Jurisprudentiol - Wednesday's cases

By Vijay Kumar

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

ST - Land owner executing Power of attorney in favour of Applicant for entering upon land & constructing complex -as title is not transferred to the applicant they cannot be treated as owner of land - prima facie applicant has provided Construction of Complex Service which is taxable - Pre-deposit ordered: CESTAT

A service tax demand of Rs.46,75,705/- has been confirmed against the applicant with penalties and interest on the ground that they provided Construction of complex service.

Income Tax

Whether possible cancellation of an existing debt, depending on outcome of on-going litigation is too distant contingency to make dues unenforceable and therefore, TRO is entitled to recover amount due u/s 226(3) - YES: HC

‘EHTPL' is a SPV constituted by agreement between Andhra Pradesh Industrial Infrastructure Corporation Ltd. (“APIIC”), holding 74% and Emaar Properties holding 26%, for the purpose of establishing an integrated project comprising golf course, convention centre-cum-exhibition complex, residential and commercial complexes, hotels, etc. Assessee is engaged in the business of construction/land development for industrial projects and residential townships, entered into a development agreement with ‘EHTPL'. Subsequently, the said agreement was cancelled and a new agreement was entered as per which the assessee was to receive consideration of 75% of gross revenue from sale of buildings constructed on EHTPL's land and 25% was to remain EHTPL's share.

Three years after the execution of the said agreement, the Government of Andhra Pradesh, on the recommendation of APIIC, prohibited the registration of documents in the integrated project being developed by Assessee and APIIC issued notice to EHTPL to terminate agreement with the assessee as it was without APIIC's approval. APIIC also filed a civil suit against EHTPL and EMGF seeking rendition of accounts and a permanent injunction on the transfer of properties to third parties. A PIL was taken up by the High Court, in which the CBI was directed to conduct inquiry into allegations of irregularity in the development agreement.

The issue before the Bench is - Whether the potential or possible cancellation of an existing debt, depending on the outcome of on-going litigation is too distant a contingency to make the dues unenforceable and therefore, the TRO is entitled to recover the amount due under section 226(3) of the Act. And the verdict goes in favour of the Revenue.

Central Excise

Valuation - s.4 of CEA, 1944 - Non-compete fee and Trademark licence fees are additional considerations flowing from Procter & Gamble Godrej Ltd. to Godrej Soaps Ltd. and are, therefore, includible in assessable value - extended period rightly invoked: CESTAT

THE appellant entered into a Joint Venture Agreement and pursuant to the same various other related Agreements were also entered into like Non-competition agreement, assignment of Trademark, Trademarks licence agreement and Manufacturing agreement.

The Joint Venture Agreement and other related agreements were terminated w.e.f. 31/07/1996.

An enquiry was initiated in the year 1996 by the Department to find out as to whether the appellant GSL (Godrej Soaps Ltd.) has under-valued the assessable value of Toilet Soaps of certain brands during the period of its alliance with PGG (Procter & Gamble Godrej Ltd.). The enquiry revealed that GSL had manufactured and cleared Toilet Soaps to PGG at an under-valued price inasmuch as it had not included the additional consideration received by it on account of advertisement expenses incurred by PGG during the period 1-3-1993 to 31-7-1996 on the Toilet Soap Brands/Trademarks licenced to PGG by G&B totally amounting to Rs.73,88,56,730/- while computing the assessable value of said goods, thereby short-paid Central Excise duty.

See our Columns Tomorrow for the judgements