TIOL-DDT 1110 · 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 1110</font><br>
14.05.2009<br>
Thursday</strong></font></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">Anti Dumping Duty imposed on plastic processing or injection moulding machines</font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>GOVERNMENT</strong> has imposed anti dumping duty on all kinds of plastic processing or injection moulding machines, also known as injection presses, having clamping force not less than 40 tonnes falling under tariff item 8477 10 00 of the First Schedule to the Customs Tariff Act, 1975 originating in or exported from, People's Republic of China.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=23&filename=notification/custom/2009/ctariff09_047.htm" target="_blank">Notification NO. 47/2009 - Cus ., Dated: May 12, 2009</a></strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Scrutiny of Central Excise Returns by Proper Officers – CBEC Instructions</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The CBEC has issued instructions on scrutiny of returns. These guidelines seek to explain the contents of the <strong>Return Scrutiny Manual </strong>, which has been prepared and is now being circulated to all the field formations vide this circular. Board is circulating the manual on 11th May. We had carried details about the Manual in <strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=9000" target="_blank">DDT 1106</a> </strong> on 08.05.2009. How did we get it even before the Departmental officers? From the ADB . In that DDT it was mentioned, “Incidentally these manuals have not been made available to the people who they were meant for – the Departmental officers. DDT contacted at least a hundred officers from various parts of the country at various levels – not one of them had heard about these manuals. We got them from ADB.”</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now what was available with the ADB and the rest of the world about what a Central Excise Superintendent has to do, is made available to the Superintendent also by the kind Board.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The gist of the instructions:</font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. The returns would be received by the Superintendent of Central Excise who is the proper officer under sub rule (1) of Rule 12 to scrutinize the return. The Inspectors posted in the Range would assist him in this task.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. The scrutiny of the return is required to be carried out in two stages, viz., (i) the scrutiny of the return and (ii) scrutiny of assessment.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. In the preliminary scrutiny (to be called the ‘scrutiny of return'), all returns would be scrutinized as per the checklist given in Annexure-1 to this Circular. [<font color="#FF6600">No such Annexure found with the Circular</font>]</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. This would involve checking the correctness of the information furnished, the timeliness of payment of duty and the timeliness of filing the return. For example, whether the 8-digit CETSH exists, and if so, whether the rate of duty is correctly mentioned. It would also involve checking the arithmetical accuracy of information contained in the return e.g. duty payment or the break-up of duty paid in cash and through CENVAT credit. Verification of the correctness of the provisional assessment order in respect of the assessee would also form part of the mandate of preliminary scrutiny. After the checklist at Annexure-1 has been executed, it should be completed and duly signed by the Superintendent. Wherever any discrepancies/deficiencies are noticed, it shall be the responsibility of the Range Superintendent to take appropriate action including safeguarding the revenue. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">5. As soon as the Automation of Central Excise and Service Tax (ACES) project is implemented, preliminary scrutiny would be done by the system.[<font color="#FF6600">This is only a vision</font>]</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">6. The second stage scrutiny called the ‘scrutiny of assessment' would be confined to returns selected on the basis of mini risk parameters, which are given in Annexure-II [again missing annexure]</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">7. Once the ACES project is implemented, the returns would be selected automatically by the system and list in descending order of risk would be forwarded every month to the Commissionerate for final selection. It would be the responsibility of the jurisdictional Joint/Additional Commissioner to decide on the number of returns to be taken up for detailed scrutiny by the Ranges keeping in mind the availability of administrative resources which can deliver quality scrutiny.</font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The field officers should carefully go through the Return Scrutiny Manual and follow the scheme of verification provided in the Manual. AMEN.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=31&filename=notification/excise/2009/excircular887.htm" target="_blank">CBEC Circular NO. 887/05/ 2009- CX ., Dated: May 11, 2009</a></strong></font></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">WHAT IS QUALITY SCRUTINY?</font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Immediately after the Board Circular was issued we received these comments from a concerned Netizen, Ravipriya.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The CBEC has through Circular No. 887/05/2009- CX dated 11th May, 2009 has done more harm than good to the officers of the department and to the trade in the matter of "Scrutiny of ER1, ER2 and ER3 returns of manufacturers and returns submitted by Dealers."