Jurisprudentiol -Tuesday's cases

By Vijay Kumar

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

Payment of duty on own volition - Notification having character of exemption cannot be forced upon an assessee if it does not suit him - Liberal and strict construction of an exemption provision is to be invoked at different stages of interpreting it - Reference answered in favour of assessee: HC

THE following question of law was referred to the High Court -

"Whether the option is available to the Assessee either to avail the exemption or to pay duty on the final product by taking modvat credit on inputs in terms of Rule 57A of the Central Excise Rules, 1944."

For the uninitiated, this issue was the hottest thing going in the Central Excise department in the year 1993 and continued for a few more years. Vide notification 1/93-CE, SSI units were granted full exemption from payment of duty upto an aggregate value of Rs.30 Lakhs clearances. Many SSI units chose to forego this ‘exemption' and pay duty on the clearances by opting to avail MODVAT credit. The jurisdictional authorities called this as "payment of duty on own volition" and sought to deny the MODVAT credit availed by citing C.B.E.C's Circular No. 2/91-CX 3, dated 4-1-1991 from F.No.93/13/90-CX 3. The corollary to this allegation was that the ‘duty so paid on own volition' was to be treated as "deposit" in view of the Supreme Court decision in Jain Spinners Ltd. (2002-TIOL-58-SC-CX) and demand notices were issued to the consignee for denial of credit taken by him as he could have availed credit only of ‘duty' & not of ‘deposit'.

Income Tax

Whether income from letting out property is to be treated as business income merely because property is commercial in nature and rental is exorbitantly high - NO: ITAT

THE AO noted that the assessee had disclosed income from house property of Rs. 104,887,980/- and claimed deduction u/s. 24(1) of 30%. The AO held that the rental income was treated as business income and deduction claim of Rs. 31466394/- u/s. 24(1) was not allowable. The CIT(A) deleted the addition of Rs. 3,14,66,394/- by treating income from business of letting out of property as rental income and allowed deduction u/s. 24(a).

The CIT(A) gave part relief of Rs. 1,07,238/- u/s. 57(iii) under the head income from other sources.

The issue before the Bench is - Whether income from letting out of property can be treated as business income and not as income from house property just because rental income was too high and the property was commercial in nature. NO is the Tribunal's answer.

Service Tax

Appellant are paying tax regularly as provider of Banking & Financial Services - during audit certain discrepancy was found in tax payment and immediately the appellant paid same along with interest - no intention to evade tax - penalties set aside : CESTAT

THE appellant is a co-operative bank and are registered as provider of Banking and Financial Services and paying appropriate tax and also filing statutory returns. During audit it was found that there was some short payment of service tax. The same was paid immediately along with interest. Subsequently, show-cause notice was issued demanding service tax of Rs.17,52,635/- along with interest and proposing imposition of penalty.

There is no intention on the part of the appellants to evade payment of tax and appellants were under the bona fide belief that the appellants were paying appropriate tax.

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