Jurisprudentiol - Tuesday's cases

By Vijay Kumar

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

Rule 57G of CER, 1944 - time limit of six months would be applicable even for consignment which had arrived before introduction of procedural restriction: CESTAT

A SCN was issued demanding the credit taken and proposing to impose penalty for violation of rule 57G(5) of the CER, 1944 which at the material time mentioned "Credit shall also not be taken by the manufacturer after six months of the date of issue of any document specified in sub-rule (3)… ".

The CESTAT observed that the time limit of six months would be applicable from the date of issue of the bill of entry and even in respect of the goods imported prior to the amendment of Rule 57G(5) introducing the time limit.

Income Tax

Whether benefit conferred on assessee by way of conversion of loan into grant by Govt for maintaining SLR as per RBI Policy so as to enable assessee-bank to carry out banking would constitute capital receipt and hence not liable to tax - YES: ITAT

ASSESSEE is a Non-scheduled Cooperative Bank engaged in the business of banking. For the assessment year under consideration, assessee bank filed a return of income on 16.10.2010 declaring total income at ‘Nil'. The return was selected for scrutiny assessment whereby after making certain disallowances the total income has been determined at Rs.181,85,34,355/-. Various additions/disallowances made by the AO were carried in appeal before the CIT(A), who has allowed partial reliefs. The assessee is in appeal challenging the additions sustained by the CIT(A) whereas the Revenue is in appeal challenging the reliefs allowed by the CIT(A). In this background, now we may proceed to adjudicate the captioned cross-appeals.

The issue before the Bench is - Whether the benefit conferred on the assessee by way of conversion of loan into grant by the Government for maintaining Statutory Liquidity Ratio (SLR) in compliance with the requirements of RBI so as to enable the assessee bank to carry out its banking activities would constitute capital receipt and hence not liable to tax. And the verdict favours the assessee.

Service Tax

Packaging Services - As per Fertiliser (Control) Order, 1985, packaging of fertilizers before marketing is statutory requirement - activity of packaging would, therefore, form integral part of manufacturing in terms of s.2(f)(i) of CEA, 1944 and cannot be viewed as service - Demand of Rs.3.20crores set aside: CESTAT

THE appellant is engaged in providing packaging activity services in relation to fertilizers manufactured by M/s Zuari Industries Ltd., Goa for which they are receiving certain consideration.

Revenue is of the view that the said services are liable for Service Tax under the category of "packaging services" defined in section 65(76b) of the FA, 1994

Packaging of fertilizer is a statutory requirement for sale of the fertilizer. Sale of fertilizer in bulk requires a license to sell in bulk. As the appellant is not having any such license, therefore, packaging is a statutory requirement for sale of fertilizer by M/s Zuari Industries Ltd. If marketing of fertilizer cannot take place without packaging, the appellant is a manufacturer as per section 2(f)(i) of the Central Excise Act, 1944, wherein manufacture includes any process incidental or ancillary to the completion of a manufactured final product. In other terms, the completion of fertilizer manufacture product occurs when packaging is done and without packaging, the fertilizer cannot be marketed. Therefore, the activity of packaging in respect of fertilizer would form an integral part of manufacturing activity and cannot be said to be a service activity, especially, in the context of packaging activity.

See our Columns Tomorrow for the judgements