Jurisprudentiol - Monday's cases

By Vijay Kumar

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

CENVAT Credit - Input Services - any service having nexus with business of manufacture which has been used by manufacturer would qualify as input service: CESTAT

INSURANCE of plant and machinery, goods in transit, cash in transit and insurance of vehicles, and laptop, is an integral part of manufacturing business, as no manufacturer would carry on manufacturing operations without insurance of plant & machinery, cash in transit, goods in transit, vehicles & computers, etc. against any loss due to accident, natural calamities, etc. In view of this, the services of plant and machinery, transit insurance of goods, insurance of cash in transit, laptop, etc. have to be treated as an activity related to the business and would be eligible for cenvat credit.

Judicial Discipline - Censure and Costs : The conduct of the Learned Commissioner amounts to clear judicial indiscipline and irresponsible exercise of adjudication function. Such exercise of adjudication powers in blatant violation of Apex Court's judgment in case of Union of India Vs. Kamlakshi Finance Corporation Ltd., reported in 2002-TIOL-484-SC-CX-LB requires to be censured as, if allowed to go unchecked, would lead to collapse of entire dispute resolution mechanism. Such adjudication orders burden not only the Assessee who has to incur avoidable expenses on challenging such order before the Courts/Tribunal, but also impose clearly avoidable costs for the Government, as the Tribunal's/Court's valuable time is also consumed in hearing appeals against such clearly erroneous and indisciplined orders, which should never have been passed. Cost of Rs. 5000 imposed

Income Tax

Whether any expenditure incurred on acquiring right to use database can be treated as akin to acquiring capital asset - NO: HC

THERE was a company jointly promoted by TATAs and IBM which were known as TATA IBM. Both agreed to bifurcate the software development activities and the hardware business into two separate entities namely IBM Global Service India (P) Limited and TATA IBM where hardware business was taken care of. Various assets of the erstwhile TATA IBM were transferred to the newly established assessee-company for certain considerations.

The issues before the Bench are - Whether any expenditure incurred on acquiring right to use database can be treated as akin to acquiring capital asset and Whether loss on account of foreign exchange fluctuation is for importing various consumable items is allowable as revenue expenditure or is to be included in the valuation of closing stock. And the verdict goes in favour of the assessee.

Central Excise

Revenue finding tobacco products in godowns owned by private persons and alleging clandestine manufacture and removal by respondent - there is virtually no evidence lending any credence to said allegation - entire case is based on assumptions and presumptions hence not sustainable: CESTAT

THIS is a Revenue appeal filed in the year 2006.

The department found tobacco products stored in various godowns outside the factory and alleged that the goods have been clandestinely manufactured and cleared by the respondents. Actually, the godowns were originally sealed by the sales tax officers and were found to be stored with the goods bearing the brand name of the respondents.

Statements of the company were recorded and they informed that the said godowns do not belong to them as they do not have any other storing place except the factory premises. When asked about the goods lying in the godowns, they submitted that the goods might have been stolen from their manufacturing units in small quantities clandestinely and might have been stored there.

See our Columns Monday for the judgements