Jurisprudentiol- Tomorrow's cases

By Vijay Kumar

Central Excise

Price at which goods were contracted to be sold to Government hospital will form AV of goods even if same have been sold through dealers - Tribunal orders J & J to pre-deposit Rs 15 lakhs

GOVERNMENT Hospitals had floated tenders for supply of pharmaceutical products viz. sutures. Tenders were accepted by the company on contract basis. Price was fixed between the manufacturer and government hospitals. Goods in turn were supplied directly to government hospitals. Supplies were also made to dealers and dealers in turn sold the goods to Government hospitals.

The case of the department is that when goods are sold by dealer's to hospitals, dealer's price should form the basis for assessable value of the goods and the applicant company is required to pay duty on such value.

Retrospective effect given by Sec 87 of Finance Act, 1997 to restrict credit on fuel to 10% cannot suo motu help Revenue in recovering excess credit - Demand required to be issued within 90 days - Inaction on part of Revenue cannot be held against the assessee : Tribunal

THE short facts are that by Notification 14/ 97CE ( N.T ) dated 3.5.1997, the Central Government inserted a proviso in the landmark notification 5/ 94CE ( N.T ) issued under rule 57A of the CER , 1944.

The said proviso restricted the quantum of credit that could be availed on inputs, namely, naphtha, furnace oil, low sulphur heavy stock, light diesel oil, bitumen and paraffin wax falling under Chapter 27 of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) to the extent of 10%, whether the same was of indigenous or imported origin.

By Section 87 of the Finance Act, 1997, a validation clause saw its birth and which gave a retrospective to this notification 14/ 97CE ( N.T ) inasmuch as it laid down that the 10% restriction applies from 23 rd July 1996 onwards in spite of the fact that the proviso was inserted only on 03.05.1997.

Income Tax

Debts - settlement to make partial recovery - balance written off as bad debts - No need to prove the same - once debts written off in books it is allowable deduction; Salary expenses of previous FYs not allowable : ITAT

ADDITIONS made for written off bad debts have now become a bad case for the income tax department. But the AOs are yet to fully acknowledge this fact. Thanks to voluminous litigations on the issue, the CBDT had amended the relevant sections only to ensure that an assessee need not prove its bad debts before claiming them, and as soon as one writes off a debt as bad debt in one's books of account, the CBDT wanted its field officials to accept such a fact. However, it did not happen in the case of Alcatel India Ltd where the AO added back a sum of Rs 249 Crore written off as bad debt.

See our columns tomorrow for the judgements