Jurisprudentiol - Wednesday's cases

By Vijay Kumar

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

Tax paid by appellant on reverse charge basis in respect of services provided by its agents in J&K and credit availed thereof - CENVAT Credit taken by the appellant is nothing but refund of the service tax paid by them on the services on which they were not required to pay service tax: CESTAT

THE appellant is engaged in the business of providing General Insurance Service throughout India. The head office of the appellants is located at Pune and is centrally registered with the service tax department for discharge of service tax liability on general insurance services. The appellant had appointed independent insurance auxiliary agents to promote their business. These insurance agents are providing services to the appellant and the said service is taxable under the category of insurance auxiliary services under Section 65(105)(zl) of the Finance Act, 1994. In terms of Rule 2(1)(d)(iii) of the Service Tax Rules, 1994, the liability to pay the service tax on insurance auxiliary services has been shifted to service receiver i.e. on insurance company.

Accordingly, the appellants discharged the service tax liability as a receiver of service from the insurance auxiliary agents. After paying the service tax on the said service, the appellants take CENVAT Credit of the service tax paid by them.

Income Tax

Whether an exporter is eligible to claim deduction u/s 80HHC for deemed credit under CENVAT Incentive Scheme - YES: High Court

THE assessee is an Indian company which is engaged in the business of export of any goods or merchandise. It had filed its return, declaring a total income of Rs.88,16,140. The assessee claimed deduction u/s 80HHC of deemed credit of Rs.89,34,887/- under the CENVAT Incentive Scheme as part of business profits. During assessment, the AO held that CENVAT incentives were not eligible profits for claiming a deduction under section 80HHC and thus had to be excluded from the business income while calculating deductions under section 80HHC. Therefore, it determined the total income of the assessee at Rs.1,63,79,073. On appeal, the CIT(A) confirmed the same. Whereas, the Tribunal held that the CENVAT incentives were in the nature of export incentives and hence allowed for the purpose of calculating business income whilst calculating a deduction under section 80HHC.

The issue before the Bench is -Whether an exporter is eligible to claim deduction u/s 80HHC for deemed credit under CENVAT Incentive Scheme. And the answer of the High Court is YES.

Central Excise

Demand of duty on clandestine removals - Since the appellant had prepared invoices during the period, clearly indicating therein that they are operating under compounded levy scheme, it cannot be held that they had removed goods clandestinely: CESTAT

THE premises of the appellant were searched by the officers of the department and on physical stock verification in the presence of some of the Directors of the main appellant, it was noticed that there was shortage of 1,05,993L.Mtrs of finished man-made fabrics. After investigations, show cause notices were issued to the main appellant as well as the individuals, directing them to show cause as to why the Central Excise duty should not be demanded from them for clandestine removal of the goods, why interest be not demanded and penalties be not imposed. The adjudicating authority, after considering the submissions made on behalf of all the three appellants, confirmed the demands with interest and also imposed penalties. The first appellate authority also confirmed the demands.

See our Columns tomorrow for the judgements