Jurisprudentiol - Monday's cases

By Vijay Kumar

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

FTP- Import of Digital Multifunction printing and photocopying machines prior to 6.6.2012 - whether licence required for importation - Matter referred to Third Member: CESTAT

THE short issue involved in the present appeals of the Revenue against the order passed by Commissioner (Appeals) is as to whether the Digital Multifunction Printing and copying Machines (Old and used), imported prior to 05.06.2012 are hit by Para 2.17 of the Foreign Trade Policy, which placed the same under the restricted category with effect from 05.06.2012. It is seen that prior to the said date, only photocopier were listed under the said Para 2.17 of the Foreign Trade Policy for the purposes of requirement of licence.

The matter goes to a Third Member with the following difference of opinion.

Whether the Digital Multifunction printing and photocopying machines imported prior to 6.6.2012 do not require a license for importation of the same as held by Member (Judicial) or the same require a license for importation as held by Member (Technical)?

Income Tax

Whether any disallowance u/s 40A(2) is warranted even assessee proves higher payment of salary to one of its key employees running critical business operations - NO: High Court

THE assessee, a limited company, is mainly engaged in the business of contract and working for National Highway Authority of India on contract basis and the assessee gets work order after submission of tenders. It was claimed by the assessee that it was maintaining regular and proper books of accounts supported by material and relevant records and accounts were also audited by a CA. During assessment, AO desired the assessee to explain the nature and source of payment debited on account of job work charges to the extent of Rs.2,51,80,655/- and particularly of three sub-contractors to whom substantial payments had been made.

The issues before the Bench are - Whether any disallowance u/s 40A(2) is warranted even the assessee proves the higher payment of salary to one of its key employees running critical business operations; Whether such disallowance can be made even if it is pointed out that the individual assessee has paid higher taxes on such income in its individual return of income; Whether payments made to sub contractors by way of account payee cheques, can be disallowed merely on the basis that the amount is excessive and Whether amount disallowed after considering all the material facts and circumstances by the Tribunal, can be altered by the High Court without any cogent basis. And the verdict goes against the Revenue.

Central Excise

Appellant supplying standby transformer to client when the one initially sold is received for repairs - after repairs, the standby transformer is received back in factory and appellant takes credit of duty paid thereon while initially clearing the same - Revenue objecting to taking such credit : CESTAT

THE applicant manufactures transformers and clears the same on payment of duty. Sometimes, the transformers which were supplied to the customer are returned for repairs. In that situation, the applicant is providing a standby transformer for the period of repair of the transformer sold to the customer. The transformer which was sent as a standby for a short period is cleared on payment of duty and after the repair, the repaired transformer is cleared; the standby transformer is returned to the factory and on which the applicants are taking credit of the duty initially paid on the same.

Revenue is not at all happy with this standby business and is of the view that the applicant is not entitled to take credit on the said standby transformer which is returned as same is not an input and the credit cannot be taken on the strength of the applicant's own invoice which is not a proper document under the CENVAT Rules.

See our Columns Monday for the judgements