TMI Tax Updates - e-Newsletter
March 14, 2012

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws Central Excise

Articles

1. REGISTRATI​ON TANGLE IN SERVICE TAX

   By: rajkumar shukla

News

1. Special Grant to Agriculture Universities .

2. Government Adopts Multi-Pronged Strategy to Extend Banking Facilities to Unserved Areas.

3. RBI releases its Monthly RBI Bulletin for March 2012

4. Anand Sharma Inaugurates 27th Edition of AAHAR India’s Food Market is US $ 182 Billion India’s Agri- Exports to Touch 40 Billion US $ by 2015.

5. Finance Minister Calls Upon the Management of Public Sector Banks to Gear-Up for Providing More Efficient and Cost Effective Customer Services Leveraging the Technological Capabilities; Also Urges them to Provide their Undivided Attention on Human Resource Development Matters to Emerge as Strong and Viable Financial Institutions

Notifications

Central Excise

1. 05/2012 - dated 12-3-2012 - CE (NT)

Deterrent measures where duty is paid wrongly or where cenvat facility is misutilized

2. 04/2012 - dated 12-3-2012 - CE (NT)

Amends Central Excise Rules, 2002 - Rule "12CC" shall be substituted by "12CCC".

3. 03/2012 - dated 12-3-2012 - CE (NT)

Second Amendment in the CENVAT Credit Rules, 2004.

Customs

4. 09/2012-Customs - dated 9-3-2012 - Cus

Duty free re-import of cut & polished diamonds into India after certification/grading by the laboratories / agencies as notified in the Foreign Trade Policy.

5. 08/2012 - Customs - dated 9-3-2012 - Cus

Seeks to amend the Notification No. 3/89-Customs, by exempting customs duty on remnant turbine fuel consumed during an aero show organised by the central government.

DGFT

6. 106 (RE-2010)/2009-14 - dated 12-3-2012 - FTP

Removal of Prohibition on export of cotton (Tariff Codes 5201 and 5203).

Circulars / Instructions / Orders

FEMA

1. 91 - dated 13-3-2012

Deferred Payment Protocols dated April 30, 1981 and December 23, 1985 between Government of India and erstwhile USSR .

2. 92 - dated 13-3-2012

Opening of Diamond Dollar Accounts (DDAs) – Change in periodicity of the reporting.

Customs

3. 08/2012 - dated 13-3-2012

Ban on export of Cotton (Tariff Code 5201 and 5203)- reg.

Highlights / Catch Notes

Income Tax

• High Court Permits Adjustment of Business Loss Against House Property Income u/s 71, Despite Business Closure.

  Case-Laws - HC : Brought forward and Setoff of business expenditure and business loss against “Income from House Property“ when business has already closed in earlier year - Section 71 - adjustment allowed - HC
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• High Court Confirms Excise Duty Exemption Doesn't Affect Manufacturing Status for Section 80IA Deduction Eligibility.

  Case-Laws - HC : The fact that the excisable products are exempt from the payment of excise duty cannot be a ground to hold that the products in question are not manufactured by the assessee - Deduction u/s 80IA allowed - HC
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• Marriage Shoguns Taxable as Gifts When Given to Assessee, Not Bride, Court Rules Against Assessee.

  Case-Laws - AT : Shoguns received on marriage taxable as gift - Shoguns were given to assesse and not to daughter, logically cheque should be in bride name - No details provided which showed that amount has been transferred to bride's account. Decided against assesee. - AT
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• Income from undisclosed sources taxable u/s 69A of the Income Tax Act; no deductions allowed.

  Case-Laws - AT : Surrender of income - additional income offered is deemed income assessable u/s 69A of the Act and no deduction is allowable against such deemed income assessed u/s 69A of the Act in the hands of the assessee. - AT
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• Auditor's Duty: Transaction Non-Reporting Doesn't Justify Rejection of Books in Job Work Context.

  Case-Laws - AT : Rejection of Books of Account - non reporting of transaction can be best attributed to auditor and cannot be ground to reject books. For Job work - AT
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• Capital Loss from Foreign Car Sale Valid Despite Resale Profit by Lessees; Lease Terms Uncontested by Revenue Authorities.

  Case-Laws - HC : Capital loss on the sale of the foreign cars - when the sale of the cars itself flow from the terms of the lease agreement and the terms of the agreement thus not questioned by the Revenue, the mere fact that the cars were sold at a price so low and that the lessees could subsequently sell the car for a higher price would not defeat the claim of the assessee for capital loss. - HC
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• High Court Rules Notional Interest on Security Deposit Not Part of Employee Accommodation Perquisite Value.

