Jurisprudentiol-Wednesday's cases

By Vijay Kumar

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

Payments were made by ONGC to MPT merely for permission to use port limits to lay pipelines under land and seabed and not for receiving any service - The term 'wharfage' used is merely to determine the measure of compensation and not to determine nature of service rendered - Revenue appeal dismissed: CESTAT

THE respondent and ONGC entered into an agreement to permit ONGC to lay pipelines for carrying oil - Bombay Uran Trunk (BUT), Heera Uran Trunk (HUT) and Mumbai Uran Trunk (MUT) - within the Port Trust limits on land and sea. The pipelines in question were in the nature of submarine pipelines which were buried under the land and seabed within the Port Trust limits. In consideration for allowing ONGC to lay submarine pipelines through the Port limits, Mumbai Port Trust was paid compensation by ONGC. The compensation was calculated as 50% of the wharfage charges normally payable for such goods handled by the Port. Consequent to the agreement, the respondent raised invoice for compensation on ONGC along with service tax during the relevant period but ONGC refused to pay service tax on compensation charges on the premise that no service tax is payable on the said compensation.

Income Tax

Whether in case of Joint Development Agreement, transfer of land in lieu of developed area would crystallise only on day developer hands over the developed area - YES: ITAT

THE assessee is an individual. He had filed his return declaring an income of Rs.3,54,480/-. The case of assessee was selected for scrutiny and notices u/s 143(2), 142(1) were issued. It revealed to the AO that the assessee along with his brother Mr. Nandish Reddy were the owner and in possession of 2 acres and 14 guntas of land. The AO found that both the assessee as well as Nandish entered into a joint development agreement with M/s Akme Project Ltd., wherein they had jointly received refundable deposit of Rs.1.00 crore for allowing the development on their land. The developer was to construct a saleable area of 3.00 lakh square feet at its own cost, wherein the assessee and his brother were entitled for 50% of the built up area. Thus, in the opinion of the AO, transfer of the land had taken place within the meaning of section 2(47)(v) and the assessees were assessable for long term capital gain (LTCG).

The issue before the Bench is - Whether in case of Joint Development Agreement, the transfer of land in lieu of developed area would crystallise only on the day the developer hands over the developed area. And yes is the answer of the Tribunal.

Customs

Steam Coal or Bituminous Coal - since Customs Tariff defines 'bituminous coal' by means of certain specifications and if those specifications are satisfied, goods will have to be classified as 'bituminous coal' only and not otherwise - commercial parlance cannot be adopted for classification - pre-deposit ordered: CESTAT

THE Commissioner of Customs, Central Excise & Service Tax, Panaji, Goa confirmed a differential duty of Rs.1,00,55,335/- on 13000 MTs of coal imported by the appellant on 27/04/2012 by classifying the same as 'bituminous coal' falling under CTH 2701 1200 and by denying the benefit of Notification No. 12/2012-Cus dated 17/03/2012. Apart from the above, interest along with penalty of Rs.10 lakhs has also been imposed on the appellant. The goods which were provisionally released have also been confiscated with an option to redeem the same on payment of fine of Rs.50 lakhs.

The reason for this change in classification from 'steam coal' to “bituminous coal” is that upon investigation by the Customs department it was revealed that the imported coal from South Africa had a volatile matter content of 39.26% and gross calorific value of 7827 kcal/kg.

See our Columns Tomorrow for the judgements