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By Vijay Kumar

Central Excise

Another Revenue appeal bites dust as Revenue did not understand what the order of adjudicating authority meant!

SOME time back an assessee had sent across an order passed by the Commissioner for our eyes only. No, that order did not drop or confirm any duty demand or did something miraculous so as to have a mention in TIOL. But then, nothing ought to go waste! We are using bits & pieces of the same for today’s story.

In that order, the assessee had succeeded before the Tribunal in his submission that the demand was hit by time bar. Accordingly, the matter was remanded to the adjudicating authority for working out the duty liability for the normal period. Incidentally, the assessee had already made a payment of Rs.6 lakhs when the case was booked.

To cut the long story short, in de novo adjudication, the revised duty demand worked out to a meager Rs.2,80,058/- & the adjudicating was mighty worried that a refund may become due. Hence he imposed a penalty of Rs.1 lakh on the Managing Director & Rs.2,19,942/- on the company. Why such an odd, sorry even, amount of penalty you may ask – add the three amounts & the total stands at Rs.6 lakh. We do not know what happened thereafter.

Service Tax

Exempted and dutiable services – common input services - Not maintaining separate records cannot be a ground for denying Input Service Credit in respect of service tax paid on services referred in Rule 6(5) of CCRs, 2004 : Tribunal

RULE 6 of the CCR, 2004 cannot but continue to hog the limelight.

Sub-Rule 6(5) of the Cenvat Credit Rules, 2004 reads thus –

(5) Notwithstanding anything contained in sub-rules (1), (2) and (3), credit of the whole of service tax paid on taxable service as specified in sub-clause (g), (p), (q), (r), (v), (w), (za), (zm), (zp), (zy), (zzd), (zzg), (zzh), (zzi), (zzk), (zzq) and (zzr) of clause (105) of section 65 of the Finance Act shall be allowed unless such service is used exclusively in or in relation to the manufacture of exempted goods or providing exempted services.

It is the submission of the Appellant Revenue that the respondents have not maintained separate records for utilization of the credit taken and the services received by them for exempted and for the non-exempted categories; that the provisions of Rule 6(3)(c) will be applicable and even if the credit has been allowed under rule 6(5), the respondent is entitled to utilize only 20% of the amount of credit that is available to him as a credit.

Income Tax.

Excise duty and sales tax cannot form part of 'total turnover' u/s 80HHC(3), otherwise formula becomes unworkable : ITAT Special Bench

THIS Special Bench has decided on as many as 16 grounds:-

CIT (A) has erred in deleting addition of Rs.38,64,109/- debited to year's revenue account as value of stores written off by holding that it is for the A.O. to prove that consumable stores had either not been used or individually costed less than Rs.5,000/- ignoring, in the process, the findings in assessment that claim could not be established on record.

The Tribunal held:

The assessee has not furnished any evidence to prove that the above consumable stores have become obsolete during the year under consideration. At the same time, considering the volume of the assessee's business wherein the assessee's turnover exceeded Rs.6000 crores, the possibility of some consumable stores becoming obsolete cannot be ruled out. Further, the obsolete stores would also have some realizable value. In the case of the assessee the items written off included 1246 M .T. of coal. Even if the coal is dust or rejected, it has some realizable value. The ld. counsel for the assessee has claimed that whenever consumable stores are sold, the amount realized are credited as other income in the assessee's books of account. However, the learned counsel for the assessee could not point out whether any amount on the realization of 1246 M .T. of coal and other consumable items written off in the year under consideration was shown as misc. income on its realization in this year or any of the subsequent years. Considering the totality of these facts and the arguments of both the sides, in our opinion, it would meet the ends of justice if the disallowance is sustained at 25% of the consumable stores written off by the assessee. We hold and direct accordingly.

Tomorrow is a HOLIDAY - Good Friday, Holi and Milad un Nabi , a holiday for Hindus, Muslims and Christians – A CESTAT bench consisting of Messrs Peeran, Chacko and Jayaraman – the most secular Bench possible in India, a CESTAT Member told me!

Enjoy an extended weekend!

See our columns Monday for the judgements