  Case-Laws - HC : Determination of perquisite value - Rule 3 - Where an employer takes residential premises on rent by giving security deposit for the benefit of employees, whether the notional interest on such security deposit is liable to be included in the perquisite value of the accommodation given to the assessee employee is the question raised in this appeal - held no - HC
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Customs

• Customs Authorities Ban Cotton Exports Under Tariff Codes 5201 & 5203 to Regulate Trade Compliance.

  Circulars : Ban on export of Cotton (Tariff Code 5201 and 5203)- reg. - Cir. No. 08/2012-Customs Dated: March 13, 2012
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• India Permits Duty-Free Re-Import of Certified Diamonds Post-Grading as Per Notification No. 09/2012-Customs.

  Notifications : Duty free re-import of cut & polished diamonds into India after certification/grading by the laboratories / agencies as notified in the Foreign Trade Policy. - Ntf. No. 09/2012-Customs Dated: March 9, 2012
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• Amendment to Exempt Customs Duty on Remnant Turbine Fuel for Central Government Aero Show Under Notification No. 08/2012-Customs.

  Notifications : Seeks to amend the Notification No. 3/89-Customs, by exempting customs duty on remnant turbine fuel consumed during an aero show organised by the central government. - Ntf. No. 08/2012 - Customs Dated: March 9, 2012
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DGFT

• Export Ban on Cotton Lifted Under Tariff Codes 5201 and 5203 per DGFT Notification No. 106 (RE-2010)/2009-14.

  Notifications : Removal of Prohibition on export of cotton (Tariff Codes 5201 and 5203). - Ntf. No. 106 (RE-2010)/2009-14 Dated: March 12, 2012
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FEMA

• Circular No. 91 Updates 1981 & 1985 India-USSR Deferred Payment Protocols: Tax Implications Under FEMA Explained.

  Circulars : Deferred Payment Protocols dated April 30, 1981 and December 23, 1985 between Government of India and erstwhile USSR . - Cir. No. 91 Dated: March 13, 2012
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• New Reporting Schedule for Diamond Dollar Accounts per Circular No. 92 (March 13, 2012) to Streamline Submissions.

  Circulars : Opening of Diamond Dollar Accounts (DDAs) – Change in periodicity of the reporting. - Cir. No. 92 Dated: March 13, 2012
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Corporate Law

• Arbitration Clause Doesn't Automatically Dismiss Company Winding-Up Petition; Court Can Proceed Despite Agreement.

  Case-Laws - HC : Petition for winding up of companies - Existence of arbitration clause is not a ground to dismiss the application seeking an order of winding up of the respondent-company. - HC
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Indian Laws

• RBI March 2012 Bulletin: Insights on India's Economy, Monetary Policy, Global Impacts, and Banking Sector Performance

  News : RBI releases its Monthly RBI Bulletin for March 2012
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• Auditing firm fined for non-compliance with financial reporting standards, highlighting the importance of regulatory oversight.

  None : E&Y fined and reprimanded over audit work
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Service Tax

• Appellant Must Arrange Warehousing and Insurance; Annual Sales Commission Taxable Under Current Regulations.

  Case-Laws - AT : Appellant agrees to arrange at his own cost suitable godowns for warehousing the products and also to arrange insurance of the goods in the joint name with the principal - Appellants are entitled for annual commission on the volume of sales - held as taxable - AT
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• Rule 3(ii) of 2006 Taxation Rules: No Evidence Found of Service Partially Performed in India.

  Case-Laws - AT : Taxation of Service (Provided from Outside India and Received in India) Rules, 2006 - Rule 3(ii) - Held that: there is no evidence on record that the service has been partly performed in India - AT
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Central Excise

• Central Excise Notification 05/2012 Enforces Restrictions to Prevent Evasion and Default in Excise Duty Payments.

  Notifications : Imposition of restriction to prevent evasion of, and default in payment of, duty of excise on a manufacturer, first stage and second stage dealer or an exporter in case of certain offence - Ntf. No. 05/2012 - Central Excise (N.T.) Dated: March 12, 2012
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• Central Excise Rules 2002 Amended: Rule 12CC Replaced with 12CCC per Notification No. 04/2012-CENTRAL EXCISE (N.T.

