Jurisprudentiol-Tuesday's cases

By Vijay Kumar

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

CENVAT - If department levies and collects CE duty on goods removed from factory, they cannot claim, for purpose of allowing CENVAT credit, that process of manufacture had not taken place: CESTAT

THE CCE, Rohtak held that converting black rods/bars into bright bars did not amount to manufacture during the relevant period (May 2003 - April 2004) and, therefore, the CENVAT credit taken on capital goods/black rods/bars used for making bright bars was not admissible.

Accordingly, the adjudicating authority disallowed the CENVAT credit of Rs.68.24 lakhs [Rs.67.72 lakhs on inputs &Rs.52,000/- on capital goods] and ordered recovery of the same alongwith interest and an equivalent penalty. This order was passed in September, 2013.

Income Tax

Whether conversion of capital asset such as Floor Space Index into stock-in-trade of business carried out by assessee is to be deemed as 'transfer' u/s 2(47) - NO: HC

THE assessee is a partnership firm engaged in the business of real estate and also running a theatre. In the year 1971, the assessee acquired a piece of land through lease deed. The assessee constructed two theatres on the said land and started earning income by exhibiting films as well as rental income from some of the shops in the theatre building. Later on, the real estate business was started. In January, 1988, the assessee introduced FSI as stock-in-trade. The assessee passed accounting entry in the books of account by crediting Rs.1,10,25,000 to the account of capital reserve A/C" and debiting to the account of FSI Right A/c. The assessee had shown capital gain in its return of income for the AY 1993-94. However, the AO rejected the assessee's claim. On appeal, CIT(A) allowed the appeal of the assessee. On further appeal, Tribunal had dismissed the said appeal.

THE issue before the Bench is - Whether conversion of capital asset such as Floor Space Index into stock-in-trade of business carried out by assessee is to be deemed as 'transfer' u/s 2(47). And the answer is NO.

Central excise

Whether adjustment of excess payment against short payment has to be allowed on finalisation of Provisional assessment - Matter goes to Third Member of CESTAT

THE Appellants cleared their products viz. lead and zinc concentrates to their sister concerns and as the actual moisture content and arms-length price of the products were not available at the time of clearance, the same were assessed provisionally. The provisional assessments were later finalised for the period from 1.4.2006 to 31.3.2007. At the time of finalisation, it was found that the Appellants had short paid duty to the extent of Rs. 8,75,83,871/-during the period 1.4.2006 to 11.1.2007 and excess paid duty to the extent of Rs.3,53,74,279/- during the period 12.1.2007 to 31.3.2007. As a result of finalisation, the adjudicating authority:

1. Demanded the short paid duty of Rs. 8,75,83,871/-

2. Did not allow adjustment of excess duty paid as their sister concerns (smelter units) to whom the goods were supplied have already availed Cenvat credit in respect of the duty paid on the said goods.

3. Demanded interest on the dues.

Whether inter se adjustment of duty short paid and duty excess paid during the period of provisional assessment is permitted at the time of finalisation of assessment in terms of Rule 7 of the Central Excise Rules when the appellants are not entitled to refund of duty excess paid. Whether interest is chargeable on the duty short paid in terms of sub-rule (4) of Rule 7 of Central Excise Rules regardless of the duty excess paid during different segment of the period involved when the appellants are not entitled to refund of duty so excess paid.

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