Jurisprudentiol - Wednesday's cases

By Vijay Kumar

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

Tax of more than Rs.5.85crores collected from clients but not deposited in entirety with Central Government - no merit in plea for waiver of SCN in terms of s.73(3) of FA, 1994 as s.73(4) expressly disentitles same - Appeal dismissed: CESTAT

THE appellant is engaged in providing various taxable services viz. Storage and Warehousing Service, Cargo Handling Service, Management, Maintenance and Repair Service, Technical Inspection and Certification Service and took registration on 10.10.2003.

During investigation, it was found that although the appellant had taken registration in October, 2003, they had not filed any returns or deposited the service tax collected from their clients. And on the occasions that they had deposited the ST, the same was far less than their service tax liability. After detection of the case, they started paying arrears of service tax in piecemeal. At the time of recording of the first statement, appellant admitted that there is unpaid service tax for the year 2004-05 amounting to Rs. 92,50,777/-. A part of the amount along with interest was deposited also. In respect of a service for which they were collecting the service tax under the head Business Auxiliary Service the tax was paid in December 2004 and the return was filed only in February 2007. Investigation further yielded that even the service tax returns which were filed after initiation of investigation did not reflect the position correctly relating to value of service tax and payments. Appellant admitted these and also paid service tax thereafter.

A SCN was issued on 24.08.2008 demanding service tax of Rs. 5,85,86,971/-. By this time, appellant had paid an amount of Rs.5,57,22,052/-. It was proposed to appropriate the same. It was also proposed to appropriate the interest of Rs. 70,66,597/-already paid by them. The original authority confirmed the various demands and appropriated the various sums and imposed penalties under Section 76, 77 & 78 of the FA, 1994.

Income Tax

Whether when assessee holds substantial shares in partnership firm and also company, any trade advance given by company to firm is to be treated as deemed dividend in hands of assessee - NO: ITAT

THE assessee is partner in M/s Shri Ram Gum & Chemicals and also director in a company named M/s Shri India Sino Gum (P). Ltd. He filed his Return of Income [ROI] in Form No. 2D declaring total income of Rs. 1,20,320/-. Subsequently, a notice u/s 148 was issued after recording requisite reasons for reopening. The assessee complied with this notice and also filed objections against the reassessment proceedings. However, assessment was completed on 20.12.2010 u/s 143(3) r.w.s 148 of the Act at a total income of Rs. 63,74,845/-. The A.O. made addition of Rs. 62,54,525/- u/s 2(22)(e) of the Act. The assessee was stated to be the key management personnel holding 2,50,100 shares valued at Rs. 25,01,000/- in the company. Thus, he was holding 50% share of M/s Shree India Sino Gum (P). Ltd.

The issue before the Bench is - Whether when the assessee holds substantial shares in a partnership firm and also a company, any trade advance given by the company to the firm is to be treated as deemed dividend in the hands of the assessee u/s 2(22)(e). And the verdict goes against the Revenue.

Central Excise

Refund - Amount claimed as refund is not shown as 'receivables' in books of account and same were expensed out in P & L account - if this be so, it signifies that the respondent has adjusted amount in their income while arriving at net profits thereby implying that the incidence of duty has been passed on to third parties - Claim hit by unjust enrichment - Revenue appeals allowed: CESTAT

THIS is a Revenue appeal, and for a change, they have won!

The respondents are manufacturers of blankets, shawls and woolen fabrics from yarn of waste wool. Yarn of waste wool is exempt from duty, if captively consumed vide Notification No. 67/95-CE dated 16/03/1995, subject to the condition that the manufacturer does not avail CENVAT credit of the duty paid on inputs used in the manufacture of such yarn of waste wool.

During the period 1/01/2002 to 30/06/2002, the respondent consumed inputs such as rags and synthetic waste apart from polyester tops and took credit of the excise duty paid on synthetic waste and polyester tops. Using such cenvatted material, they manufactured yarn of waste wool which was in-turn consumed in the manufacture of blankets, shawls and woolen fabrics. On the yarn so manufactured, initially they paid duty.

Subsequently, they filed a refund claim for the refund of duty of Rs.76,61,460/- being the amount of duty paid on yarn. The claim was filed with the department on 12/08/2012. However, subsequently on 24/08/2002 the respondent claimed to have reversed CENVAT credit taken on inputs used in the manufacture of waste wool amounting to Rs.3,12,569/-.

See our Columns Tomorrow for the judgements