TIOL-DDT 1142 · the untouched capture
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<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN" "http://www.w3.org/TR/html4/loose.dtd"> <html> <head> <title>Untitled Document</title> <meta http-equiv="Content-Type" content="text/html; charset=iso-8859-1"> </head> <body bgcolor="#FFFFFF"> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="3">TIOL-DDT 1142</font><br> 29.06.2009<br> Monday</strong></font></p> <p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">GST </font></strong><font color="#006600"><strong> Stuck? Karunanidhi opposes</strong></font></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DMK</strong> Chief Karunanidhi does not like GST. In a letter to the Prime Minister and all Chief Ministers he is reported to have expressed serious concerns about the proposed GST as</font></p> <div align="justify"> <blockquote><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. It is highly regressive.</font></blockquote> </div> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. Has "flawed design".</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. Its impacts have been exaggerated while its serious drawbacks have been underestimated.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. The incidence of taxation on the articles consumed by the common man will rise, while the rate of tax on luxuries will fall.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">5. The proposal that all states must have a uniform rate is diametrically contrary to the federal principals of the constitution, as it reduces the autonomy of the states.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">6. At a time when decentralisation of power to lower tiers (like local bodies) is being advocated, this move will be in the opposite direction, towards centralisation of powers.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">7. There were no reliable estimates available on the potential benefits to the states under the proposed system.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">8. Most of the discussion on 'revenue gain' for states is based on purely speculative estimates at best, and wishful thinking at worst.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">9. GST model will bring into central excise jurisdiction lakhs of small and medium enterprises which are currently exempt.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">10. It will also be highly unpopular with SMEs who will suddenly see a doubling of inspector raj.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">11. VAT experience on compensation arrangement for revenue loss to the states does not inspire confidence to go for another uniform tax regime.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">12. Our experience under VAT has been very bad. Bureaucratic obstacles and movement of goal posts by the Finance Ministry has given us a raw deal. Rs 4,055 crores of our claims remain outstanding.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">13. VAT was implemented when the economy was booming. Implementing a revenue negative new system during a slowdown will pose a much higher compensation burden, at a time when the Centre has been unable to meet its fiscal deficit targets.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">14. The idea of a fixed rate of Central GST would handcuff the Central Government's fiscal policy.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">15. If the proposed GST had been in place, the much needed stimulus packages in which excise duties were cut twice would not have been possible.</font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Karunanidhi's proposals are sure to be lapped up by many Chief Ministers. Many of them are scared that they will lose one of their Kamadhenu departments.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Litigation, complications, mind boggling rules, inexplicable calculations, plethora of contradictory case laws – these are the ingredients which give the Babu and the Neta the power to lord over the Citizen Taxpayer – and why should they give them all up?</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The political fact since 1971 had been that any Central Government that was dependent on the DMK or the AIADMK was always jittery – but the fact now is that the Central Government is not really dependent on the DMK support and actually the DMK Government in Chennai is dependent on the Congress support. If this equation is accepted as a political fact, the Karunanidhis of this world will act more responsibly.</font></p> <p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">Pre-Deposit – Post-adjudication Blues - Delete Section 35F</font></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Writing in our Budget Run up, noted Senior Advocate Arvind Datar had suggested that Section 35F should be deleted from the Central Excise Act. He said, “Before the Tribunal, it leads to tremendous delay in disposal of cases as a lot of time is consumed at the interlocutory stage. If Sec. 35F is abolished, it will save considerable amount of judicial time as CESTAT can straightaway hear and dispose off the main appeal itself.”</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Central Excise Officers go to ridiculous lengths to demand duty on unimaginable grounds and the poor assessee is under the Damocles' sword of a huge pre-deposit falling on his head at any moment. The first few fresh hours in the Tribunal are spent in disposing of stay and waiver of pre-deposit petitions. And many of the consultants invariably argue their whole case at the stay hearing stage itself. Even in many cases where huge pre-deposits are ordered, the final verdict is in favour of the assessee. And when huge pre-deposits are ordered, the cases invariably go to the High Courts by writ petitions, though High Courts have a set policy that they normally will not interfere in interlocutory matters. We are simply clogging our courts. The whole purpose of setting up Tribunals is for speedy disposal and if best time of the Tribunal is spent in disposing pre-deposit matters, the purpose is defeated.