Jurispruden tiol – Tomorrow ' s cases Legal Corner Icon — the image was hosted by the publisher and was not captured.

By Vijay Kumar

Central Excise

Tribunal says repacking of bought out electrical appliances and spares and subjecting them to quality control, branding and packing and marking with MRP prima facie amounts to manufacture - but stay granted on account of other issues

ISSUES cannot get murkier than this. As if the zealousness exhibited by the Revenue on “manufacture” matters was on the wane, this order may boost it a few notches further!

The facts are that the applicant purchased electrical appliances and spares from different manufacturers and after subjecting them to quality control, branded and packed them.

The case of the department is that the activities carried out amounts to manufacture within the meaning of Section 2(f) of the CEA’44. The adjudicating authority recorded a finding that the products are received in gunny bags/cartons and are subjected to quality control, branding & packing; that the goods received from vendors are not marketable & hence are required to be subjected to quality checking, labelling and packing and marking MRP; that in terms of section 2(f)(iii), the activity amounts to manufacture.

Surprised with these complex interpretations, the appellant is before the Tribunal.

Central Excise – rotors and stators, held excisable for one period and not excisable for another period, by the same Commissioner – since non-excisability order was accepted by department, appeal allowed: Supreme Court

THE appellant is a small scale industry. It commenced manufacturing electric fans falling under the erstwhile Tariff Item No.33 prior to coming into force of Central Excise Tariff Act, 1985, after obtaining central excise licence. Rotors and stators falling under Tariff Item 30D which are essential components required for the manufacture of electric fans, were also manufactured by the appellant and captively used. The appellant, from time to time, also received orders for doing diverse specific specialised processing work on job work basis on customers' raw materials like winding, die casting, coil setting etc. which did not transform the customers' raw materials into rotors and stators as commercially known and the customers undertook various further processes in their own factories to manufacture rotors and stators and used the same in the manufacture of their fans.

For the period January 1983 to March 1984, the Collector vide its order dated 31st May 1988 held that the rotors and stators were complete and were manufactured by the appellant and thus exigible to the levy of excise duty. This order was confirmed by the Tribunal by the impugned order dated 27th April 2001.

Order of the Tribunal as well as that of the Collector are under challenge in this appeal.

Income Tax

Interest earned from Income Tax Department & staff loans to be assessed under 'other sources'; Interest on Credit sales is business income; When profit is negative, deduction under Section 80 HHC is nil : ITAT

Interest earned from Income Tax Department: the assessee has fairly conceded that the interest earned on refunds from Income Tax Department is to be assessed under the head "other sources". Accordingly this issue is decided against the assessee.

Interest earned on credit sales: ITAT in assessee's own case for A.Y. 2003- 04 in ITA No. 1722/Del/2006 held that the income was assessable under the head 'business income' Respectfully following the precedent it is held that interest earned on credit sales is to be assessed under the head "business income".

Interest earned on staff loans: similar issue came up before ITAT in assessee's own case for A.Y. 2003-04 wherein interest on staff loans has been treated as income from other sources. Respectfully following the precedent in assessee's own case it is held that interest earned from staff loans being an incidental activity carried on by the assessee is liable to be assessed as income from other sources.

computation of deduction u/s 80HHC. Deduction u/s 80HHC is allowable on the profits included in the business income of the assessee. In the case before us, the export profit included in the business income is a negative figure as is evident from the computation made by the Assessing Officer in the assessment order. Therefore, in view of provisions of section 80AB, deduction u/s 80HHC will be nil.

See our columns tomorrow for the judgements