Custom Case Law

Customs - INDIAN FARMERS FERTILISERS CO-OP. LTD. Versus C.C. (IMPORT), NCH, MUMBAI = 2008

Date of Decision: March 7, 2008 - CESTAT MUMBAIRefund - Duty paid in excess due to arithmetical error – application for rectification of mistake filed u/s 154 of Custom Act, got accepted by authority – applicability of limitation period provided in Section 27(1) - held that refund arising as a result of correction of error is admissible even if refund claim is not filed u/s 27(1) – only bar of unjust enrichment is applicable - matter remanded back to the original authority to consider the question of unjust enrichment

Excise case laws

Central Excise - SHALIMAR WIRES INDUSTRIES LTD. Versus COMMR. OF C. EX., KOLKATA-IV = 2008

Date of Decision: June 11, 2008 - CESTAT KOLKATAWoven greig fabric produced during the manufacture of FWC - Demand raised is in respect of heat treated fabric, before it is processed into FWC - Leviability of basic excise duty under the Additional Duties of Excise (Goods of Special Importance) Act, 1957 – held that duty is leviable unless goods are specifically exempted – revenue has not proved marketability of intermediate product - matter remanded to re-determine the marketability of product

Central Excise - BRAKES INDIA LTD. Versus COMMISSIONER OF C. EX., DELHI-III = 2008 Date of Decision: June 5, 2008 - CESTAT NEW DELHIValuation of goods which are transferred inter-units - goods cleared were assessed on provisional basis, paying higher amount of duty - appellant adopted a higher profit margin of 30% - appellant explained this adoption of higher margin only to take care of value fluctuation in respect of inputs which have gone into the manufacture of the goods cleared from their Chennai units – since there is no allegation of fraud, whatever duty paid is taken as credit by another unit, credit is not deniable
Central Excise - HINDALCO INDUSTRIES LTD. Versus COMMISSIONER OF C. EX., BELGAUM = 2008

of Decision: May 22, 2008 - CESTAT BANGLORESteel plates and strips used in mfg. of capital goods (steel tanks) – in view of Explanation 2 in Rule 2(k) of the Cenvat Credit Rules, impugned goods can be treated as inputs because these goods are used in the manufacture of tanks falling under Chapter 84, which is specifically mentioned in the definition of capital goods – credit cannot be denied merely for the fact that steel tank are exempted under Notification No. 67/95
Central Excise - COROMANDAL PAINTS LTD. Versus COMMR. OF C. EX. & CUS., VISAKHAPATNAM-I = 2008

Date of Decision: May 16, 2008 - CESTAT BANGLORESupervision expenditure by buyer to ensure the correct quality - issue involved is whether the expenditure incurred by the buyer is to be included in the assessable value – impugned expenses are not incurred on behalf of manufacturer - department proceeded against the appellants holding that they are includible – action of department is not acceptable – appeal of assessee is allowed

service tax cases

Service Tax - COMMISSIONER OF CENTRAL EXCISE, MUMBAI-V Versus GTC INDUSTRIES LTD. = 2008

Date of Decision: September 25, 2008 - CESTAT MUMBAIWhether the services provided by the outdoor caterers in the canteen of the manufacturer is input service, in respect of which credit can be taken by the manufacturer – Whether the cost of food is borne by the worker or by the factory, the same will form part of expenditure incurred by the manufacturer and will have a bearing on the cost of production - hence, employment of outdoor caterer has to be considered as an input service relating to the business and Cenvat credit is admissible
Service Tax - TOYOTA KIRLOSKAR MOTOR P. LTD. Versus C.C.E. (L.T.U.), BANGALORE = 2008

Date of Decision: August 5, 2008 - CESTAT BANGLORESocial functions to entertain the employees for Rajyostava Function and inauguration of police station cannot be brought within the ambit of activities relating to business – hence expenses for holding Kannada Rajyostava function and for inaugural function of Kengeri Police Station cannot be considered as input service – credit not admissible – bona fide belief of appellant of admissibility of credit on input services – no allegation of willful suppression in SCN – demand is time barred
Service Tax - MORINDA CO-OPERATIVE SUGAR MILLS LTD. Versus COMMR. OF C. EX., LUDHIANA = 2008

Date of Decision: September 5, 2008 - CESTAT NEW DELHIAppellants are manufacturers of sugar; as required by the Government, during the relevant period, they maintained a specified buffer stock out of free sale sugar to be disposed of subsequently based on specific instructions - prima-facie view is that in the given facts and circumstances of the case the appellants are not rendering the service of storage and warehouse – demand under the category of storage and warehouse service is not justified – stay granted
Service Tax - COMMISSIONER OF CENTRAL EXCISE Versus EXCEL CROP CARE LTD. = 2008