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The pre-deposit concept has also been instrumental in breeding corruption at all levels. Even honest assessees are happy with the corrupt officers, for obvious reasons! So there should be no pre-deposit at least till the Tribunal stage or it should be mandatorily fixed at 5% of the duty demanded. (Considering the huge perverse demands being made, even ten percent, as suggested by Jai Kumar and Natarajan in another Budget run-up piece we carried, is too much). Then there would be no stay applications before the Tribunal and Tribunal can concentrate on finally deciding the cases instead of wasting their precious time on pre-deposit matters.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Speaking at a Seminar the other day, an eminent tax expert said that if there is one change he wanted the Finance Minister to make, it was doing away with pre-deposit.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But who will consider all these? After all the system thrives on corruption, complications, litigation and liaisoning.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>The Indian Businessman is a great species – but for his urge to stay in business, he would have become a terrorist and shot down all the personnel of the numerous enforcement agencies, he has to cope up with.</strong></font></p> <p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">Customs Officer sentenced for Computer theft</font></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A Federal judge sentenced a U.S. Customs and Border Protection officer to two years probation on Friday for stealing a computer.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">John Joseph Rendzia, Jr., 42, of Norfolk, had admitted guilty to embezzlement and conversion of an airline passenger's laptop computer.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Rendzia was on duty as a CBP supervisor at the Philadelphia International Airport on March 19, 2008. A family returning from vacation left a laptop computer in the Customs area, and the laptop was missing when they returned to look for it. The family reported it stolen to airport police, and a CBP officer later found the laptop. The officer turned the computer over to Rendzia, his supervisor.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Rendzia kept the laptop and brought it to Norfolk where he was transferred in August 2008. A computer operating system on the laptop traced it to an address in Norfolk, and special agents of the Department of Homeland Security Office of Inspector General obtained a search warrant. Together with agents from the FBI, the Naval Criminal Investigative Service, the Norfolk Airport Police, and a detective from the Philadelphia Airport Police, seized the laptop and obtained statements from Rendzia.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Forensic analysis of the laptop by NCIS confirmed that Rendzia had deleted the owner's user profiles, installed new profiles, and converted the computer to his own use.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Aren't Indian Customs officers far better?</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">–Tuesday's cases</font></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 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><font color="#663399">Central Excise</font></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6600">Goods falling under Tariff Heading 55.06 manufactured from duty paid inputs falling under Heading 55.01, entitled for exemption under Notification No.30/2004- C.E : Bombay High Court</font></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THERE</strong> is nothing in the Notification No 30/04 to suggest that the term `staple fibre' has been used in a restricted sense so as to apply only to inputs falling under Heading 55.03/55.04. On the contrary, reading the Notification as a whole it is seen that the said Notification is issued to ensure effective implementation of the new tax regime so that the manufacturers are required to pay only the mandatory excise duty and not required to pay excise duty at different stages specified in the CET. Therefore, there is no reason to construe the terms `staple fibre' narrowly so as to restrict it to unprocessed staple fibres used as inputs in the manufacture of Tops.</font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Income Tax</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6600">Non-resident company - gets contract - follows percentage of completion method - No income need to be offered for taxation if work is not completed up to 25% of project; If there is no income the law does not cast a duty upon a person to file return of income; HO expenses prior to setting up project office in India allowable deduction: ITAT</font></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IS </strong>non-filing of return an offence under the Income Tax Act? When is the need to file return triggered? In the case of a non-resident engineering contract firm which followed the percentage completion method and filed no return, the AO disallows the claim of deduction for expenditure on work in progress in the preceding year merely because no return was filed. The Tribunal in this case has observed that every person, including a company, is liable to file return if its total income assessable under the Act during the previous year exceeds the maximum amount which is not chargeable to income tax. Thus the requirement for filing the return is activated only when there is some income chargeable to tax. If there is no income, then the law does not cast a duty upon a person to file the return of income. </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">Benefit of exemption notifications not allowed – Refund without challenging assessment – writ maintainable – High Court</font></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> law is well settled that mere statutory remedy even of an appeal by itself, will be no bar to the exercise of the extra ordinary jurisdiction of the High court. The High Court if it finds that there has been a breach of the fundamental principles of justice, would certainly not hesitate to issue a writ of certiorari and the fact that the alternative remedy is available would be no answer. The fact that the Petitioner has paid the duty under mistake of law and or in the instant case by oversight cannot result in being assessed to duty which was otherwise not payable. This will be a case of manifest injustice and on the face of it erroneous.</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> </body> </html>