BS Reporter / New Delhi December 03, 2007
The Supreme Court has ruled that the amount of penalty under Section 114A of the Customs Act could not be more than the amount equal to the chargeable duty.
In this case, UK Enterprises imported integrated circuits made by Philips Ltd, Motorola Ltd and NEC from Hong Kong. The customs commissioner in Goa found that the items were heavily undervalued and imposed a fine of Rs 50,000.
On appeal, the Customs Tribunal raised it to Rs 10 lakh, which was more than the duty demanded which was Rs 4.91 lakh. The firm appealed to the Supreme Court which reduced the penalty to the latter amount.
SC: Consumer of capital goods cannot get the excise heading changed to claim Modvat credit
The Supreme Court observed last week that a consumer of capital goods could not get the excise heading changed to claim Modvat credit after the manufacturer and the excise authorities classified the goods in a different category for tariff.
The court, thus, dismissed the appeal of Sarvesh Refractories Ltd against the ruling of the Excise and Service Tax Appellate Tribunal. The firm bought 'loadall', a material handling equipment like a forklift truck or crane, from Escorts JCB Ltd. The cost included the excise duty.
The firm then claimed Modvat credit, which was rejected by the authorities. After several appeals, the Supreme Court held that tax authorities were right.
SC: Vicco products are ayurvedic medicines, not cosmetics
The Supreme Court held last week that Vicco Laboratories' products Vajradanti (toothpaste) and Vicco Turmeric (skin cream) are not cosmetics but Ayurvedic medical preparations and therefore not liable to pay excise duty.
The excise department had challenged the Bombay High Court order that restrained it from recovering dues, and had argued that Vicco's products were cosmetic and not Ayurvedic.
It had also demanded Rs 9.09 crore as excise duty on the two products, contending that these products were being marketed as cosmetics and so cannot avail of the benefit of Modvat credit. The Supreme Court rejected all these contentions, stating that these issues have already been decided earlier.
SC: CA firm cannot get tax deduction for depreciation of building
The Supreme Court has ruled that a firm of chartered accountants could not claim income tax deduction for depreciation of the buildings providing residential accommodation for its employees as they are 'professionals' and not doing business. Section 32 of the Income Tax deals with depreciation of buildings used for business.
In this case, GK Choksi & Co, a firm in Ahmedabad claimed deduction claiming that it was doing business. But the tax authorities stated that they were professionals.
The Gujarat High Court accepted the claim of the revenue authorities. The Supreme Court dismissed the appeal of the firm stating that Parliament had restricted the benefit only to assessees doing business.
SC: Tax tribunal must rectify mistake if it causes harm to assessee
The Supreme Court has asserted that if the income tax tribunal realises that it had made a mistake causing harm to an assessee or the revenue department, it has a duty to rectify it exercising its power under Section 254(2) of the Income Tax Act.
It thus overruled the Delhi High Court in the case of Honda Siel Power Products which manufactures portable generators in collaboration with Honda Motor Company, Japan.
The company had claimed depreciation on account of fluctuation of the foreign exchange rate by enhancing the written down value of the assets. The tribunal did not allow it initially, but on pointing out an omission, it rectified the mistake. This was not permitted by the high court. The Supreme Court set aside the high court judgment observing that the tribunal was justified in rectifying the manifest error which caused prejudice to the company.