Jurispruden tiol – Monday's cases

By Vijay Kumar

Legal Corner Icon — the image was hosted by the publisher and was not captured.Central Excise

Notification 6/2002-CE, Condition no. 53 – unjust CENVAT ‘enrichment' – it is not conclusively proved that Explanation to Rule 3 will be applicable – issue of interpretation – Pre-deposit waived by Tribunal.

Plain reading of the above said condition would indicate that the assessee who has availed the credit of duty paid on chassis will get covered under the said serial no. 214 but whether this will apply to person or assessee who has availed credit of inputs and capital goods needs to be examined in detail... The issue involves interpretation of the explanation and notification 6/2002, is an issue of interpretation of statute. As such, we find that the applicants have made out a case for the waiver of pre-deposit of the amounts involved.

Service Tax

Export of Services – Commission received by appellant from General Motors through Indian Railways in Indian Rupees in lieu of foreign exchange as less foreign exchange was released - Machinery of a statue should be interpreted so as to promote the object and purpose of the scheme – Denial of rule 4 not justified

It is well settled that machinery of a statute should be interpreted so as to promote the object and purpose of the scheme. Further, once the legislative intention is properly understood, then the case should be decided in fulfilment with the legislative intention. In the present case, it is revealed from contract that the appellant would be paid USD equipment to non-convertible Indian. Rupee at the Rate of Exchange prevailing on the date of supply order. It is noted that the equivalent amount of foreign exchange payable to the appellant was not released to the Indian Railways, and therefore, the appellant complied with the provision of Rule 3(1)(b) of the Rules.

Income Tax

For deduction under Section 80I/80IA there must primarily be manufacture or production of articles or things involving a new undertaking or undertakings. The relevant tests in this behalf have been laid down by the Supreme Court as under : -

(i) Investment of substantial fresh capital in the industrial undertaking set up;

(ii) Employment of requisite labour therein.

(iii) Manufacture or production of article in the said undertaking.

(iv) Earning of profits clearly attributable to the said new undertaking; and

(v) Above all, a separate and distinct identity of the industrial unit set up

There is no doubt that the benefit of section 80-I/80-IA is not available to a unit or new unit unless the unit is in the nature of an ‘undertaking'. The term ‘unit', according to The New Oxford Dictionary of English, signifies an individual thing or person regarded as single and complete, especially for purposes of calculation… We have already considered identical issue and restored the same for a fresh consideration and decision to the file of the CIT (A). Following the same, the aforesaid issue is restored to the file of the CIT (A) for a fresh decision. Second issue relates to the exclusion of sales tax and excise duty from the total turnover for the purpose of working out the relief under section 80HHC…

See our columns Monday for the judgements