Jurisprudentiol - Thursday's cases

By Vijay Kumar

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

Mandap keeper services - Appellant availing input service credit and also claiming abatement in terms of notfn. 1/2006-CE - when they came to know that CENVAT credit cannot be availed they stopped taking credit from October 2009 - appellant should have brought the above to notice of department and voluntarily reversed credit taken earlier - since that was not done, malafide intention is proved - demand not hit by limitation - appeal dismissed: CESTAT

THE appellant is a resort and providing various services like mandap keeper, hotel rooms, and catering service. The appellant was paying service tax as per Notification no. 21/97-ST by availing abatement of 40% of taxable amount.

The Notification no. 21/97-ST was rescinded by notfn. 02/2006-ST and a new notification no. 1/06-ST occupied its place. As per said Notification, the appellant is not entitled to take input service credit on the services received by them to avail the benefit of abatement as per the Notification. The appellant continued to take input service credit on the services received and availed the benefit of abatement for payment of service tax. The appellant was also filing their service tax returns and showing amount of input service credit taken and benefit of the said abatement availed till October 2009.

Income Tax

Whether when computation of book profits is done u/s 115JB, no penalty is warranted even if assessee made false claim of depreciation - YES: HC

THE assessee is a company. It is involved in the manufacture of steel pipes, Synthetic Filament Yarn and Polyster Clips, etc. It had filed its return for the AY 1998-1999, which was for 23 months disclosing the total loss at Rs. 1,75,91,003/ and had worked out its taxable liability u/s 115J of Rs.37,42640/. During assessment, AO had computed books profit for the purpose of levying tax u/s 115 J at Rs 5,58,33,750/. The allegation of the Assessing Authority was that the Assessee had claimed extra depreciation under the Profit and Loss Account. On appeal, Tribunal had accepted the book profit disclosed by the Assessee for the purpose of levy of tax u/s 115J . AO however on the basis of the assessment order levied penalty u/s 271(1)(c) at Rs. one crore which had been reduced to Rs.74,17,870/ by CIT(A) in the appeal against which the Assessee filed appeal before the Tribunal which has been allowed by Tribunal.

The issues before the Bench are - Whether if the computation of book profits has been done u/s 115JB, the concealment of income has no role to play and it is totally irrelevant and Whether in such a case penalty for concealment cannot be levied even in respect of the false claim of depreciation made by the assessee. And the answers favour the assessee.

Central Excise

Making of corrugated boxes from craft paper - amounts to manufacture - not liable to Service Tax - The order passed by Addl. Commissioner shows his total ignorance to Central Excise Law.: CESTAT

IT appears that the Additional Commissioner, in his anxiety to confirm the service tax demand made in the show cause notice put up before him for adjudication, did not realize that on the basis of his decision in this adjudication order that making of corrugated boxes from craft paper on job work basis does not amount to manufacture, all the corrugated box manufacturing unit manufacturing corrugated boxes from craft paper would claim that their activity would not attract excise duty. It is also surprising that the Commissioner (Appeals), instead of deciding the appeal on merits, as an Advocate representing the appellant had appeared before him, has chosen to dismiss the appeal by invoking Rule 5 of the Central Excise (Appeal) Rules, which pertains to the production of additional evidence. Considering the reply to the show cause notice and hearing the appellant when the original adjudicating authority had passed an ex parte order without waiting for the reply to the show cause notice cannot be treated as introduction of additional evidence.

See our Columns Tomorrow for the judgements