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By Vijay Kumar

Central Excise

Not a colourful picture for paint manufacturer Berger Paints - Tribunal orders pre-deposit of Rs 2.5 Cr, but was it ...

THE brief facts of the case are that the applicant M/s Berger Paints India Ltd. is engaged in the manufacture of paints and varnishes which are the goods notified and subjected to assessment under Section 4A of the Central Excise Act, 1944 on the basis of MRP of the product. One of the products manufactured by the applicant is base material for paints which is intended to obtain colour range of over 5000 shades by tinting through a system called Berger Colour Bank Dispensing System, which are installed at the premises of their dealers.

The company manufactures base material for paints and imports the colourants on payment of CVD . The base paint is cleared from the factory in a packed tin, on payment of appropriate duty of excise on the basis of MRP of the paints under Sec. 4A and is sold to the dealers through the applicants depot network.

The colourant, which is imported by the applicant, is subsequently dispatched to the depots. In the dealers' premises, on identification of a particular shade by the ultimate consumer, the base in pre-packaged form is opened, colourants are added to the quantity required by the consumer and the same is tinted. After tinting, the shade of the consumer's choice is obtained. In this process, the lid or cap of the package containing base material is opened and after tinting it with the colour the same is delivered to the customer.

Income Tax

Journalist loses income tax case; Validity of search cannot be questioned in Tribunal; unexplained cash- addition correct; foreign income, no deduction allowed as procedure was not followed; expenditure not explained with proof- not allowed : ITAT

SEVERAL issues are decided in this appeal by noted journalist Iftikhar Gilani and also by Revenue against the order passed by CIT (A). The assessee was found with a huge unaccounted cash transaction of about four lakhs of rupees!

Validity of search u/s 132 of Income Tax Act.

The assessee has challenged the powers exercised u/s 132 of Income Tax Act, 1961 by the AO. According to the assessee, there was no material information in possession of the department to justify search u/s 132 of Income Tax Act, 1961, so, the proceedings u/s 132 were invalid and illegal.

The Tribunal held that in view of the Special Bench decision of ITAT in the case of Promain Ltd, the question of validity of search cannot be challenged either before the CIT (A) or before the ITAT as it could be adjudicated upon only by the High Court. Hence, the Tribunal having no jurisdiction to decide the validity of search, the issue cannot be raised before the ITAT and accordingly the ground involving this issue challenging the validity of search is liable to be rejected as such and accordingly the ground of appeal is rejected.

Income Tax

Consequential search - authorisation issued by JDI is valid; unaccounted cash not explained with proof – addition correct; value of flat – retracted statement cannot be accepted – carpenter's ' bill ' for woodwork – carpenter was not produced before AO – addition is correct : ITAT

THESE two appeals, one filed by the assessee and the other filed by revenue arising from the order of CIT (A), New Delhi , were heard together and several issues are decided.

If you have read the case of journalist Gilani , this is his wife's case. Revenue had found that she had huge unaccounted wealth:-

1. Unaccounted cash deposits in banks of Rs. 3 ,66,600 /-

2. She had purchased a flat for Rs. 13 Lakhs but undervalued it to Rs. 2.5 Lakhs.

3. A chit was found in her house which is said to be a bill for doing woodwork for Rs. 1 ,10,750 /-.

Service Tax

Advertising – agency commission received from broadcasting and print media – not taxable: CESTAT

THE appellants render taxable service under the category of advertising agency service. They entered into contract with their clients for providing advertisement agency service. The appellants render advertising services to various clients in the form of creative agency wherein they create advertisement by themselves or their third party media agency wherein they do media printing and /or buying for advertisement to be published in print/ electronic media. They were receiving 15% agency commission from authorized broadcasting and print media during the period April 2000 to March 2001. The appellants had passed on the above mentioned commission to their clients. The case of the department is that the appellants should have included the whole amount of commission received by them in the gross taxable value. Proceedings were initiated against the appellants for recovery of the differential service tax. The adjudicating authority confirmed the demand of service tax to the tune of Rs. 1 ,16,29,505 /- under Section 73 read with Section 78, 76 and 77 of the Finance Act 1944. read with Rule 6(1) of the Service Tax Rules. He demanded interest under Section 75. A penalty of Rs, 100/- per day was imposed under Section 76 of the Act. Penalty of Rs. 1 ,16,29,505 /- was imposed under Section 78 of the Act for proposing the value of taxable services. Further, a penalty of Rs, 1,000/- was imposed under Section 77 of the Act.

See our columns tomorrow for the judgements