  Notifications : Amends Central Excise Rules, 2002 - Rule “12CC“ shall be substituted by “12CCC“. - Ntf. No. 04/2012-CENTRAL EXCISE (N.T.) Dated: March 12, 2012
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• CENVAT Credit Rules Amended: New Procedures for Manufacturers and Service Providers to Avail Input Credit.

  Notifications : Second Amendment in the CENVAT Credit Rules, 2004. - Ntf. No. 03/2012-CENTRAL EXCISE (N.T.) Dated: March 12, 2012
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• Rule 4 Prevails for Valuing Excisable Goods: Aligns with Section 4 of Central Excise Act, 1944 for Accurate Assessment.

  Case-Laws - AT : Determination of value of excisable goods - clearances to sister unit for captive consumption as well as to independent buyers - in a case where both the rules are applicable, the application of Rule 4 will lead to a determination of a value which will be more consistent and in accordance with the parent statutory provisions of Section 4 of the Central Excise Act, 1944. - AT
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• Job Workers Not Liable for Duty on Scrap from Machining Inputs or Castings.

  Case-Laws - AT : Duty liability on the scrap generated at the end of job workers during the course of machining of the inputs/castings - assessees are not liable to pay duty on the scrap generated at the job workers' end. - AT
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• Goods with Nil Duty Rate Remain Excisable; Nil Rate Does Not Alter Excisable Status.

  Case-Laws - AT : Even if attracting nil rate of duty, the goods remain excisable and they do not become non-excisable. Therefore, just because the goods listed in the schedule attract nil rate of duty, it cannot be said that they become non-excisable. - AT
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• Excise Duty Demand u/s 4 Overturned for Goods Altered by Dealers Before Sale Under MRP Scheme.

  Case-Laws - AT : Demand of duty under Section 4 of the Central Excise Act - Goods cleared under MRP scheme u/s 4A - packaged form was opened at the dealers end for addition and mixing of the desired colourants, prior to the delivery to the ultimate customer - Demand on the basis of valuation u/s 4 set aside. - AT
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• Rule 6(6) Cenvat Credit Rules: Exempted Goods Supply from DTA to SEZ Units/Developers Eases Credit Restrictions.

  Case-Laws - AT : Supplies to SEZ from DTA - Exception provided under Rule 6(6) of Cenvat Credit Rules, 2004 shall be applicable to supply of exempted goods both to SEZ units and SEZ developers/promoters. - AT
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• Deemed Credit Under Notification 58/97 CE: Input Purchasers Entitled to Credit Despite Disputes on Manufacturer's Production Capacity.

  Case-Laws - HC : Deemed credit under Notification 58/97 CE - in case the annual capacity of production of input manufacturer because of dispute cannot be determined at the time of issue of invoice, the scheme of conveyance of deemed credit cannot be put on hold and the substantive benefit of deemed credit cannot be denied to the input purchaser. - HC
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• Demand for Secretive Removal of Electricity Consumption Overturned Due to Insufficient Evidence.

  Case-Laws - AT : Demand - clandestine removal - based upon the calculations arrived at by the department on the basis of electricity consumption - no corroborative evidence - demand set aside. - AT
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• Jewellery with brand names only on packaging, not on the item itself, isn't taxed as branded.

  Circulars : If brand name is not affixed or embossed on the jewellery or article itself but appears on the packing, such goods will not be treated as branded jewellery and thus will not be liable to excise duty.
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VAT

• Court Rules Homoeopathic Globules Exempt from VAT Under West Bengal Value Added Tax Act, 2003 Item No. 35A.

  Case-Laws - HC : Principal of classification - VAT on homoeo globules - West Bengal Value Added Tax Act, 2003 - omoeo globule imported by the writ petitioner is entitled to the benefit of item No. 35A for which no tax is payable and direct the assessing authority to act accordingly. - HC
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Case Laws:

• Income Tax

• 2012 (3) TMI 168
  A society formed for advancement of music, other fine arts and traditional arts - assessee applied for renewal of its approval under Section 80G of the Act - Assessee registered under Section 12AA - The Department contented receipts of the assessee from sponsorship fees, sale of tickets and music coaching was in excess of Rs. 10 lakhs and application for renewal of approval under Section 80G of the Act rejected - Held that :- assessee's object was development of music and other fine arts based on Indian culture and assessee was not carrying on any trade, commerce or business, when it was collecting fees from persons who were attending the programmes - denial of renewal of application under Section 80G of the Act, when its registration under Section 12AA of the Act was intact, was unjustified [Mylapore Fine Arts Club v. Dy. DIT(E) in I.T. Appeal No. 1706/Mds/2010 ] - advancement of traditional musical culture of Tamil Nadu and conducting music programmes sponsored by various persons and sponsorship fee so received, distributed among the artists, can never be considered as an activity in the nature of trade, commerce or business - assessee was eligible for renewal of approval under Section 80G of the Act - appeal filed by the assessee is allowed.

