Jurisprudentiol – Tuesday's cases

By Vijay Kumar

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

Conditional Exemption Violation of conditions Show Cause Notice is required to be issued even in cases where bond is executed High Court

THE issue involves demand of customs duty (Rs.5,75,65,331/-) along with interest under Section 28AB of the Customs Act, 1962 and Central Excise duty (Rs.1,28,26,974/-) along with interest under Section 11AB of the Central Excise Act, 1944 in terms of the bond executed before the Assistant Commissioner of Customs and Central Excise, in fulfillment of the conditions laid down for duty free import under an exemption notification.

Show cause notice is a must before adjudication of the quantity of the duty sought to be levied followed by demand -Clause (a) of sub-section (1) of Section 28 is a mandatory in character and it is well settled that in the regime of interpretation of statute the mandate of fiscal law has to be strictly construed. The entire adjudication and consequent demand notice are absurd and in breach of principles of natural justice Matter remitted to Adjudicating Authority.

Income Tax

Whether if an expenditure is held to be capital in nature, it automatically invites application of provisions of Sec 35AB in such a case - YES: High Court

THE assessee company had claimed technical know how fees of Rs.24,04,000/- in the Profit & Loss Account. The AO held this to be capital in nature and also held that the assessee's request for applying Section-37 was also incorrect. The expenses of technical know-how was covered by the provision of Section-35AB and there would not arise question of applicability of provision of Section-37 and accordingly, such technical know-how was added to the total income of assessee.

The issue before the Bench is - Whether if an expenditure is held to be capital in nature, it automatically invites the application of provisions of Sec 35AB in such a case. And the answer goes against the Revenue.

Central Excise

CENVAT Credit on inputs alleged to be not received - In view of clear evidence in respect of non-crossing of Sale Tax check post barrier, a clear conclusion emerges of non-receipt of goods - Demand upheld: CESTAT

THE issue involved is denial of CENVAT Credit on the inputs on the ground that the goods were not received by the assessee. According to the investigations, the assessee's unit is located in Himachal Pradesh and as per the provisions of Himachal Pradesh General Sales Tax Act, 1968, the owner or person in charge of goods, carriage or vessels entering the limits of H.P. State or leaving the H.P. state limits has to give, in triplicate, a declaration containing such particulars as may be prescribed of the goods carried in such vehicle or vessel as the case may be, before the officer in charge of the check post or barriers and ST-XXVI-A form is required to be generated/submitted at the barriers/check-posts for the goods entering into/leaving the State of H.P. It is the case of the department that the subject case was booked primarily on the basis of Sales Tax records pertaining to the supplier, M/s Karan & Co. Parwanoo. As per evidence gathered and confirmed by the Sales Tax Authorities, the goods have not even crossed the State border on the appointed dates, yet Cenvat Credit has been availed by the party.

See our Columns Tomorrow for the judgements