Jurisprudentiol - Wednesday's cases

By Vijay Kumar

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

CENVAT - Distribution of service tax through ISD is only facility provided under the Rules and does not deal with recovery - Therefore, credit, if taken wrongly, has to be recovered from the person who has taken credit - Pre-deposit ordered: CESTAT

THE appellant was denied CENVAT credit of Rs.1.31crores by CCE, Raigad on the ground that the credit is attributable to trading activities undertaken by the appellant. Penalties have also been imposed along with interest.

Before the CESTAT, the appellant took the following stand -CENVAT credit has been taken on the strength of the invoices issued by their Head Office, which was registered as an Input Service Distributor (ISD) with the department and, therefore, without putting the ISD to notice, the impugned demand could not have been confirmed.

Income Tax

Whether facts relating to AY 2005-06 can be assumed to be known to Revenue when it came to be known only in AY 2009-10 that interest on which deduction was claimed u/s 57 was infact related to home loan but same was diverted to purchase debentures - NO: HC

THE assessee had claimed deduction u/s 57 as "Interest paid to HDFC" as Rs.53,65,251/- for the AY 2005-06. The AO reopened the assessment for this AY on the ground that such interest was paid on home loan and so no deduction should have been allowed u/s 57. The AO recorded in the reasons for reopening of assessment as that during AY 2009 - 10, various loan documents, including loan application from the assessee and sanction letter by the HDFC Ltd,., was called for. From these, it was observed that the assessee had taken this loan in FY 2002-03, but that this loan was a Home Loan (under Adjusted Rate Home Loan Scheme- ARHL) taken for the purpose of purchasing a residential property.

The issues before the Bench are - Whether facts related to AY 2005-06 were already known to the Revenue when it was only during the assessment proceedings of AY 2009-10 it was revealed that interest expenditure on which deduction was claimed u/s 57 was infact related to home loan; Whether the theory of consistency can be applied, when each assessment is a separate assessment unit; Whether the obligation of the assessee to comply with the provisions of the Income Tax Act have to be complied with in each AY and Whether when the assessee may be able to satisfy the AO that reopening of the assessment was not justified, the assessment cannot be reopened, although the reasons recorded do indicate that there was prima facie evidence to form a reasonable belief of income escaping assessment. And the verdict goes against the assessee.

Customs

Revocation of CHA licence or dropping of proceedings under CHALR cannot be said to be an order passed by Commissioner as an adjudicating authority - in absence of specific provision in CHALR, 1984, Revenue cannot appeal against such order before Tribunal: CESTAT

AN inquiry was initiated against the CHA with regard to their involvement in evasion of Customs duty on the import of electrical and electronic goods of foreign origin. The investigation revealed that the said CHA had filed Bill of Entry and had failed to give factual description, brand and country of origin. Further, the value of goods were declared as Rs.10,03,690/- whereas on physical verification, the value was found to be Rs.77,10,000/-. The CHA had admitted to attending the clearance work in respect of the said consignment and also admitted to introducing the importer to the overseas suppliers and bankers for financial assistance. They had also admitted to misdeclaring the value.

See our Columns Tomorrow for the judgements