Jurisprudentiol - Tuesday's cases

By Vijay Kumar

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

61 crores lost - SCN was for classification under 'maintenance and repair services' whereas demand confirmed under "IPR services” for period prior to 16/05/2008 and under 'information technology services' post 16/05/2008 - Without putting appellant to notice and without giving an opportunity to appellant to rebut same, no demand can be confirmed: CESTAT

THIS is the second round of appeal and the Service Tax demanded is Rs.86.42 crores with loads of penalties and interest. Four SCNs covering the period from 01.04.2004 to 31.03.2013 make up for the proceedings.

Before the CESTAT, the appellant submitted that as regards the first show-cause notice, the proposal in the notice was that the services rendered by the appellant falls under the category of "maintenance and repair services”, whereas the adjudicating authority has confirmed the demand under the category of "Intellectual Property Rights Services” (IPR) for the period prior to 15/05/2008 and under "Information technology services” with effect from 16/05/2008.

Income Tax

Whether if acquisition of machinery turns out to be contrary to terms of contract, Revenue is right in denying depreciation u/s 32 - NO: HC

THE assessee company was engaged in the business of manufacture and trading of pharmaceutical products and its machines. It had entered into a contract with M/s. Nicholas Piramal and the products manufactured were ophthalmic which required a particular type of machinery to manufacture the moulds. M/s. Nicholas Piramal had the particular type of machinery to manufacture the moulds and as per the manufacturing agreement, the assessee also could purchase the second machinery which could be installed in the premises of M/s. Nicholas Piramal and used for the manufacture of the said moulds. Accordingly, M/s. Nicholas Piramal had one machine and the assessee purchased another machine and installed the same in the premises of M/s. Nicholas Piramal and the same was used for manufacturing the moulds. During the FYs 1997-98 and 1998-99, the assessee claimed depreciation on the second machine purchased by it.

The issues before the Bench are - Whether when there is no substantial change in the language of the substituted provision of law, it can be said that the assessee would be denied deduction merely because the provision has changed; Whether in order to claim depreciation u/s 32, it is relevant how the said machinery was acquired & Whether in case acquisition of machinery was contrary to the terms of the contract between the parties, depreciation claim can be denied to the assessee. And the verdict favours the assessee.

Central Excise

Manufacture of dutiable and exempted goods - Once proportionate credit on inputs used in exempted products is reversed, there is no requirement to reverse 8% of price of exempted goods: CESTAT

THE respondents were engaged in the manufacture of Paper and Newsprint classifiable under Chapter 48 of CETA, 1985 and availing MODVAT/CENVAT credit under CENVAT Credit Rules, 2001. The respondent removed an intermediate product, "Lapped Chemical Bagasse Pulp”, a non-dutiable product. They availed MODVAT/CENVAT credit for inputs viz. Furnace Oil, Hydrogen Peroxide, Caustic Soda, Liquid Chlorine etc. used in the manufacture of dutiable and exempted products. By Show Cause Notice dated 19.7.2002, the respondent was directed to pay the amount of Rs.24,74,092.20 being 8% of the value of clearance of Wet lapped bagasse pulp for the period July 2000 to December 2001 under Rule 57AD of the Central Excise Rules, 1944 and Rule 6(3)(b) of CENVAT Credit Rules, 2001. It has also proposed imposition of penalty along with interest. The adjudicating authority dropped the proceedings.

See our Columns Tomorrow for the judgements