</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In the above circular, it has been observed thus: “It would be the responsibility of the jurisdictional Joint/Additional Commissioner to decide on the number of returns to be taken up for detailed scrutiny by the Ranges keeping in mind the availability of administrative resources which can deliver quality scrutiny.” What is the import of this? Is the CBEC not demoralizing its own cadre? Does the CBEC admit to existence of administrative resources which cannot deliver quality scrutiny? If so, who was at fault? Will this also not lead to corrupt practice of “pick and choose” posting of staff?</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In the Central Excise department, the executive staff plays a pivotal role in the revenue collection, of which assessment is one aspect. Among the executive staff, the Inspectors were the back-bone, once upon a time. This cadre, thanks perhaps to the inordinate delay in promotions to Superintendent's cadre and regular recruitment through Staff Selection Commission, had the essential characters of “Executives” in terms of experience and youth till, a decade before and started losing the said character slowly.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The cumulative effect of the following developments not only spoiled the “right-mix,” but also brought down the morale of the “Executives” over the years:-</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(1) Complete ban on recruitment of Inspectors as was being done in earlier years, despite geometric progression in revenue;</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(2) Frequent changes in laws; rules; procedures; formats etc.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(3) Introduction of self-assessment, in the name of “reposing more trust” on assessees;</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(4) Notification of about 6 to 8 new taxable services and widening existing services, without clear definition of services and ambiguity in related laws;</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(5) Reducing the Range Offices to a level of “Daily statistical data collection centres”;</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(6) Illogical cadre restructuring done and consequent re-shaping of the department with disproportionate organs such as swollen head, flabby body, thin limbs etc.;</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(7) Lack of training to staff about the change in law, procedures and information-technology;</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(8) Lack of strategy, planning, development to check every growing pendency in litigation;</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(9) Failure to espouse faith in alternate dispute redressal system and process, (not increasing the infrastructure, numbers of CESTATs in the country and diluting the Settlement Commissions' powers to name a few);</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(10) Failure to check corrupt practices, in all administrative and revenue matters.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">From the assessees' point of view there is no respite from harassment, notices and adverse orders.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBEC should first conduct a quality scrutiny of its functions.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Let us only hope that one day, the diminishing faith of the assessees is halted and hope of pleasant tax administration emerges.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong> Hope On, my friend!</strong></font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Mandatory penalty – <em>Dharmendra Textile </em> case did not stipulate that for every demand, penalty is an automatic consequence – If the non-payment of duty was attributable to fraud, collusion etc, Penalty is mandatory, payment of duty before or after SCN does not make any difference. – Supreme Court</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The <em>Dharmendra Textile </em> - </font><font size="1" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=37&filename=legal/sc/2008/2008-TIOL-192-SC-CX-LB.htm"><strong>2008-TIOL-192-SC- CX -LB</strong></a></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> case is being liberally interpreted on a large scale.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In a case decided on 12.5.2009, the Supreme Court observed, “In almost every case relating to penalty, the decision is referred to on behalf of the Revenue as if it laid down that in every case of non-payment or short payment of duty the penalty clause would automatically get attracted and the authority had no discretion in the matter.”</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Recently,
explaining <em>Dharmendra</em>, the ITAT Pune Bench observed in </font><font size="1" face="Verdana, Arial, Helvetica, sans-serif"><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=39&filename=legal/itat/2009/2009-TIOL-278-ITAT-PUNE.htm" target="_blank">2009-TIOL-278-ITAT-PUNE</a></strong></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>, “</strong>Therefore,
Hon'ble Supreme Court's observations to the effect that a penalty is to provide
remedy for loss of revenue cannot be construed to mean that a penalty can
