TIOL-DDT 1097 · the untouched capture
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="3">TIOL-DDT 1097</font><br>
27.04.2009<br>
Monday</strong></font></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">Is
this the way Service Tax Department Should Work?</font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>A</strong> really agitated (he used a much stronger term, which is related to some liquid not very well appreciated in Indian Journalistic jingo) Netizen sent us this.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">25 April was the due date for filing of service tax return for the period October to March 2009. My office staff had been to Thane II Division of Service tax Department in Wagle Estate, Thane to file the service tax return on 24 April. He happened to reach the office just around 6 pm. And much to his surprise, he was informed that no service tax returns will be accepted as no officers are working after 6 pm. Please note he reached just on time and yet the doors were closed. Persistent request to meet the officers were summarily rejected on the ground that all officers have left for the day. He was also informed that the Divisional AC has already left for the day. The obvious message was no service tax returns would be acknowledged on Monday the 27 April without penalty.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Isn't this pathetic? All that was required was for someone to acknowledge the service tax return; isn't it? And why pay penalty when Law permits that I can file my service tax return on Monday given that the due date was on a Saturday and Department is not working on the said day. Does it require an expert law analyst or an express Department Circular to inform these officers of the law of the land? Are we into some sort of dictatorship or barbaric rule where a few so called ‘autocratic officers' at the field level decide the way the Department should run. And why cannot the AC rein in these characters (sorry for the use of the language but some in the Service tax Department in the said building that I referred, can only be so referred to). Isn't it a great insult to the Service Tax Department at large and its senior officials at the helm of affairs, who are doing their very best to give it the right reputation? Are these officers aware that they are duty bound to follow the Citizens' Charter?</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Not that there are no good officers in the Department who understand their job and do wonderful justice to the trade and to the department alike. A visit to LTU Mumbai and it would be a pleasure to have company, talk and interact with some of the very best officers who really go out of the way to give the right sort of inputs and support to the Trade. And please do not read vested interests to this statement of mine.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">I also had the pleasure of interacting with couple of officers from the Central Excise Division from Wagle Estate who were genuinely concerned that the service tax return could not be acknowledged because of the attitude of their brother officers and made the very best effort to at least verbally ensure that all be in place on Monday and were sorry that another visit would need to be made to the office on Monday only to file the returns.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">I understand that there cannot be an idealistic situation and we will have the so-called ‘rotten eggs' in the basket. But, shocking is the fact that we are in an age of e-filing and with this sort of attitude and approach and some service tax officers especially at the client interfacing level, whatever remaining power vested with the Departmental officers will well and truly we taken away. And when a respected Departmental officer in TIOL has suggested that powers be given to the Service Tax Department officers to arrest, I shudder to think how these characters in the Department will use (mis-use) them. The response to the article itself speaks volume of the fear psychosis which shows how immature the Department still is when it comes to make appropriate use of the powers rightfully granted by the statute.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The reason for mailing this to TIOL is to get this on DDT, the AC would definitely be informed that there is a piece which refers to his Division and I really want to come back to DDT to inform whether we are penalized for late filing on Monday or otherwise. Hopefully the new Commissioner, DGST will also read this bit. Will some sense and decorum be instilled into these officers? May be even time cannot tell.</font></p>
<p align="justify"><font color="#FF6600" size="2" face="Verdana, Arial, Helvetica, sans-serif">ANGUISH or ANGER? Today we are carrying an article from a Departmental Officer suggesting steps to make service Tax more bearable and one of the suggestions is an annual return. See our<strong> <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=8945" target="_blank">Guest</a></strong> column.</font></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">Unfair Government</font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A former Joint Commissioner of Customs and Central Excise is highly agitated that;-</font></p>
<blockquote>
<p align="justify">1. <font size="2" face="Verdana, Arial, Helvetica, sans-serif">Unlike sec 28 AB of Customs Act, <strong>sec 18 (3) </strong> provides that the interest will be payable from “ <strong>the first day of the month in which the duty is provisionally assessed till the date of payment thereof </strong>”. There appears to be an error here because interest liability cannot start from a date prior to the date when duty became payable. e.g. If provisional assessment is done on 30 th of a month say 30 th April, how can interest be demanded or collected for a period from 1 st April to 29 th April. This section needs to be in line with sec 28 AB which provides that interest is payable from “ <strong>the first day of the month succeeding the month in which the duty ought to have been paid”.</strong></font> </p>
</blockquote>
<div align="justify">
<blockquote>
<p>2. <font size="2" face="Verdana, Arial, Helvetica, sans-serif">The interest rate for delayed payment of duty u/s 28 AB is 13% pa whereas u/s 47 it is 15% pa in terms of Notification Nos 76/03- cus (NT) dated 12-09-03 and 28/02- Cus (NT) dated 13-05-02 respectively. Why can't it be same either 13% or 15% for both the sections?</font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. The Govt charges interest from the first day of the month in which provisional assessment had taken place in case duty is recoverable from the assessee, u/s 18(3) that too @ 13% pa whereas in case of refund to the assessee, the interest would be paid only after expiry of 3 months from the date of filing of refund u/s 18(4) and that too only @ 6%. This is highhandedness of the Govt and is against the principles of equity.</font></p>