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• 2012 (3) TMI 155
  Recovery proceedings issued during pendency of appeal against the order issued, stay petition before 2nd respondent and pendency of application for rectification before 1st respondent – Held that:- 2nd respondent is directed to consider stay petition within stipulated time and in the meanwhile further proceedings pursuant to Ext.P1 will be kept in abeyance – Decided in favor of petitioner.

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• 2012 (3) TMI 154
  Appeal to be filed in Tribunal- the limit prescribed for filing appeal before the Tribunal is Rs. 2 Lakhs now increased to 3 Lakhs vide Instruction No. 3/2011 dated 9.2.2011-Difference between the tax on the total income assessed and the tax that would have been chargeable, had such total income been reduced by the amount of income in respect of the issue against which appeal is intended to be filed- - held that:- appeals of the Revenue against Ld. CIT(A)are dismissed being not maintainable and the Cross-objections of the assessee are dismissed as not pressed Merely because the assessee fails to claim the benefit of set off cannot relieve the ITO of his duty to apply section 72 in an appropriate case.

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• 2012 (3) TMI 153
  Application of provisions of Section 50C - effective date - Immovable property sold - Amount received as Co-owners - Property transferred on 4.10.06 registered under Property Act 8.01.07 - Held That:- This amendment was brought w.e.f. 01.10.2009 for the reason there was a leakage in the provision because certain persons who transferred the land on the basis of sale agreement and want to save themselves from the valuation to be adopted by the Stamp Valuation Authority. Accordingly, from 01.10.2009 even if the land is transferred through the agreement, provision of section 50C is still applicable. However, these provisions are not applicable on the facts of the present case because the transfer, was already made much before the date of amendment, made to section 50C. So taking into consideration this aspect that the sale agreement was much before the date of sale deed execution and the possession was already given on 4.10.2006 before the sale deed execution, which was executed on 08.01.2007. Therefore, we hold that the provision of section 50C(1) are not applicable on the facts of the present case. Determination of value for the purpose of section 50C - Stamp value authority versus Registered Valuer - Value determined by Stamp Valuation Officer at Rs.33,76,391 - by registered value 13,88,000 - Held That:- After going through these reasons, we are of the view that if the valuation of this property is taken to Rs.20 lakhs instead of Rs.33,76,391/- or shown by Registered Valuer that will meet ends of justice. Though the valuation of Registered Valuation Officer is on some authentic method but there can be some shortcomings also. The AO has not referred the matter to DVO whereas he should have referred the matter to the DVO for taking valuation from him so that both the valuation can be compared. It is a matter of small addition. Therefore, we are not inclined to send the matter to the file of the AO for referring the matter to the DVO for the purpose of ascertaining actual market value. Accordingly, we direct the AO to adopt valuation of this property at Rs.20 lacs for the purpose of capital gains. We order accordingly.

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• 2012 (3) TMI 152
  Sales tax Incentives eligible for deduction under 80IB - Held That:- In view of assessee own case for A/Y 05-06, AO not to exclude sales tax incentives from the profit of the units while calculating the deduction u/s 80IB of the Act. Interest Incentive eligible for deduction under 80IB - Held That:- When in immediately preceding assessment year assessee didnot raised the ground related to denial of deduction under 80IB on interest received, we reject the claim of assessee on principle of consistency.

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• 2012 (3) TMI 151
  Whether the land,subject-matter of sale is agricultural land as on the date of sale without taking into consideration the conversion of land to non-agricultural purpose - held that :-the land retained its agricultural character till the date of the order permitting non-agricultural use and thereafter it is not an agricultural land and, therefore, can be treated as capital asset. whether the land should be treated as agricultural land and the same is exempt from capital gains in view of section 2(14) - held that sale consideration of Rs. 50 lakhs, is not a transaction involving transfer of a capital asset and, therefore, no need to bring the income referable to the capital gains part of the transfer of the asset.

