CS Final :: Direct And Indirect Taxation - Law and Practice : December 2003

What are the tax concessions available under the Income-tax Act, 1961 in the case of conversion of a firm into a private limited company ?

On 1st April, 2002 X and Mrs. X purchased all the shares of a private limited company. The company had the unabsorbed allowances/losses :

	Rs.
Accumulated loss	3,00,000
Unabsorbed depreciation	8,00,000

State the effect of change of shareholders on the right of the company to carry forward the above items.
Does it make any difference if the company is a manufacturing company or a trading company engaged in export of goods ?

A State Industrial Development Corporation recommends a project in a backward State to your client (a company). The estimated outlay is about Rs.10 lakh (of which 60% being cost of plant and machinery). Your client will have to borrow Rs.5 lakh, which will be lent by the corporation at the interest rate of 10% per annum interest. Sales tax and energy concessions are available. The project will qualify for relief under section 80-1B. If the annual income after making provision for depreciation but prior to deduction of interest on borrowed capital and allowances under section 80-1B is expected to generate Rs.1.1 lakh, advise your client as to whether it should accept the project or not. Give reasons. Make suitable assumptions.

“Employee’s tax borne by the employer to the extent it relates to perquisites in kind is not chargeable to tax.” Comment.

337

Will a reference in a ‘Heading’ of the Central Excise Tariff Act, 1985 to a material or substance shall be taken to include a reference to mixtures or combinations of that materials or substances with other materials or substances ?
If so, how such materials or substances will be classified in terms of Rule 2 or Rule 3 of Rules for Interpretation of Schedule to the Central Excise Tariff Act, 1985

In what circumstances refund of customs duty will be paid to the claimant instead of being credited in Consumer Welfare Fund ?

Your company, manufacturer of cigarettes, has received a show cause notice alleging that the company has been clearing, without payment of excise duty, sticks of cigarettes as samples for test in its quality control laboratory within the factory premises. It was further alleged that the company did not maintain any account in respect of quantity of cigarettes removed.

It has been argued by the company that no excise duty was leviable on samples of cigarettes drawn for test purposes, since the process of manufacture of cigarette is not completed until the same are packed as packing is a process incidental or ancillary to the process of manufacture of cigarettes and packing is done only after the samples sent are tested in laboratory.

The managing director of your company has approached you, as a company secretary, to prepare a report on the following questions that fall for consideration :

(i)	Whether the cigarettes removed for the purposes of test could be treated to be excisable goods manufactured and consequently liable to payment of excise duty ?

337

Quality Products obtained an advance licence for import of components for manufacture of finished machines. Import of components was exempt from duty of customs. A show cause notice was issued to the importer, after clearance of components without payment of duty, as to why duty and penalty be not levied on it for misrepresentation of facts. It was alleged that while obtaining the licence, it was indicated in the application that it would use indigenous components, whereas in actual facts it did not use any such component. Advise on the matter.

Vijay, a dealer in Jaipur, makes inter-State sale of goods (other than declared goods) to the following :
Buyer Local Rate under Rajasthan Sales Tax Act W Nil X 3% Y 6% Z 12%
What is the rate of central sales tax rate if—

(i)	The buyers are registered dealers and issue Form-C;
(ii)	The buyers are registered dealers, but do not want to issue Form-C; and
(iii)	The buyers are having their units in Special Economic Zone.

Discuss in brief whether service tax will be payable, if services relating to project/management consultancy are to be provided by a practising company secretary.

An assessee sold certain goods for Rs.4,35,000 and did not charge any excise duty in his invoice on the understanding that the product was exempt from excise duty. Subsequently, it was found that such goods were not exempted from excise duty, but were liable to pay duty @ 16%. Calculate the amount of excise duty payable thereon, stating reasons for your calculation.

A manufacturer receives cenvatable inputs in metal containers. Value of containers is included in the value of inputs and the duty on the inputs is on ad valorem basis. Discuss in brief whether duty is payable when such empty containers are cleared from the factory.

Duty demanded has to be deposited before filing an appeal. An assessee deposited such duty and the appeal was decided in his favour, so he was entitled to get refund of pre-deposit made by him. Is it necessary to file refund claim under section 11B of the Central Excise Act, 1944 ? Does ‘doctrine of unjust enrichment’ apply here in this case ?

Examine the following issues and state whether the case can be taken up for settlement under Chapter-V of the Central Excise Act, 1944 :

(i)	Show cause notice has been issued and the matter is pending before adjudication officer.
(ii)	The case is pending with Commissioner (Appeals) involving interpretation of the classification of excisable goods under the Central Excise Tariff Act, 1985.
(iii)	In a case, excisable goods have been seized before 8 months.

337

An importer imported certain goods and deposited in the warehouse pending the final clearance. They were under exemption from duty both at the time of import and deposit in the warehouse. Subsequently, at the time of clearance from warehouse for home consumption, the exemption was withdrawn by the government and consequently, the goods become dutiable.

The customs authorities have asked for the payment of duty, whereas, the importer is of the view that taxable event was complete when the goods crossed the territorial waters of India and at that time they were exempt from duty. Decide the case in the light of statutory provisions and decided case laws, if any.

A bill of entry was presented on 4th August, 2003. The vessel carrying goods arrived on 11th August, 2003. The bill of entry was assessed on 8th August, 2003 and returned prior to the entry of vessel. Assessment was completed and entry inwards was granted on 13th August, 2003, and the bill of entry was returned to the importer for payment of duty on that date.
The duty amounting to Rs.4,60,000 was paid by the importer on 19th August, 2003. Calculate the amount of interest payable under section 47(2) of the Customs Act, 1962. 17th August, 2003 was a Sunday.

An exporter exported 2,000 pairs of leather shoes @ Rs.750 per pair. All industry rate of drawback is fixed on average basis, i.e., @ 11% of FOB subject to maximum of Rs.80 per pair. The exporter found that the actual duty paid on inputs was Rs.1,95,000. He has approached you, as a consultant, to apply under Rule 7 of the drawback rules for fixation of `special brand rate’. Advise him suitably.

State, giving reasons in brief, whether the following statements are correct or incorrect :

(i)	Central sales tax in each State is administered by local sales tax authorities of each State.
(ii)	Submission of Form-F to prove stock transfer is mandatory under the Central Sales Tax Act, 1956.
(iii)	As per the Central Sales Tax Act, 1956, local sales tax on declared goods can be charged only at one stage.
(iv)	Under the Central Sales Tax Act, 1956, on liquidation of a private company the directors are held responsible personally for the payment of the dues to government.
(v)	Certain provisions of the Central Excise Act, 1944 also apply to service tax.
(vi)	Return of service tax has to be filed on or before 25th October and 25th April in Form ST-3.

“Promissory estoppel plea fails, where public interest intervenes.” Comment on the statement.