Jurisprudentiol - Thursday's cases

By Vijay Kumar

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

CENVAT - Segregating defective Inputs and valuing them at lower rate for purpose of stock valuation is not equivalent to writing off value of inputs in books of account - no cause for reversal of credit: CESTAT

THE appellant is a manufacturer of automobile components and availed CENVAT credit. On receipt of inputs, the defective ones are segregated and returned to the suppliers but some inputs which have been issued for processing are rejected in machining process.

The appellant was asked to show cause as to why under the provisions of Rule 3(5B) of CCR, 2004 they should not reverse the CENVAT credit availed on such process rejection.

Income Tax

Whether if it is found that assessee has made purchases at abnormally high prices from a party that is not traceable, Revenue will have all legitimacy to reject books and tax gross profit on estimate basis - YES: ITAT

ASSESSEE is a registered firm engaged in the business as a wholesale dealer in Iron and Steel. During the course of assessment proceedings the AO observed that as against gross turnover of Rs. 44.89 crores the assessee had declared gross profit of Rs. 1.31 crores only which worked out to 2.93%. Since the gross profit disclosed by the assessee was very low, the AO made enquiries to ascertain the genuineness of claim of purchases. From the addresses of all the suppliers given by the assessee, the AO called for information u/s 133(6) from 34 suppliers.

THE issue before the Bench is - Whether if it is found that the assessee has made purchases at abnormally high prices from a party that is not traceable, the Revenue will have all the legitimacy to reject the books and tax the gross profit on estimate basis. And the verdict goes against the assessee.

Service Tax

ST - If laying of cables cannot be taxable service, adopting the same logic, laying of pipeline also cannot be construed as taxable service - Demand of Rs.7.62 crores set aside by CESTAT

THE appellant undertook manufacture and supply of pipes to Maharashtra Jeevan Pradhikaran and as per the contract apart from the supply of pipes they were also required to undertake the activity of laying, connecting, jointing pipeline for water supply projects till the stage of testing and commissioning of raw and pure water by pumping machinery.

It is the view of the department that the said activity is classifiable under “erection, installation and commissioning service"and accordingly a SCN was issued demanding Service Tax of Rs.7,62,26,657/- on the total contract value of Rs.75,36,01,409/- received by the appellants during the period from 2003-2004 to 2006-2007.

See our Columns Tomorrow for the judgements