Jurisprudentiol– Wednesday's cases

By Vijay Kumar

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

Supplementary invoices – CENVAT Credit - Taking recourse to Settlement Scheme and payment of additional or differential duty on receipt of show cause notice, per se may not necessarily be treated as admission of guilt: Larger Bench of Tribunal

WORLD over, commercial prudence dictates that an early quietus is given to disputes with the tax departments. Taking a cue from this ideology prevalent in the business world, we have witnessed the Central Government launching short term Voluntary Disclosure of Income Schemes, Kar Vivad Samadhan Scheme, Tax Dispute Resolution Schemes and Tax Amnesty Schemes to mop up revenue. To ensure that there exists a permanent machinery for settlement of disputes, the Central Government on the recommendations of the Wanchoo Committee, set up the Income Tax Settlement Commission in the year 1976 and tried to replicate its success by establishing the Customs and Central Excise Settlement Commission in the year 1999.

Income Tax

Revenue wins first Transfer Pricing case; Once conditions for invoking Sec 92 are prima facie satisfied, burden lies on assessee to prove that loss suffered in international transactions is not because of arrangement with non-resident parties: ITAT

THIS is perhaps the first Transfer Pricing (TP) case which has gone in favour of Revenue. What has also emerged from this decision is that if the Revenue invokes the relevant Section 92 in a case after certain conditions are satisfied, the burden lies on the assessee to prove that this is not a fit case to be referred to the TPO or their abnormally low profit is not on account of any arrangement with the related non-resident parties. The Tribunal in this case has also held that for considering profit it is not gross profit but net profit which is to be taken into account.

For invoking TP Section what is to be seen by the Revenue is the fulfilment of three conditions:

1. The business is carried on between a resident and a non-resident.

2. There is a close connection between the resident and non-resident party.

3. The resident earns either no profits or less than ordinary profits because of arrangement existing between parties.

Customs

Valuation of goods imported –Evidence of special relationship between the supplier and importer influencing gross undervaluation of imports available – Pre-deposit of Rs 2 Crores ordered: CESTAT

Based on prima facie evidences put forth by the Revenue, the Tribunal held that the transactions are of a dubious nature and the import value declared by the appellant is not genuine. In view of these substantial evidences of misstatement and suppression of facts by the appellants, Tribunal ordered the appellant to pre-deposit an amount of Rupees Two Crores within eight weeks subject to which the balance amount of duty with interest and penalty shall be waived and stay granted.

A happy Deepawali

While the rest of the world is reeling under an economic recession, the Central Government employees must be a happy lot with the Pay Commission Arrears of anything ranging from Rs. 30,000 to Rs. 2 lakhs.

See our columns Wednesday for the judgements