TIOL-DDT 1316 · the untouched capture
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<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="3">TIOL-DDT 1316</font> <br>
11.03.2010 <br>
Thursday </strong></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">If Amount paid is not Tax will provisions of Section 11B apply for refund claims? </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> assessee was registered with service tax authorities in Chennai as an ‘Architect'. They provided their services for construction of a building in Sri Lanka and paid service tax. Subsequently they realized that they were not liable to pay any tax and claimed refund. The Assistant Commissioner rejected the refund on limitation and this order was upheld by the Commissioner (Appeals). </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The assessee approached the High Court of Judicature at Madras with a Writ Petition seeking a Mandamus, directing the authorities to refund the service tax paid by them under a mistake of law, on export of services. After hearing the arguments from Counsels for both the parties, the Single Judge Bench observed, </font></p>
<blockquote>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">"……………. it is clear that if what was paid cannot be taken to be duty of excise, the bar of limitation under section 11B (1) cannot be applied. This is on account of the fact that the bar of limitation prescribed under Section 11B (1) applies only to "any person claiming refund of any duty of excise and interest". Therefore, I am of the considered view that the claim of the petitioner for refund can be entertained by this Court, since there is no dispute about the fact that no service tax was payable by the petitioner and as a corollary, what was paid by them was not service tax." </font></em></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The High Court further observed that since the assessee has produced adequate proof to show that there will be no unjust enrichment, the authorities were directed to refund the amount paid by them within eight weeks from the date of receipt of a copy of this order. Please see<em> <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=43&filename=legal/hc/2010/2010-TIOL-67-HC-MAD-ST.htm" target="_blank"><font size="1">2010-TIOL-67-HC-MAD-ST</font></a></strong>.</em> </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Earlier, in more or less similar circumstances, an order passed by the Single Judge Bench of Karnataka High Court <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=43&filename=legal/hc/2010/2010-TIOL-68-HC-KAR-ST.htm" target="_blank"><font size="1"><em>2010-TIOL-68-HC-KAR-ST</em></font></a></strong> directing the lower authorities to grant refund was stayed by the Division Bench <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=43&filename=legal/hc/2010/2010-TIOL-89-HC-KAR-ST.htm" target="_blank"><font size="1"><em>2010-TIOL-89-HC-KAR-ST</em></font></a></strong>. In that case the assessee who was engaged in construction activity claimed refund of service tax paid by them on the plea that they were not at all liable to pay any service tax for their activity, by relying on TRU Circular dated 17.09.2004. This claim was rejected by the authorities taking recourse to Section 11B resulting in a Writ of Mandamus from the Single Judge Bench directing the lower authorities to sanction refund within two weeks. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Recently, the case in High Court of Madras followed the same trajectory as that of the case in Karnataka High Court. Against the Single Judge Bench order of Madras High Court, Revenue filed a Writ Appeal to the Division Bench of the High Court of Madras, headed by the Chief Justice. The Division Bench on perusing the contents of the petition and the affidavit filed in support thereof and after hearing the arguments from the Counsels for both the parties immediately stayed the order passed by the Single Judge till the disposal of the Appeal. Please see<em> <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=43&filename=legal/hc/2010/2010-TIOL-161-HC-MAD-ST.htm" target="_blank"><font size="1">2010-TIOL-161-HC-MAD-ST</font></a></strong> </em></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It may be noted that the Supreme Court in <em>CCE, Chandigarh vs. Doaba Cooperative Sugar Mills</em> held that in making claims for refund before the departmental authority, an assessee is bound within four corners of the statute and the period of limitation prescribed in the Central Excise Act and the Rules framed there under must be adhered to. The Authorities functioning under the Act are bound by the provisions of the Act. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Supreme Court followed the ratio of this judgment in <em>Porcelain Electrical Mfg. Co., vs. CCE</em>, Delhi and held that the refund claim filed before the authorities has to be governed by the provisions of the statute and that the general law of limitation cannot be made applicable. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Incidentally, the Supreme Court in Union of India vs. ITC Ltd observed, "……..It has been settled by this Court that where excess <a>duty was not payable by the party under the provisions of a statute but had in fact been paid under a mistake of law, the party has a right to recover it and there is a corresponding legal obligation on the part of the Government to refund the excess duty so collected because the collection in such cases would be without the authority of law". </a></font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And in <em>Mafatlal Industries Ltd vs. Union of India</em> <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=32&filename=legal/sc/2002/2002-TIOL-54-SC-CX.htm" target="_blank"><font size="1"><em>2002-TIOL-54-SC-CX</em></font></a></strong>, the Constitution Bench of the Apex Court observed as follows: </font></p>