be imposed as an automatic consequence for addition to returned income.”</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Well, judicial minds think alike and this is exactly what the Supreme Court also clarified.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Supreme Court observed that it is clear that <strong>penalty under section 11AC, as the word suggests, is punishment for an act of deliberate deception by the assessee </strong> with the intent to evade duty by adopting any of the means mentioned in the section.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We bring you this important Supreme Court Judgement today.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">See <strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=9025" target="_blank">Breaking News</a>.</strong></font></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">FICCI </font></strong><font color="#006600"><strong> Demands Tax Cuts</strong></font></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It seems the leaders of FICCI met the Revenue Secretary Bhide , yesterday and sought</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. reduction in corporate tax rate to 25 per cent</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. reintroduction of investment allowance</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. continuation of tax holiday benefits for housing, telecom and power sectors</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. reduction in personal income tax rate to 25 per cent</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">5. that tax holiday benefit period for IT and software sector to be extended beyond 2010 and Section 80HHC (exemption of export profits) temporarily revived.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">6. excise duty rate of 8 per cent and service tax at 10 per cent be continued at least till the next fiscal.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">7. reduction in central sales tax (CST) rate from 2 per cent to one per cent.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">8. early introduction of goods and service tax (GST) regime </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This is the problem with Captains of Industry and Trade in India. They know pretty well that a new Government is to be formed in a few days and the policies along with the Revenue Secretary may change. What is the point in making representations to the Revenue Secretary just three days before the Election Results are to be announced?</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">They had drafted their proposals and had to submit them to the Revenue Secretary and have their photo sessions. The RS must have had a good laugh.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In January, I had the privilege of being invited to a meeting of one of these Trade Associations where they discussed their proposals for suggestions to the FM for the Budget. I told them, this year there would be no regular budget and nobody is going to see their suggestions. They told me it was the tradition of the Chamber to have these meetings in January ever year and send their proposals to the FM. Stupid irritants like not having a regular Budget were not going to stop them from sending their suggestions to the FM.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now you know why the Babus treat the trade with contempt?</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>Friday'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 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 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></strong></font></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 size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6600">If warranty is an integral part of the sale price of the goods and the warranty is attached to the sale price of the product, obligations arising from past events have to be recognized as provisions. These past events are known as obligating events – Supreme Court</font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>WHAT </strong> is a provision? This is the question which needs to be answered. A provision is a liability which can be measured only by using a substantial degree of estimation. A provision is recognized when: (a) an enterprise has a present obligation as a result of a past event; (b) it is probable that an outflow of resources will be required to settle the obligation; and (c) a reliable estimate can be made of the amount of the obligation. If these conditions are not met, no provision can be recognized. Liability is defined as a present obligation arising from past events, the settlement of which is expected to result in an outflow from the enterprise of resources embodying economic benefits. A past event that leads to a present obligation is called as an obligating event. The obligating event is an event that creates an obligation which results in an outflow of resources. It is only those obligations arising from past events existing independently of the future conduct of the business of the enterprise that is recognized as provision.</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 size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6600">Foreign Currency seized from two persons in the same case – for one person, confiscation quashed and for the other upheld – the Appellate Authority could not have adopted a schizophrenic approach</font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> Appellate Authority could not have adopted a schizophrenic approach: the jurisdiction of the Customs authorities vis-à-vis the two sets of foreign exchange – one seized near the Airport and the other seized subsequently was on the basis that they formed part of the same transactions or arose out of the statement recorded in the first seizure. Such being the case and the notices having been issued as a part of the same investigation process, the Central Government could not have adopted a schizophrenic approach; on the one hand holding that the confiscation was unauthorized, and on other, upholding the confiscation in the absence of such order in the petitioner's case. The order nowhere discloses that insofar as the petitioner is concerned, there was any such determination by the authorities under FEMA or the RBI , as the case may be. Therefore, Central Government has, in the impugned order disclosed an inconsistent and wholly illogical approach in law which can hardly be commended by this Court.</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 the <strong><font color="#FF0000" size="5">1111th edition of DDT</font></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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