Jurisprudentiol – Monday's cases

By Vijay Kumar

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

Clearance of goods on job work does not amount to clearance under full exemption or at nil rate of duty – CENVAT credit on inputs used in such job work allowed: CESTAT

It is strange that the department is still agitating an issue which was settled by the Larger Bench of the Tribunal and an Apex Court judgment and the ratio of these judgments were followed by various benches of the Tribunal in cases involving similar issue. It is time the Board sensitizes the Commissioners to follow the judgments of the Tribunals and Apex Courts and dispense with the practice of filing frivolous appeals.

Service Tax

Refund of Input Service credit to exporter – there is nothing in rule 5 that such refunds would apply only in respect of exports made after 14.03.2006 – even a consolidated yearly claim can be filed as Notfn 5/2006-CE( N.T ) employs word 'may': Tribunal

THE assessee filed a refund claim of Rs.43.28 lakhs on 25.07.2006 under Rule 5 of the Cenvat Credit Rules being the amount of Cenvat Credit availed by them on the input services which remained unutilized on account of the export clearances of their finished goods effected by them during the period 01.04.2005 to 31.03.2006.

Revenue's contention is that during the relevant period neither Rule 5 of the Cenvat Credit Rules nor Notification no. 11/2002-CE( N.T ) dated 01.03.2002 issued thereunder provided for refund of unutilized amount of input service credit in case of provider of export services and was confined to manufacturer only and such facility was extended by substituted Rule 5 with effect from 14.03.2006 read with Notification no. 5/2006-CE( N.T ) dated 14.03.2006 and therefore refund cannot be granted relating to exports made prior to 14.03.2006. Moreover, as per conditions and limitations set out in para 2(b) of the Appendix to Notification No. 5/2006-CE( N.T ) dated 14.03.2006, an EOU is required to file claim for such refund for each calendar month whereas refund claim filed by the appellants was for the period 01.04.2005 to 31.03.2006 which means a total period of twelve months.

Income Tax

Singapore-based company - Benefits under Article 8 of DTAT cannot be allowed to profits derived from commission earned on ship-cargo booking; Article 24 - exemption allowed only to extent an income is received in Singapore : ITAT

IN an interesting decision, the Tribunal has denied the benefits of Double Taxation Avoidance Treaty ( DTAT ) with Singapore to a shipping agency company as it was not found to be deriving its profits from the operation of ships in international traffic as mandated under Article 8 of the Treaty. Since the agency was found to be just one of the agencies forming the chain between the actual cargo owner and the real ship owner, its profit derived from commission earned on such deals cannot avail the benefits of DTAT .

The non-resident company was also denied the benefits under Article 24 as it can be allowed exemption only to the extent an income is received in Singapore . If the amount of income is not remitted to the country of residence, then the country of source shall be entitled to charge tax on that part of the income as per its own provisions.

See our columns Monday for the judgements