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<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">"…………. Applying the law laid down the decisions aforesaid, it is not possible to conclude that any and every claim for refund of illegal/unauthorised levy of tax, can be made only in accordance with the provisions of the Act (Rule 11, Section 11B etc. as the case may be), and an action by way of suit or writ petition under Article 226 will not be maintainable under any circumstances. An action by way of suit or a petition under Article 226 of the Constitution is maintainable to assail the levy or order which is illegal, void or unauthorised or without jurisdiction and/or claim refund, in cases covered by propositions No. (1), (3) (4) and (5) in Dulabhai's case, as explained hereinabove, as one passed outside the Act and ultra vires . Such action will be governed by the general law and the procedure and period of limitation provided by the specific statute will have no application. ……… …". </font></em></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Tail spark:</strong> In the instant case, it appears that the assessee had provided taxable services as an architect for construction of building in Sri Lanka and the High Court (Single Judge Bench) while summarizing the facts of the case, acknowledged it as export of services. In such a scenario it could come under the provisions of Rule 3(1)(i) of Export of Service Rules, 2005 and in terms of Rule 5 of the said Rules, where taxable services are exported, Central Government may grant rebate of service tax paid on such taxable service in terms of Notification No. 11/2005-ST. Strangely, the litigation did not follow this path, but took off in a tangent. We have to keep our fingers crossed for the final outcome of the Revenue Writ Appeals in the respective High Courts. </font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Distribution of Workload for DRPs </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>KEEKPING</strong> in view the workload and efficient functioning of Dispute Resolution Panel (DRP) at Headquarters Delhi and Mumbai, the Board has notified new jurisdiction and classes of cases for DRPs at Delhi and Mumbai. </font></p>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=35&filename=notification/cbdt/2010/order_03.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">ORDER NO. 3/JS(FT&TR-II)2010, Dated: March 8, 2010 </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Vacancies of Judicial Members and Accountant Members in ITAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> Law Ministry has notified 22 vacancies of Judicial Members (out of which two are carried forward vacancies) and 13 vacancies of Accountant Members (out of which three are carried forward vacancies). The requisite age, qualifications and other eligibility conditions for appointment as Judicial Members and Accountant Members are also notified. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Consequent to this, CBDT has called for names of eligible officers along with their resumes positively before March 26, 2010. </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=70&filename=pitara/deputation/application_%20post_am.htm" target="_blank">CBDT Letter F.No. A-35011/05/2005-Ad.VI(Pt.), Dated: March 10, 2010</a></strong> <strong>and</strong> <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=70&filename=pitara/deputation/applications_invited.htm" target="_blank">Ministry of Law Notification for Appointment of Members of ITAT</a> </strong></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">UK Customs Chief has not only an unhappy workforce but an unhappy workforce that intends to stay with organisation</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>A</strong> survey conducted among the employees of HM Revenue and Customs revealed certain interesting facts. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>HMRC as a whole is well managed </strong>- 11% positive. HMRC ranks 11th out of 11 Departments and this score is 16% lower than the median score across the other Departments taking part. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>I feel that change is well managed in HMRC </strong>- 11% positive. HMRC ranks 11th out of 11 Departments and this score is 9% lower than the median score across the other Departments. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>When changes are made they are usually for the better -</strong> 9% positive. HMRC ranks 11th out of 11 Departments and this is 10% lower than the median score across the other Departments. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Overall, I have confidence in the Senior Civil Servants in HMRC - </strong>11% positive. HMRC ranks 11th out of 11 Departments and this score is 21% lower than the median score across the other Departments. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>HMRC energises me to ‘go the extra mile' - </strong>12% positive. HMRC ranks 11th out of 11 Departments and this is 17% lower than the median score across the other Departments. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>I have confidence in the decisions my line manager makes -</strong> 56% positive. HMRC ranks 10th out of 11 Departments and this score is 12% lower than the median score across the other Departments. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>My line manager motivates and inspires me to be more effective in my job - </strong>47% positive. HMRC ranks 10th out of 11 Departments and this score is 10% lower than the median score across the other Departments. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The<font color="#FF6633"><strong> Employee
