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By Vijay Kumar

CE/ Customs/ FEMA - Cognizance of offence - Taking of cognizance is a sine qua non or condition precedent for holding a valid trial - Cognizance is taken of an offence and not of an offender : Supreme Court

THE issue before the Supreme Court is whether issuance of process in a criminal case is one and the same thing or can be equated with taking cognizance by a Criminal Court. And if the period of initiation of criminal proceedings has elapsed at the time of issue of process by a Court, the proceedings should be quashed as barred by limitation?

Service Tax

Service Tax paid for a wrong service does not cease to be Service Tax – rigours of Section 11B applicable for refund - CESTAT

THE appellants had undertaken maintenance of certain apartments and collected maintenance charges from the apartment owners from April, 2000 to January, 2005. They got themselves registered as Real Estate Agent in terms of Section 65 (88) of the Finance Act, 1994 in March, 2001 and were paying service tax regularly since then upto January, 2005. The Central Government proposed to levy service tax on repairs and maintenance of immovable property in the 2005 budget, which fact became known to the appellants towards the end of February, 2005 (the proposal became law with effect from 16.06.2005). The appellants accordingly applied for cancellation of their registration as Real Estate Agent in March, 2005. Simultaneously, they also applied for refund of the service tax which they had paid for the period April, 2000 to January, 2005. This claim was made under Section 11B of the Central Excise Act read with Section 83 of the Finance Act, 1994. The original authority rejected the claim for refund for the prescribed period of limitation (March, 2004 – January, 2005) on merits. As for the claim for refund for the period prior to March, 2004, that authority rejected it as time-barred. Aggrieved by the decision of the original authority, the party preferred an appeal to the Commissioner (Appeals) and the latter held in favour of the assessee on the question whether they were eligible for refund for the prescribed period. The appellate authority, however, remanded the case to the original authority on the question of unjust enrichment. Aggrieved by the adverse decision of the appellate authority for the period prior to March, 2004, the party has filed the present appeal. The appellants have since obtained refund of Rs. 78,390/- for the prescribed period from the Deputy Commissioner in terms of order-in-Original No.2 /2005-06-Refund ( STC ) dated 28.02.2006.

Central Excise

Appellants are to be blamed for not conducting an inspection of the Goods Inspection Register seized by department or taking a copy of the same – Demand on ' clandestine removal ' sustained by Tribunal

PETITIONERS sought a writ order or direction in the nature of certiorari quashing the order dated 07-04-2003 passed by the Customs, Excise and Service Tax Appellate Tribunal, New Delhi , rejecting the application of the petitioner for condonation of delay. The Tribunal dismissed the appeals as the delay in filing the Appeals were not explained by the petitioners.

Income Tax

Big win for Income Tax Department; Interest paid on borrowed capital for acquisition of new machinery before same is first put to use, cannot be claimed as revenue expenditure even as extension of existing business; to be added to ' actual cost ' of assets : P & H High Court Larger Bench

FOR the Income Tax Department, the latest ruling of the Larger Bench of the Punjab & Haryana High Court amounts to a big win. And, at the centre of the dispute was whether the interest paid on borrowed capital for purchasing new plant and machinery before the same is put to use is revenue expenditure or to be added to the ' actual cost ' of the asset? What further complicated the issue was the fact that the assessee was a running company and wanted to set up a new plant by buying new machinery out of borrowed capital. Since the new production plant was mere an extension of the existing business, the assessee treated the interest payment as revenue expenditure. Although to curb tax avoidance the CBDT had inserted explanation 8 to Sec 43(1) vide Finance Act, 1986 w e f April 1, 1974 and also inserted a proviso to Sec 36(1)(iii) vide Finance Act, 2003 to make it clear that no deduction shall be allowed for interest paid, in respect of capital borrowed for acquisition of an asset for extension of existing business or profession (whether capitalized in the books of account or not) and such amount of interest is for the period beginning from the date on which the capital was borrowed for acquisition of the asset till the date on which such asset was first put to use. Given that the laws were so unambiguous and clear what was the actual issue before the Larger Bench? It was the interpretation of the converse whether the law also meant that the interest payment before the capital assets are put to use are to be added to the ' actual cost ' of the assets or to be allowed as revenue expenditure?

See our columns Tomorrow for the judgements