Jurisprudentiol – Monday's cases

By Vijay Kumar

Customs

Customs authorities cannot refuse exemption when DGFT had no qualms about Advance licences issued by them – Tribunal grants stay in a multi-Crore case

THE case against the appellant is that excess quantity of raw material viz. white/yellow phosphorus valued at Rs.13.93 crores was imported duty free by inflating the value of inputs in the application filed before the DGFT for the Advance Licenses and thereby the importer had obtained excess entitlement of duty free imports.

Central Excise

Good news for EOUs - Cestat rules proviso to Notification 22/2003-CE or 52/2003- Cus is applicable only if final goods are exempted – vice of proviso is not attracted if byproducts , waste and scrap are cleared without payment of duty in DTA

THE department contended that since Aluminium Dross is non-excisable, the EOU has to pay the duty foregone on the imported Ingots on pro-rata basis in terms of the proviso to Notification 52/2003 Cus . The demand of duty by invoking the above proviso was dropped by the Commissioner and the revenue was in appeal. For the subsequent period, the successor Commissioner confirmed the demand and hence the EOU was in appeal before the Tribunal. While disposing both the appeals, the Tribunal held:

Only the final products, which are manufactured and cleared to the DTA with the permission of the Development Commissioner are liable to Central Excise Duty in terms of Section 3 of the Central Excise Act. However, if the goods are not excisable, there is a proviso to para 3 of the Notification. In terms of this proviso, if the finished goods are not excisable or non-excisable, then, the liability to discharge the Customs Duty on the materials, which are used in the manufacture of such finished goods arises. Now, this proviso comes into force only in cases where the finished goods of the EOU are not excisable. It will have no application whatsoever where the finished goods are excisable. In this case, the finished goods of the assessees or 100% EOU , are Aluminium Wheels. They are excisable and they are exported and where they are cleared to DTA , they would be paying duty in terms of para 3 main section after taking the permission of the Development Commissioner. Therefore in a case like this, where the finished product is Aluminium Wheels and which is excisable, the proviso cannot be invoked at all for any reason.

Income Tax

Deduction for leave salary payable - any liability which has accrued in relevant year of account is allowable as a deduction; Appeal by Revenue to Tribunal on same issue already decided, not maintainable: ITAT

THE Tribunal found that the matter is squarely covered by the decision of the Supreme Court cited. There is no dispute that the provision has been made in accordance with the rules of the company. The assessee is following the mercantile system of accounting and, therefore, any liability which has accrued in the relevant year of account is allowable as a deduction. There is no suggestion that the liability is a contingent liability. In these circumstances and respectfully following the judgment the ITAT confirmed the decision of the CIT (Appeals) and dismissed the ground.

See our columns Monday for the judgements