Engagement score</strong></font>, consisting of three elements (speaking
positively about the organisation, wishing to stay, and going the extra
mile) was 32%. This is 16% lower than the median score across the 11
Government Departments. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Treasury Committee of the British Parliament asked <em><strong>Ms Lesley Strathie</strong></em>, Permanent Secretary and Chief Executive of HMRC Executive what she could say to convince the Committee that HMRC senior management was taking its staff with them. She replied, frankly, that "in short, the survey tells us we are not and we take that incredibly seriously." A further challenge she drew out was that, <em><strong><font color="#663399">not only does she have an unhappy workforce, she has an unhappy workforce that intends to stay with the organisation. </font></strong></em></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Can the Indian Revenue Service afford to conduct such a survey and publish the results? Recently<strong> <font color="#FF6633">DDT</font></strong> informally met some senior officers – what they had to say about their bosses was appalling – more on that some other time. </font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Treasury Committee alarmed at low staff morale</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> Treasury Committee's report released yesterday stated, "We are particularly alarmed by the low of staff morale and engagement at HMRC, and its effect on performance. We are deeply troubled by the apparent absence of any plan to ameliorate the situation, and call on HMRC management to re-double their efforts here." </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">"Given the extraordinary measures the Treasury and its associated bodies for the period have had to take over 2008-09 in the wake of the financial crisis and subsequent recession - many of which remain ongoing business - it was very difficult to draw final conclusions regarding the level of its ‘success.' </font></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><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"> – Friday's cases</font></strong></font></strong></font></p>
<p><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><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">Income Tax </font></strong></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Indo - UK DTAA - Articles 5,13 - Whether income from referral services amount to fees for technical services - whether in absence of a PE, same could be taxed in India</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>A</strong> UK resident company, Real Resourcing Limited sought a ruling from the AAR. In the original application filed, the nature of services to be provided in India was stated to be two-fold; (i) recruitment services where the applicant would place a candidate with an Indian company and receive payment for providing such service (ii) referral services where the applicant would refer potential Indian clients to a third party based in India which was likely to be another Indian-based recruitment agency for which the payment will be received by applicant from the third party in India. </font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Central Excise </font></strong></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">PDI and After Sales Service charges - Where the CBEC has transferred all similar pending cases to "call book" pending decision of Larger bench on issue, there shall be no prejudice to Revenue if we grant waiver of pre-deposit of 21 Crores and stay of recovery in favour of present appellant: CESTAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN</strong> departmental circles, the "Call Book Register" is a black hole in to whose vortex, over the years, thousands of SCNs are sucked only to be resurrected, if at all, pursuant to an Inspection report of the DGICE. Surprisingly, no concerted effort is made by the concerned officers to "review" the continuation of the cases in this register although Board's Circulars stipulate a time frame in this regard. Sooner of later, the cases and the register (CBR) go missing and every one heaves a sigh of relief! </font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Customs </font></strong></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">ROM application is not maintainable against any miscellaneous order of Tribunal – Application drafted without application of mind dismissed: CESTAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>SOMETHING</strong> is seriously wrong with the Review cell of the Revenue department. Every order that is against the Revenue is "meant" to be appealed against is probably the one line thinking being adopted nowadays. A moment is never spared to even see whether the order with which Revenue is dissatisfied is appealable in the first place. If nothing else, the bosses almost always goad the lower authorities to file a ROM application. After all, it does not cost anything for the Revenue. </font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">See our columns tomorrow for the judgements </font></strong></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until tomorrow with more <strong>DDT</strong> </font></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a nice day. </font></p>
<p align="justify"><font color="#FF6666" 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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