Date of Decision: July 29, 2008 - HIGH COURT GUJARAT Input credit on mobile services - On a plain reading of Rule 2(l)(i), it is apparent that the mobile service provider, who is liable to pay service tax, and recovers the same by adding such service tax in his bill, is the person providing taxable service and is rendering ‘output service’ so as to constitute ‘input service’ in hands of respondent assessee – credit not deniable on ground that phones were not installed in the factory premises – no question of law arise – revenue’s appeal dismissed
Service Tax - ANAND ASSOCIATES Versus CST, AHMEDABAD = 2008

Date of Decision: August 26, 2008 - CESTAT AHMEDABADServices of Mandap Keeper - that the definition of “Mandap Keeper” includes providing of services to client in respect of open plot allowed to be used for social function and the same does not include commission received from decorators by providing them the client for the purpose of decoration. Such commission has to be excluded while calculating the service tax – matter is remanded to original adjudicating authority for re-quantification of the duty & penalty
Service Tax - CCE. RAJKOT Versus RAJHANS METALS P. LTD. = 2008

Date of Decision: August 13, 2008 - CESTAT AHMEDABADWhether the respondents are eligible for cenvat credit of service tax paid on GTA services availed for the purpose of transportation of the finished goods from the factory to the consignment agent’s premises - Circular No.137/3/2006-CX.4 dt. 2/2/2006 - In view of the fact that consignment agent premises is also defined as a place of removal and the property in the goods never passes to a consignment agent, respondents are eligible for the cenvat credit.

Income Tax case

Income Tax - Mr. Mustaq Ahmed., In re = 2008

Date of Decision: November 19, 2008 - AUTHORITY FOR ADVANCE RULINGSApplicant is a non-resident - applicant sells jewellery in local market as well as by export, mostly to Singapore – income arising to the applicant on the purchase in India of gold for the purpose of manufacturing gold jewellery in India for export – held that such income attracts charge to tax under sub-section (2) of Sec.5 as the income is received in India and has accrued in India - Explanation 1(b) to Sec. 9(1)(i) does not come to the aid of the applicant - income is taxable in India

Insurers to adopt uniform definition of policy expiry

HYDERABAD: Domestic life insurers may have to adopt a uniform definition for expiry of insurance policies to give more leeway to policyholders on premium payments. IRDA has recommended a uniform grace period of 30 days for policyholders paying their premium every quarter, half-year or every year. A 15-day grace period has been suggested for policy holders paying monthly premium. An insurance policy lapses when the subscriber does not pay the premium within the grace period. IRDA has recommended re-instatement of a policy if the premium is paid within the revival period of two to five years, as per the internal practice of the insurer. Currently, companies have different definitions on expiry of policies and this creates a lot of confusion. The suggestion to life insurers to adopt a uniform grace period and lapse definition has been made in IRDA’s first occasional paper on lapsation of insurance policies and its impact on the domestic industry. Lapsation of insurance policies is of world-wide concern and impacts all stakeholders. IRDA chairman J Hari Narayan reckons that results thrown up in such research studies could help stimulate a policy debate and make course corrections, if need be. The occasional paper has been authored by a team led by R Kannan, member, actuary, IRDA. The recommendations, if adopted by insurers, would give more leeway to policyholders and curb policy lapses. The study reveals that the lapse rate in terms of the number of policies increased from 5.62% in 2002-03 to 6.64% in 2006-07. The lapse rate of premium rose from 4.4% to 6.95% during the period under review. The lapse rate in Unit Linked Insurance Plans (ULIPs), 18% in terms of number of policies and 10% by premium was also much higher compared to most traditional plans. ULIPs are popular savings instruments that offer flexibility to the policy-holder in terms of investment and also a life cover. A part of the premium is invested in equities or government bonds, depending on the choice of the policy-holder. Term assurance products showed the highest rate of lapse, while pension policies had the lowest lapsation rate. The lapse rate for non-medical policies was, however, higher than that of medical covers. When a policy lapses, the policy holder forfeits the premium paid and the insurance cover. The agent loses the renewal commission. It also impacts the growth of the insurance business and solvency margins of the insurer. Solvency margin refers to the excess of assets over liabilities that an insurer maintains as a prudential measure in the interest of policyholders.

