an undertaking that assessee would supply at least 90% of their production to buyer - such 'compensation' is not includible in AV as SCN did not bring out categorically allegation that arrangement was to influence sale price - CESTAT by Majority

THE appellant was manufacturing re-treading and supplying 97% to 98% of their production to M/s Black Stone Rubber Industries Pvt. Ltd ("the buyer"). During 1996-97, the buyer paid an amount of Rs.6,84,780/- as "compensation" to the appellants in addition to the declared price of the goods. During 1997-98 the buyer paid Rs.6,50,500/- in similar manner.

The case of Revenue is that these amounts should have formed part of the assessable value of goods sold by the appellant to the buyer.

Accordingly, a SCN demanding excise duty of Rs.2,20,835/- was issued and confirmed by the adjudicating authority and also upheld by the Commissioner. However, the Commr(A) set aside the penalty of Rs.25,000/- on the appellant manufacturer and reduced the penalty on the partner to Rs.10,000/-

Aggrieved by this order, the appellant is before the CESTAT.

Income Tax

Whether assessee -Trust would lose exemption for entire income even if there is one instance of application or use of income or property of Trust directly or indirectly for benefit of any prohibited person - YES: Delhi HC

THE assessee is a Charitable Trust which was granted registration under section 12A of the Act. In respect of the assessment year 2006-07, it filed a return of income declaring Nil income. The return was processed under Section 143(1). Subsequently a scrutiny of the return was initiated and notices under Sections 142(1) and 143(2) were issued. A sum was shown by the assessee as the proceeds of the sale of assets, being land. The assessee in furtherance of its objects to open a school, entered into agreements with M/s A for purchase of land. In these agreements the assessee paid 95% of the price of the land to M/s A and simultaneously obtained possession of the plots.

The issues before the Bench are - Whether the trust would lose exemption in respect of its entire income even if there is one instance of application or use of the income or property of the trust directly or indirectly for the benefit of any prohibited person; Whether where assessee-trust pays advance to the extent of 95 per cent of cost of property purchased to prohibited person without taking possession and without concluding a proper sale deed even after one year from the date of deal and then cancelling the deal and getting the advance back without interest would amount to violation of section 13(1)(c)(ii) read with section 13(2)(a) and Whether it would amount to violation of Section 13(1)(c)(ii) read with Section 13(2) and Section 13(3) of the Act, where assessee in furtherance of its objects intended to open a university, proper formalities were completed but due to Supreme Court order the object could not be achieved in the hands of the assessee and it formed this charitable society with same objects and trustees and incurred the expenses which were shown as advance to the educational society. And the verdict partly favours it.

Customs

Vessel arrived at Marmagao port and after conducting dredging operation for more than one month it sailed - fact that nobody objected the dredging operation during that period meant that necessary documents had been submitted to Customs authorities - in this view of matter, it cannot be alleged that facts were suppressed - Revenue appeal dismissed: CESTAT

ONE vessel 'Dredger VolvoxHansa' arrived at Marmagao port on 18.08.2000 and commenced dredging operation on same day till 29.09.2000 and thereafter it sailed.

A show cause notice was issued on 09.10.2001 for proposing penalty under section 114A of the Customs Act, 1962 alleging suppression. The Commissioner held that as the activity of the respondent was in the knowledge of the department on 18.08.2000 itself, therefore, extended period of limitation cannot be invoked.

The order was reviewed by the Committee of Chief Commissioners and an appeal came to be filed before the CESTAT.

The Revenue representative submitted that the observation of the Commissioner that the copies of documents which were submitted to Port Trust have been sent to the Customs is not based on record.

See our Columns Monday for the judgements