Jurisprudentiol - Monday's cases

By Vijay Kumar

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

CENVAT - Rule 6(3A) of CCR, 2004 - deficiency in reversal of credit is due to rounding off of percentages of credit to nearest decimal - no evidence that taking of credit was on account of any intention to evade service tax - Stay granted: CESTAT

A demand of Rs.1.01crore was confirmed by the CCE, Mumbai-I along with penalties and interest against the service tax assessee.

The appellant is before the CESTAT and submits that -

+ During the year 2008-09 the appellant availed CENVAT credit on input services used in the rendering of dutiable as well as exempted services. However, they reversed the CENVAT credit attributable to the exempted services as per the procedure. Inasmuch as the turnover of the exempted services amounted 90.60% of the total turnover, the same was rounded off to 90% and the credit was reversed accordingly.

+ In the subsequent year i.e., 2009-10, the appellant reversed CENVAT credit at 87% of the total credit taken whereas the credit attributable to the exempted services amounted only to 86.57%. This was also done due to rounding off.

+ The excess credit availed in 2008-09 amounted to Rs.1.01crore while the short credit availed during the year 2009-10 amounted to Rs.1.11crore.

+ It is submitted that it was only due to rounding off, the excess taking of credit or the short-taking of credit arose, and there was no intention on the part of the appellant to evade any service tax and, therefore, if the excess credit taken during the year 2008-09 is adjusted against the short-credit taken during 2009-10, there would be no loss of revenue to the exchequer.

Income Tax

Whether when assessee does not cooperate in assessment and DVO also adopts arm-chair approach of making no independent inquiry, merely following return on capital method AO can make huge additions as unexplained investment - NO: HC

THE assessee, an individual, had filed the return for AY 2007-08. Revenue conducted a search and seizure u/s 132 in respect of the Gopal Zarda Group including the assessee, and proceedings u/s 153A were initiated. The case of the assessee was centralized by an order and notice was issued u/s 153A requiring the assessee to file return. The assessee filed a return declaring income of Rs. 12,76,890/-. The original return in this case was filed on 05.11.2008 declaring income of Rs. 12,62,699/- . The difference was on account of interest income from bank which was declared at Rs. 14,846/-; subsequently it was disclosed as Rs. 29,035/-. AO held that property bearing No. 201 to 210, 15, Community Centre, Karkardooma, Delhi-92 shown to have been purchased for a consideration of Rs. 51 lakhs was not correctly valued.

The issue before the Bench is - Whether when the assessee does not cooperate in the assessment proceedings and the DVO also adopts arm-chair approach of making no independent inquiry, merely following the return on capital investment method the AO can make huge additions as unexplained investment. And the verdict favours the assessee.

Central Excise

CENVAT Credit on capital goods - Credit on Captive Power Plant set up on premises leased out to adjacent unit - Credit allowed - Tribunal by majority.

CENVAT Credit on Capital goods/input/input service used on power plant situated at a different premises is admissible subject to exclusive supply of power by the impugned plant to the assessee manufacturing unit - In the present case, the capital goods were used to set up power plant for generation of electricity primarily for use in the manufacture of the final product within the factory of the appellant - So, if the power plant is situated outside the factory premises, CENVAT credit on capital goods used for setting up power plant cannot be denied as the electricity is captively consumed within the factory of the appellant - title of the property is not relevant for availing CENVAT credit on capital goods.

See our Columns Monday for the judgements