</blockquote>
</div>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">“I hope you will bring these facts to the knowledge of people through your esteemed site”, he says in his mail.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">No equity sir; it's ‘heads I win; tails you lose'.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">I asked a senior officer who was connected with this interest- ing issue as to why there should be dual rates – one for the assessee and one for the Government. He said it was to maintain equity and fair-play. Government can get money for even less than 6%, but for the assessee cost of borrowing would be around 13% or would have been 13% when the rate was fixed. If the rate of interest is fixed at 6% for the assessee, nobody would pay – it is as good as borrowing from government at 6%! And if the government was to pay 13% interest, it would amount to borrowing at more than double the available rate.</font></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">Simplified procedure for sanction of refund of unutilized credit/rebate claims in cases of export</font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The CBEC Circular No. 828/5/2006 – CX dt . 20/04/2006 had clearly prescribed that, for select category of exporters 80% of the rebate claim is to be sanctioned within 15 days after preliminary scrutiny, and balance amount is to be sanctioned within 45 days of the filing of the claim.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It seems Board has received representations from the trade and industry that rebate/refunds on account of duty drawback excise duty and service tax are being held up in field formations .. What's New? It is easier for a camel to pass through the eye of a needle than to get a refund from the Department.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now CBEC reiterates that the instructions laid down in the aforesaid circular may be followed and all rebate/refund claims are decided expeditiously as per law.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Obviously nobody in the field has any respect for Board instructions which are routinely and regularly ignored.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In fact even the Board seems to have forgotten its previous instructions. In F.No . 268/4/2005- XC -8(Pt) Dated : October 3, 2007, Board had instructed that 80% of the refund claimed should be given without pre-audit within 15 days..</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now should they issue two Adjudication orders for the same refund claim, one for 80% and the other for 20%?</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Please see <strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=6313" target="_blank">DDT 734- 05.11.2007</a></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Board should seriously think of coming out of the secret shell and share information. Your instructions really don't reach the field and they are never available when wanted. Give them to us – we will keep them available for posterity and give them to the stake holders as quickly as possible.</font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=31&filename=notification/excise/2009/board_circular.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CBEC F.No . 268/25/200/- CX.8 dated: 6th February, 2009</strong></font></a></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">Service Tax – C </font></strong><font color="#006600"><strong><font color="#FF6600">and</font> F Agent <font color="#FF6600">not</font> C or F Agent – High Court not impressed with CESTAT Larger Bench Orchestra</strong></font></font></p>
<p align="justify"><font color="#FF6600" size="2" face="Verdana, Arial, Helvetica, sans-serif">The whole “operations” involved in “C&F operations” now remind us of an orchestra, performing a western classical symphony. It reminds us of a connoisseur's experience of harmony in western classical music. While listening to Mahler's 9th symphony, one does not listen to an individual violin or a trumpet, but the harmony emanating from many different seemingly unrelated instruments. In the same way, a C&F Agent's functions consisting of seemingly unrelated tasks are well orchestrated. Merely, because the bassoon was not played in one of the movements of a symphony, it does not cease to be otherwise a part of the orchestra. While forming this view, we have certainly not overlooked the fact that while music can be sometimes taxing, a tax can never be musical. Because a buyer buys only rice and not wheat in a grocery shop, which claims to sell “wheat and rice”, the shop cannot cease to be a shop selling “wheat and rice”.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">That is an extract from the CESTAT Larger Bench order in <em>Medpro Pharma Pvt. Ltd </em><strong>- </strong></font><font size="1" face="Verdana, Arial, Helvetica, sans-serif"><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=44&filename=legal/cestat/2006/2006-TIOL-848-CESTAT-DEL-LB.htm" target="_blank">2006-TIOL-848-CESTAT-DEL-LB</a>.</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The High Court was not impressed and said, <strong>“We have not been able to understand with utmost respect to the Tribunal as to what is 'Orchestrated nature of work' involved in the present transaction. The example of 'wheat and rice' grocery shop is obviously wholly mis -appropriate and does not fit in the context.”</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The High Court did not accept the larger Bench decision and upheld the <em>Mahavir Generics's </em> case - </font><font size="1" face="Verdana, Arial, Helvetica, sans-serif"><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=44&filename=legal/cestat/2004/2004-TIOL-344-CESTAT-DEL.htm" target="_blank">2004-TIOL-344-CESTAT-DEL</a>.</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Please see our <strong> ST <em>se </em>GST <em>tak </em></strong>tomorrow for more details.</font></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">Income Tax collected at Source (TCS) – Stayed by High Court, later upheld – What happens to the period when tax was not collected?</font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Recently the Bombay High Court had an interesting case.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per section 206 C(1), certain sellers of alcohol, Tendu leaves, Timber etc,. are required to collect tax at source and pay it to the government. If he fails to collect that tax, he is responsible for paying it.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now in this case the High Court had granted interim stay from collection of this tax on some writ petitions challenging this very provision of law. The validity of the provision was later upheld.