The Hindu Business Line : Palm oil for soap which ended up in ghee and shackles Detaxification

The personal liberty of an individual, though precious, is of little value if the larger interest of the people and the nation are at stake, the Delhi High Court ruled in the Lalit Goel vs Commissioner of Central Excise, Delhi case.

Goel, who had been accused of diverting non-edible grade crude palm oil meant for manufacture of washing soap to vanaspati ghee manufacturers, had appealed for bail, which the court rejected, stating the accused needed to be “put in shackles” for playing with the health of the public at large for selfish interests.

The petitioner faces prosecution under Section 135 of the Customs Act for alleged evasion of Customs duty to the tune of Rs 1.27 crore.

As proprietor of Pioneer Soap and Chemicals, he had imported crude palm oil (non-edible grade) for manufacture of washing soap at concessional rate of Customs duty between January and August, 2005 against six bills of entry. The statements of witnesses showed that the consignments were diverted to ghee manufacturers in UP and Haryana and no washing soap was actually manufactured by Goel, as claimed.

The applicant was functioning under self-assessment scheme and as such was only required to maintain simple accounts in respect of receipt and consumption of the imported raw material.

As a certain degree of trust had to be reposed under the scheme, the records maintained by him were not being officially checked. The bonds in respect of four bills of entry were discharged on a bona fide assumption that the relevan t records were being truly and correctly maintained.

The court held that economic offences constitute a class apart and need to be visited with a different approach in the matter of bail. It added: “National interest must reign supreme in all situations and sacrificing individual interest of a person posing threat to it can never be a bad bargain.”

“Unscrupulous elements on the prowl to maximise material gains by unlawful means need to be placed in shackles by appropriate legislative measures and judicial intervention if the interest of the public at large and the State are to be safeguarded.”

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The true value of cars

Expenditure incurred by car dealers or financiers on advertising cannot be included in the assessable value of cars, according to a ruling by the CESTAT zonal Bench at Chennai. The decision came during the Ford India Private Ltd (FIPL) vs CCE, Chennai case, wherein the company challenged a demand of more than Rs 1 crore as differential duty and cesses and equal amount of penalty for cars manufactured and cleared by it during 2000-05.

The company manufactures various models of cars and sells them through a national network of dealers. The expenditure incurred by dealers in promoting Ford car sales by advertising them in the print media and static display was being included in the assessable value of cars.

The sales promotion campaigns were undertaken by one or several dealers together or jointly with financiers such as Ford Credit, HDFC Bank, ING Vysya, etc. In most such cases, FIPL reimbursed the expenditure incurred by the dealers/financiers to varying extents from 25 per cent to 75 per cent at its discretion.

The Commissioner demanded duty on that portion of the expenditure not reimbursed to the dealers, treating the financier’s contribution to such events as the commission due to the dealer of the territory who also figured in the advertisement.
The dealers/financiers had advertised the cars for their own benefit, and there was no written or oral agreement requiring them to advertise the cars.

Though FIPL reimbursed part of the advertisement expenditure, it did not have any enforceable legal right against the dealers to require them to incur expenditure on advertisement.

Therefore, the expenditure incurred by the dealers or financiers cannot be included in the assessable value of the cars.

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Cheque please, no cash

Tamil film star of yesteryear, ‘Venniradai’ Nirmala, was convicted and fined by the Madras High Court for having taken a loan of Rs 4.65 lakh in cash, in contravention of the I-T Act, which requires large sums to be taken only by cheque. In the Venniradai Nirmala vs Assistant Director of Inspection (Investigation) case, the court set aside the two years rigorous imprisonment sentence for the actor, but upheld the fine of Rs 4.65 lakh.

Nirmala had obtained a loan of Rs 4.65 lakh from the AIADMK political party in Chennai as per the entry made in the party’s ledger folio on April 17, 1986. She had admitted in her sworn statement before the Assistant Director of Inspection (Investigation) on April 23, 1986, about the said borrowal.

According to the prosecution, as per Section 269SS of the Income-Tax Act 1961, a person can obtain any loan or deposit only through an account-payee cheque or an account-payee bank draft if the loan amount exceeds Rs 10,000.

Since the loan obtained by the accused was not by way of either of these instruments, there is a violation of the said section, liable for punishment. A trial judge had earlier convicted the actor, imposing a sentence of two years RI and ordering her to pay up a fine of Rs 4.65 lakh, but the High Court set aside the sentence, allowing only the fine.

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Not music to his ears

The loud thud of a drum cannot erase the soft whispers of a flute, which also forms a part of orchestra, said the CESTAT Principal Bench, New Delhi in the CCE, Chandigarh vs ADH Agencies case. The case pertained to the Revenue seek ing service tax from the respondent, a consignment agent, which had received a favourable ruling from the Commissioner (Appeals) that it was not liable to pay service tax as it was not a C&F agent.

The CESTAT Bench, however, said that the consignment agent was also responsible for the movement of goods dealt with, which would fully qualify it to be a C&F agent.

“Taxable service should mean any service provided to a client by a C&F agent, including a consignment agent in relation to clearing and forwarding operations, in any manner.”

Giving a musical analogy, the Bench also said that the situation was identical with the Medpro Pharma decision, in which the Larger Bench of the tribunal had compared the C&F operation to an orchestra performing a Mahler’s symphony.

“The loud thud of a drum cannot erase the soft whispers of a flute, which also forms a part of orchestra. Even if the mellifluous tra-la-la of the flute is dominated by the thundering drums, for all practical purposes, the former does not cease to be the part and parcel of the orchestra.”

Similarly, the Bench said, the activities performed under the agreements, howsoever subtle and sketchy they may appear, would certainly qualify to make them taxable activities of clearing and forwarding.

D. MURALI

C. RAMESH

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