Jurisprudentiol – Monday's cases

By Vijay Kumar

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

Evaluation of market trends and identification of prospective customers in India for overseas entity, export of service -. It is axiomatic that decisions of this Tribunal are binding on Revenue: CESTAT

THE appellant Alpine Modular Interiors (P) Ltd (AMIL) provided certain services to UB Office Systems Ltd UBOS under an agreement dated 02/01/02. The scope of the services provided by AMIL are evaluation of market trends and identification of prospective customers in India for the overseas entity, for its modular furniture business; and providing a list of prospective customers on a regular basis to enable UBOS to strategise its decisions, for sale of its products to customers.; Larger Bench of this Tribunal in Paul Merchants Ltd. vs. CCE, Chandigarh reported in 2012-TIOL-1877-CESTAT-DEL considered substantially analogous facts and the relevant statutory provisions and concluded that the transactions fall within the ambit of Export of Service Rules, 2005 and are not therefore liable to levy of service tax. This view is reiterated in the recent decision of this Tribunal dated 28/02/14 in an appeal preferred by M/s GAP International Sourcing (India) Pvt. Ltd. vs. CST, Delhi, reported in 2014-TIOL-465-CESTAT-DEL.

Income Tax

Whether retention money would be income accrued to assessee when it is received from contractee in order to have more liquidity but against bank performance guarantee on condition that guarantee will be released only after satisfactory completion of work - NO: HC

THE assessee is a civil contractor. It was awarded a construction contract by SSNNL. Out of running bills raised by assessee for construction work, SSNNL would retain a portion for satisfactory completion of the work upon being certified by the Engineer-In-charge. Such terms were later on modified to permit greater liquidity to the contractors and an option was given to receive such completion warranty amounts also in cash, subject to providing bank guarantee of a matching sum.

In the return of income filed, assessee claimed debit of retention money in computation of income.

The issue before the Bench is - Whether the retention money would be the income accrued to the assessee when it is received from the contractee in order to have more liquidity but against a bank performance guarantee on a condition that the guarantee will be released only after satisfactory completion of the work upon being certified by the Engineer-In-charge and in case of any non satisfactory completion of work, it would be recovered from bank guarantee. And the answer favours the assessee.

Customs

Factory employee acts on behalf of employer and appellant has to take responsibility for any irregularity done by employee - law does not stipulate that only differential quantity which has been misdeclared is to be confiscated - once there is misdeclaration entire quantity is liable to be confiscated -: CESTAT

THE appellant had filed two shipping bills for export of dyed printed fabric made from 100% polyester filament yarn under DEPB scheme. On examination, it was found that there was shortage of 5 mtrs. in each pack of 25 mtrs. in both the shipping bills. Thus there was shortage of 12335 mtrs. valued at FOB Rs.6,48,255/- in respect of the first shipping bill and 12689 mtrs. valued at FOB Rs.6,46,870/- in respect of the second shipping bill.

It appeared that due to the misdeclaration in the quantity of the goods, the appellant would have got the benefit of Rs.1,07,831/- under DEPB scheme. The appellant's explanation to the shortage is that some worker in the factory by mistake has cut the saree pieces in the width of 4 mtrs. instead of 5 mtrs and that is how this misdeclaration has happened.

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