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now the question is ‘was there a failure to collect the tax during the period when there was stay by the High Court?'</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The High Court held that during that time if they collected the tax it would have amounted to contempt of court. So during the stay, no tax could be collected but after the stay was vacated, could the tax be collected ?. The High Court held that it could not be collected.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Fine! Reasonable. But what happens to government Revenue which was lost due to the stay? No way to recover?</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Actually the Government did not lose any Revenue; it was only tax collected at source and the buyer would anyway be entitled for credit of this amount when calculating his tax liability. So ultimately government does not lose anything! Wait wait – there is the interest angle. Who will pay the interest?</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Interestingly when this stupendously important case came up for hearing before the High Court, there was no counsel for the Revenue to defend the case. Yet another reason why the government loses cases. The amount involved in this case is over Rs. 25 lakhs and there was <strong>none </strong> to represent the Revenue. Was it intentional?</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Revenue should have been present and pleaded that when the STAY is vacated, its interests should be protected and anyway it should have got interest.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This is the way Revenue treats its important cases and they blame the Judiciary pro-assessee.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">You can have more details in </font><font size="1" face="Verdana, Arial, Helvetica, sans-serif"><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=38&filename=legal/hc/2009/2009-TIOL-198-HC-MUM-IT.htm" target="_blank">2009-TIOL-198-HC-MUM-IT.</a></strong></font></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">Jurispruden</font><font color="#FF6633" size="5">tiol</font><font color="#006600">–</font></strong></font><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong> Tomorrow's cases</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><strong><strong><strong><strong><strong><strong><b><img src="http://www.taxindiaonline.com/RC2/image/stories/ddt_hammer.jpg" alt="Legal Corner Icon" width="100" height="84" hspace="5" border="0" align="left"></b></strong></strong></strong></strong></strong></strong></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font><font color="#663399">Income Tax</font></strong></font></p>
<p align="justify"><font color="#FF6600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Block assessment - if AO accepts block return and does not investigate on his own, no notice u/s 143(2) is required - but if fresh inquiry is done, notice is mandatory as it is substantive right of assessee - lack of notice does not make assessment merely irregular but invalidates it: Delhi HC</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>EARCH, </strong>followed by block assessment, is a regular exercise for the Income Tax Department. But, is block assessment a self-contained code? Does it really have nothing to do with the procedures of regular assessment? Can an Assessing Officer proceed to conduct his own investigation if he is not too keen to accept the return for the block period without issuing any notice u/s 143(2)? <strong> Subscribing to the views of the Guwahati HC on this issue the Delhi HC has held that if the AO accepts the block return and does not embark on any investigation he is not required to issue any notice u/s 143(2) and can complete the assessment and pass the order under section 158 BC (c). But if he declines the return, it is mandatory for him to issue notice u/s 143(2) as giving an opportunity to the assessee to present materials relevant for assessment is not an empty formality but a substantive right which cannot be denied to the assessee. And if the AO skips the notice u/s 143(2) it does not merely render the assessment irregular but invalidates it.</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399">TN </font></strong><font color="#663399"><strong>GST</strong></font></font></p>
<p align="justify"><font color="#FF6600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Where certain items which are not included in the turnover are disclosed in the dealer's own account books and the assessing authorities include these items in the dealers' turnover disallowing the exemption, penalty cannot be imposed; No interference on factual findings – Supreme Court</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE </strong>Supreme Court found that the authorities have factually adjudicated the issues. The High Court has observed that the factual scenario was identical. The conclusions arrived at by the revenue authorities and the High Court that in fact what was sold was a complete wet grinder which was a new commodity and not merely parts thereof. This being a factual finding, there is no scope for interference in these appeals so far levy of tax is concerned.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399">Customs</font></strong></font></p>
<p align="justify"><font color="#FF6600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Seizure of cash- High Court ought not to have granted unconditional release – Supreme Court</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> main point in this civil appeal is: whether misdeclaration of description and value in the facts and circumstances of this case constituted "smuggling" as defined in Section 2(39) of the Customs Act. Another issue is whether the High Court was justified in ordering unconditional release of the currency which allegedly represented the sale-proceeds of the misdeclared goods, which, if proved, were liable to be confiscated under Section 111 or Section 113.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399">See our columns Tomorrow for the judgements</font></strong></font></p>
<p align="justify"><font color="#FF6600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Tomorrow with more <strong>DDT</strong></font></p>
<p align="justify"><font color="#FF6600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a Nice Day.</font></p>
<p align="justify"><font color="#FF6600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Mail your comments to</font> <font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="mailto:vijaywrite@taxindiaonline.com">vijaywrite@taxindiaonline.com</a></font></p>
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