Jurisprudentiol - Thursday's cases

By Vijay Kumar

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

Construction of Hostel for Women and Synthetic Track in University is prima facie not a 'Commercial construction service': CESTAT

THE applicants had undertaken the work allotted by Maharashtra State Electricity Transmission Company Ltd. and M/s. Power Corporation of India Ltd. in respect of construction of foundation walls for sub-station or control rooms, foundation for electricity tower etc.

On this activity, the CCE, Kolhapur has confirmed a service tax demand of more than Rs.1.99 crores.

Before the CESTAT, the applicant submits that this activity is exempted from payment of service tax by the section 11C Notification No. 45/2010-ST dated 20.7.2010. Inasmuch as this Notification exempts from payment of service tax in respect of all taxable services relating to transmission of electricity upto 26.2.2010. Furthermore, in terms of Notification No. 11/2010-S.T. dated 27.2.2010 exemption is granted to service provided to any person for transmission of electricity.

Income Tax

Whether gratuitous one-time settlement amount paid by licensor to licensee out of goodwill gesture, at time of termination of agreement, but not under any contractual obligation can be treated as revenue receipts - NO: HC

THE Assessee had entered into an agreement in 1995 with Beiersdorf AG., (BDF) a German concern, wherein the German Concern had agreed to grant a license to use the Trade Marks, the Know-How and the Copyrights in the Territory for a certain period and on agreed terms and conditions. The agreement was for a period of five years with a renewal clause for another period of five years. The Agreement was terminable by the Licensor with a prior notice of 12 months although not to be effective before December 31, 2000. The contract between the assessee and BDF continued for another term of five years after expiry of the initial five years and was thus to come to an end on 31st December, 2005. However, before that, an agreement dated 22nd March, 2005 was entered into between the assessee and BDF whereunder BDF agreed to pay a sum of Rs.18 crores for agreeing to BDF establishing a wholly owned subsidiary (WOS) in India (BDF India) for the purpose of carrying on the business of manufacturing, marketing and sale, importing and exporting of various products, in particular cosmetics and toiletries and other Beiersdorf consumer products. The assessee agreed to provide all necessary support and assistance that may be required by BDF to set up its subsidiary in India and to carry out its operation in India. The assessee also agreed to provide BDF with a No-objection certificate for facilitating the setting up of a WOS.

The issue before the Bench is - Whether a gratuitous one-time settlement amount paid by licensor to the licensee out of goodwill gesture, at the time of termination of the agreement, but not under any contractual obligation can be treated as revenue receipts. And the answer goes in favour of the assessee.

Central Excise

Refund - Quantity discounts given to dealers at end of calendar year - incidence of duty refunded to the dealer through credit notes - refund is not hit by unjust enrichment: CESTAT

THE appellants were clearing Motor Vehicles to their dealers at a fixed rate and allowing quantity discount. The actual quantum of discount was known only after completion of the calendar year.

As per the appellant's request, the assessment was ordered to be provisional on the basis of quantity discount scheme made known by the appellants and existing after 01.09.2000 onwards.

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