EPF amendments

EPF amendments to pursue India's social security pacts
New Delhi, Nov 20 (PTI) To bring into effect social security pacts signed by India with countries like France, Germany and Belgium, the government has initiated registration for "International workers" after amending the Employees Provident Fund Act.The amendment in the Act will include Indian employees who are posted to these countries and foreign nationals working in India into the ambit of the Employees' Provident Fund (EPF) scheme.The modifications to the EPF scheme were brought to effect from November 1, and so far about 30 Indian IT and Construction firms have completed necessary registration process of the International workers employed with them."The modifications to the scheme will benefit the Indian workers for availing their pension benefits right here in their country of origin. It will also allow for exportability of social security benefits accrued in these countries back to India," an EPFO official told PTI here.Since the social security pacts are on a reciprocity basis, citizens from France, Germany and Belgium would not be required to register themselves under the 'International worker' category and they can continue contributing to social security schemes in their country of origin.However, there is yet some time before the social security pacts could be actually brought to effect.Modifications to the Employees' State Insurance Act are still awaited to ensure continuity in insurance term for Indian employees covered under similar schemes in foreign countries.This figures as one of the major condition of the social security pacts with foreign nations. PTI

sunk cost

Definition
Money already spent and permanently lost. Sunk costs are past opportunity costs that are partially (as salvage, if any) or totally irretrievable and, therefore, should be considered irrelevant to future decision making. This term is from the oil industry where the decision to abandon or operate an oil well is made on the basis of its expected cash flows and not on how much money was spent in drilling it. Also called embedded cost, prior year cost, stranded cost, or sunk capital

work measurement

Application of time and motion study and activity sampling techniques to determine the time for a qualified worker to complete a specific job at a defined level of performance. Work measurement is used in budgeting, manpower planning, scheduling, standard costing, and in designing worker incentive schemes

proxy contest

proxy contest
A strategy that may accompany a hostile takeover. A proxy contest occurs when the acquiring company attempts to convince shareholders to use their proxy votes to install new management that is open to the takeover. The technique allows the acquired to avoid paying a premium for the target. also called proxy fight

STORY-OF-THE-WEEK

WOULD YOU DIE FOR ME?

A young man called Ramaswami died an untimely death. His parents, wife and nine year old son were crying bitterly, sitting next to his dead body. They all happened to be disciples of a holy man whom they called ‘Maharaj Ji’.When Maharaj Ji learnt that Ramaswami had died, he came to visit the family. He entered the house and found the family wailing inconsolably. Seeing Maharaj Ji, the wife started crying even louder. She sobbed saying, “Maharaj Ji, he has died too early, he was so young. Oh! I would do anything to make him alive again. What will happen to our son? I am so helpless and miserable.” Maharaj Ji tried to pacify the crying lady and the old parents, but the loss was too much for them to come to terms with so easily. Eventually, Maharaj Ji said, “Alright, get me a glass of water.” Maharaj Ji sat near the dead body and put the glass next to it. He said, “Now, who ever wants that Ramaswami should become alive again may drink this water. Ramaswami shall come back to life, but the person who drinks the water shall die!” Silence!“Come, did you not say that Ramaswami was the sole breadwinner of the family? Who would die instead of him? It is a case of fair exchange, isn’t it?”The wife looked at the old mother and the old mother looked at the wife. The old father looked at Ramaswami’s son. But no one came forward. Then Maharaj Ji said to the old father, “Babuji, wouldn’t you give your life for your son?” The old man said, “Well, I have my responsibility towards my wife. If I die who will look after her? I cannot offer my life to you.”Maharaj Ji looked questioningly at the old woman and said, “Amma?” She said, “My daughter is due to deliver her first baby. She will be coming to stay for a month. If I die who will look after her and the newborn. Why don’t you ask Ramaswami’s wife?”Maharaj Ji smiled and looked at the young widow. She widened her tear filled eyes and said, “Maharaj Ji, I need to live for my son. If I die, who will look after him? He needs me. Please don’t ask me to do this.”Maharaj Ji asked the son, “Well little boy, would you like to give your life for your father?” Before the boy could say anything, his mother pulled him to her breast and said, “Maharaj Ji, are you insane? My son is only nine. He has not yet lived his life. How could you even think of such a thing?”Maharaj Ji said, “Well it seems, that all of you are very much needed for the things you need to do in this world. It seems Ramaswami was the only one that could be spared. That is why God chose to take him away. So shall we proceed with his last rites? It’s getting late.”Having said that, Maharaj Ji got up and left.God’s plan is impeccable. Sometimes man is unable to understand God’s design. The time of entry and exit for each one of us, is in God’s hands. It is His prerogative alone to pluck the flower He wishes to. It is no body’s prerogative to question His will.In the words of Baba, “We tend a plant only when the leaves are green; when they become dry and the plant becomes a life-less stick, we stop loving it. Love lasts as long as life exists.”