Jurisprudentiol - Monday's cases

By Vijay Kumar

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

Cenvatted Moulds cleared under Rule 57S(8) to Job worker without payment of duty - Demand of duty on ground that the consignor cannot be treated as job worker as no raw material was supplied by the Principal manufacturer - No error in order of Tribunal setting aside the demand: HC

THE respondent/assessee is engaged in the manufacture of washing machines. They availed credit of duty paid on capital goods. The assessee had sent their moulds to their consignees/job workers for the manufacture of washing machine parts by using the moulds supplied by the assessee to the said job worker. The job workers, on their part, used the moulds and dies for manufacture of the parts. The raw material, for manufacture of those parts, was, however, procured by the job worker and after the parts were manufactured, they were cleared and supplied to the assessee on payment of Central Excise duty, payable on those goods. The amortised value of moulds was also included in the value of parts. The assessee in this case, while sending the moulds and dies to the job workers invoked the provision of Rule 57S(8) of Central Excise Rules, 1944 and at the time of removal of moulds and dies, the assessee took permission from the Commissioner, removed the moulds and dies without payment of duty and sent to the job workers for the purpose of production of goods on their behalf and in accordance with the specifications.

The Department was of the view that the job workers/consignees were buying the raw materials on their own and manufactured the parts of the washing machine with the help of the moulds and dies supplied by the assessee and therefore, they are the principal manufacturers and the assessee also is a principal manufacturer.

Income Tax

Whether interest earned on bill discounting with credit institutions is to be included in interest income u/s 2(7) - NO: HC

THE assessee, a Government of India undertaking, was engaged in the business of general insurance. Pursuant to the return filed by assessee, an assessment order was passed u/s 8(2) computing chargeable interest at Rs.3,84,84,910/-. Subsequently, notice u/s 10 was issued and a return of chargeable interest of Rs.3,92,51,082/- was filed. By an order, AO added certain amounts to the chargeable interest. The additions were made subject matter of challenge before the appellate authorities, including the Tribunal, who had substantially deleted several additions, but in respect of interest on call money with bank and interest on bills re-discounting scheme, the matter was restored to the AO. The remand order was passed to determine the nature of interest. By an order AO referred to definition of the term "interest" in Section 2(7) to hold that the aforesaid amounts had to be treated as interest under the said Section and rejected the contention of assessee relying upon Section 2(5A)(1). This order of AO had attained finality. AO thereafter initiated penalty proceedings u/s 13 and levied penalty of Rs.44,42,839/- in respect of the above two additions. On appeal, CIT(A) had deleted the said penalty after referring to several facts. On further appeal, Tribunal had had affirmed the aforesaid finding of CIT(A).

The issue before the Bench is - Whether interest earned on bill discounting with credit institutions would be included in interest income u/s 2(7). And the answer is NO.

Service Tax

Merely because postal department pays service tax on the Speed Post service, it cannot be held that the appellant need not discharge service tax liability in respect of business support/auxiliary service rendered by him in canvassing business for postal department - Pre-deposit ordered: CESTAT

THE appellants have been engaged as an outsourcing agent by the postal department and they have been asked to canvass business for the postal department. For the business so canvassed, the postal department pays them a commission based on the turnover of business achieved/canvassed.

It is the case of the department that the appellant is liable to pay Service Tax under the category ‘Business Support Service' on the commission so received. The Commissioner (A) confirmed the service tax demand of Rs.1,96,759/- along with interest.

See our Columns Monday for the judgements