Shaw Wallace Gelatines (SWGL), a subsidiary of Shaw Wallace had subscribed to the VDIS 1997 to avoid penalty and interest on a transaction in relation to which the Income Tax department had raised certain queries. The company also received show-cause notices from the department of central excise and customs in relation to various issues.
The transaction, related to the VDIS, dates back to 1994-95 when the company had entered into an agreement with a party for leasing certain equipment and claimed depreciation under the Income Tax Act 1961, at the appropriate rate. During the course of the assessment proceedings, the assessing authority had raised certain queries about the transactions. In order to avoid penalty and interest that could arise on completion of assessment, the company decided to offer depreciation in respect of the said assets less lease income, already claimed, for taxation under the VDIS. Accordingly, taxation charge amounting to Rs 69,92,490 has been paid and provided for in the balance sheet for 1997-98, and according to the requirements of the scheme, the original entries relating to the above transactions were reversed in the accounts.
The company has also been at the receiving end of show-cause notices from the excise and sales tax departments. The department of central excise and customs had issued a demand notice to the company for payment of Rs 4.69 crore contending that the dicalcium phosphate manufactured by the company is liable for payment of excise duty.
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The company, however, denies any such liability and has not paid the said amount. The company also does not envisage any liability on this account at this stage.
The department has also issued a show-cause notice to the company in respect of modvat credit availed on capital goods amounting to Rs 8.71 lakh and modvat availed on inputs of Rs 1.48 crore on various grounds.
The company had appealed against the demands and the hearing of the issues is pending before the excise department.
The company also has, based on a Supreme Court decision, contended before the Delhi High Court towards reclassification of some of its products under excise laws, entailing refund claim of excess excise duty levied by the excise authorities approximating Rs 1.15 crore. The ad hoc settlement against such claim of an amount of Rs 94.70 lakh received in earlier years, pending final disposition of the company's contention has been included under sundry creditors.