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By Vijay Kumar

Sales Tax

Amortisation under Central Excise law is not applicable to Sales Tax – Supreme Court

Tomorrow we bring you a landmark judgement of the Supreme Court on valuation – in Central Excise and Sales Tax.

The Supreme Court, in a scholarly judgement with crystal clear understanding of the concepts of amortisation and valuation under Central Excise and Sales Tax, has explained the subtle difference between the valuation in Central Excise and Sales Tax, thereby once again proving that our Supreme Court is really SUPREME in understanding the complexities of tax laws, which even the experienced taxmen find confusing. In a world of falling standards, our Supreme Court stands outstanding as a classic example of excellence.

The question is whether the concept of amortisation known to Central Excise Valuation can be applied to U.P. Trade Tax Act, 1948.?

Valuation is a matter of principle. Under Section 4 of the Central Excise Act, the basis of valuation is the transaction value for each removal. Section 4 lays down the method for arriving at the assessable value for levying excise duty. It refers to taxing the value. Therefore, Section 3 of the Act is the charging section which creates the liability to pay excise duty whereas Section 4 deals with assessment or quantification of liability ad valorem. Under Section 4, duty of excise is chargeable with reference to the value of excisable goods and "value" is defined by Section 4. The price charged by the manufacturer on sale by him represents the measure of that value, therefore, prices and sale are related concepts. Therefore, Section 4 of the 1944 Act requires the Department to find out the real value of the excisable article. Excise is a tax on value. This is the most important distinction between the excise law and the sales tax law.

Cost is a fact

Price is a policy

Profit is a projection

Income Tax.

Income Tax – expenditure on abandoned project - disallowed since there is no corresponding credit either by way of contract receipts or in the least equivalent amount of work in progress : ITAT

THE assessee is in appeal agitating the order of the CIT (A) raising the following grounds mainly on two issues:

"A. Cost of Projects - Rs. 6,64,01,149/-

a) That the learned DCIT erred in disallowing the sum of Rs. 6,64,01,149/- towards the Amarkantak Thermal Power Project in Madhya Pradesh.

b) That the learned DCIT erred in stating that expenditure on a project cannot be merely allowed as an expenditure unless there is a corresponding credit in the form of contract receipt or work in progress.

c) That he ought to have observed that the Madhya Pradesh Electricity Board had arbitrarily terminated the project and accordingly the expenditure incurred on the project would be an allowable expenditure under the Income-tax Act, 1961.

Central Excise

Remission of excise duty on goods destroyed in fire – no body invites a fire accident – CESTAT sets aside ingenious findings of Commissioner in not allowing remission

IT is erring on revenue side at its best. When it is decided that no benefit is to be extended, the orders are given by adopting novel ways and innovative findings. In this case, an assessee sought remission of excise duty on goods destroyed in fire.

Their insurance claim was settled by the insurers by holding that it was a case of fire accident. The report of the forensic laboratory analysed the cause of fire as due to short circuit and on that basis the investigation by the police department stands concluded.

NDPS

Conviction – small quantity and accused is only a carrier and not a kingpin - quantity of narcotic drug or psychotropic substance found in mixture, relevant for the purpose of imposition of punishment – sentence reduced to six years : Supreme Court

On 5.3.2001, the Intelligence Officer was informed that two persons with certain drugs would be arriving by a Tamil Nadu Transport Corporation Bus at Thiruvananthapuram Bus Stand. The Officer along with other persons and the informant went to the bus stand and waited for the bus. At about 9.00 a .m., the two accused alighted from the Tamil Nadu Transport Corporation bus. They were identified by the informant. They were intercepted by the officials. The officials disclosed their identity and the accused were searched. When asked about possession of narcotic drugs, it was admitted by the accused that they were carrying 4 kgs. of heroin and they handed over the bag to the Officer. The bag contained two packets wrapped in Tamil newspapers secured with brown adhesive tape in which light grey powder was found. Two samples of 5 gms. each from both the drug packets were packed, sealed and sent for testing to the Laboratory. The accused were arrested, but the second accused escaped while on the way to produce them before the Magistrate. On 26.3.2001, the Customs House Laboratory, Cochin sent a report confirming the samples as answering to the test of crude heroin, a narcotic drug covered under the NDPS Act. The report further said that the Laboratory was not equipped to conduct a quantitative test. Thus, the samples were sent for quantitative test. On 22.2.2002, a quantitative test was done in the Customs Laboratory, Chennai where the purity was tested.

See our columns tomorrow for the judgements