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• 2012 (3) TMI 150
  Brought forward and Setoff of business expenditure and business loss against "Income from House Property" when business has already closed in earlier year - Section 71 - Held That:- Total amount of business loss is Rs. 17,45,392. Out of the same, Rs. 7,64,562 is disallowed against the assessee and the balance would be set off against the income from house property. - Tribunal has rightly appreciated the law and issue and has found that even though there was a temporary break, the assessee continued the business in dis- tributorship and also maintained the establishment, thereby incurred the expenditure which were wholly and exclusively for the purpose of the business. This finding of the Tribunal is in tune with the order of the Division Bench in CIT v. S. S. M. Ahmed Hussain (1986 -TMI - 26098 - MADRAS High Court) Purchase of aluminum - Delayed Payment - Assessee contended TDS deducted and amount remitted to goverment account - Interest Expenditure of Rs 7,64,562 - Disallowance made Held That:- There is also no material to show that there was any compromise between the assessee and Nalco as to the payment of interest and by virtue of the agreement, paid the interest during the accounting year. No material were brought on record. - Decided against assessee.

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• Customs

• 2012 (3) TMI 162
  Re-import of goods being returned by foreign purchaser as find not suitable for consumption - Port Health Officer conform not upto the standards prescribed by the Prevention of Food Adulteration Act - Petitioner filed writ petition to allow release of goods under Bill of Entry No.4605474 dated 12.9.2011 and to reexamine the goods- Held that :- food item not find suitable by foreign buyers and same confirmed by Port Health Officer - dump the same on unsuspecting public in India cannot be permitted - writ petition is dismissed.

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• Corporate Laws

• 2012 (3) TMI 160
  Prosecution of eight Directors of M/s. Metlex Ceramics Ltd. (in liquidation) on the ground that no Statement of Affairs had been filed by any of these Directors in spite of the company being ordered to be wound up - Held that :- The Official Liquidator has filed the report and as per the details as of today except Sh. S.L. Chopra it would not be possible to proceed against any other Directors - if the appellant or Sh. S.L. Chopra are also allowed to go scot free and are not even tried, the effect of that would be as if none of the Directors had any responsibility and/or duty to file the statement of affairs; such a situation cannot be accepted - Once the appellant assumed the position of a Director and some evidence has come on record in the form of signing the documents, prima facie it would lead to the conclusion that she was taking part in the day to day affairs of the company - no merit in this appeal and is accordingly dismissed - Official Liquidator to take up the matter before Learned Company Judge against Sh. S.L. Chopra

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• Central Excise

• 2012 (3) TMI 159
  Pre-deposit of Duty along with penalty u/s 11AC - manufacture of Chewing Tobacco (Khaini) under the brand name of Raja falling under Chapter 24 of the First Schedule to the Central Excise Tariff Act, 1985 - Revenue contented that one of the raw materials i.e. lime used is first dissolved in the water and after filtration of dissolved limestone, the filtered lime water is further put to use for making khaini by dissolving other raw materials in this end - 50% of the production so recorded on the ground that addition of water results in 50% of excess production and duty stands confirmed against them on the findings of excess production and clearance - Held that;- appreciating the order of the Settlement Commission laying down that such water addition to lime and the other material results in 10% excess production of final product - the appellant to deposit Rs. 3.50 crores within a period of 12 weeks from the date of order passed.

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• 2012 (3) TMI 158
  Dispute of quantification - SSI Exemption - Held that:- Excise duty actually paid at the time of clearance of goods from the factory, in terms of Notification No.175/86 is not required to be included in the total demand, in as much as that already stands paid by the appellants. Once they cross the nil rate of duty slabs and start paying concessional rate of duty under the second slab, the entire clearances thereafter have to be treated as having been cleared on payment of concessional rate. Similarly after crossing the final slab requiring the appellants to pay full rate of duty, the clearances affected thereafter are required to be considered as having been made on full rate of duty. - set aside the impugned order and remand the matter to Commissioner for correctly quantifying the demand of duty.

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• 2012 (3) TMI 147
  Modvat credit on the glasses of bottles included in the assessable value of aerated water during the material period - Revenue submits that as per clause (iii) of the explanation to Rule 57 A of the Central Excise Rules, the cost of packing material which is not included or had not been included in the preceding financial years in the assesseable value of the final product under Section 4 of the Central Excise Act, does not qualify as `inputs' for the purpose of the Modvat credit - Held that :- the assessee had added price of the empty glass bottles and crown corks in the assessable value of the final product as shown in the cost certificate issued by the Chartered Accountant and as such, they are entitled to avail the Modvat credit - the appeal, is dismissed as it does not raise any substantial question of law as the appeal against the order of the CESTAT cannot be entertained if it involves a question of fact

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