Jurisprudentiol - Friday's cases

By Vijay Kumar

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

Apart from undertaking cutting and slitting of coils, appellants are putting of layer of plastic for improving drawability and applying inter-leaving paper for protection of material for end use application - such activity is ancillary to completion of manufactured product and, therefore, amounts to manufacture: CESTAT

THE appellants are engaged in the activity of cutting and slitting of coils. In addition to that they carried out slitting into desirable width as per the customers' requirement; larger weight coils are cut into smaller weight as per the customers' requirement; that the coils are coated and layered with plastic for improving drawability of, besides applying inter-leaving paper for protection of the material so as to be fit for end use application. The appellant took registration as a manufacturer in the 2006& thereafter they procured capital goods and inputs for the manufacturing activity.

CENVAT credit availed on these capital goods, inputs and input services is denied by the CCE, Raigad on the ground that the activity undertaken does not amount to manufacture.

Income Tax

Whether, for purpose of taxation, cost of acquisition of tenancy right is to be taken as NIL in case of enhanced compensation - YES: HC

THE assessee, late G S Bapna, was wife of late Kesar Singh, who was a sub-lessee to M/s Delhi Pottery Works (P) Ltd. During the relevant year under consideration, the Govt. of India had transferred 24.1 acres of Arkpur village land in favour of Delhi Pottery through registered lease deed dated 19 th Mar, 1924. Subsequently, 19.1 acres out of this land was sub-leased by Delhi Pottery to late Kesar Singh and his sons for a period of 17 years at a rent of Rs. 500 p.m., whereupon factory premises were constructed and machineries were installed by Kesar Singh. Thereafter, Delhi Pottery went into liquidation and the leasehold rights were transferred in favour of Harnam Kaur, widow of Ram Singh Kabli, on March, 1949 and rent payable under the sub-lease was paid to her.

The issue before the Bench is - Whether, for the purpose of taxation, cost of acquisition of tenancy right is to be taken as NIL in case of enhanced compensation. And the answer of the High Court is YES.

Service Tax

Outdoor Catering Service - Appellant supplying ready-to-serve food to Khanna Hotels Pvt. Ltd. - whether the food prepared is served by employees of KHPL or by the appellant himself requires verification - Matter remanded: CESTAT

A mouth-watering demand (for Revenue, of course) of Rs.2,47,23,573/- with interest & penalties was confirmed against the appellant on the ground that they had provided Outdoor catering service but not paid service tax.

Before the CESTAT, the appellant submitted that they are engaged in supply of foods to Khanna Hotels Pvt Ltd. (KHPL); they entered into an agreement for preparation of ready-to-serve food and beverages except liquor, soft drinks and aerated waters and to provide banquet service in the Club; as per the agreement, KHPL had provided necessary equipment including kitchen equipment, crockery, cutlery, linen etc. required for preparation of food and beverages;the food prepared by the appellants is served by the employees of KHPL; charges to be charged from the customers for various items are decided by KHPL; KHPL issued bills for catering and other services to the customers; the amount of bills was credited to KHPL's account and as per the agreement, the appellants were receiving 75% of the net sale collection as consideration towards sale of ready-to-serve food;that the appellants are paying VAT in respect of the sale of food to KHPL; that they are raising bills on KHPL for supply of food by 5th of every month, which was to be paid by KHPL within 15 days.

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