TIOL-DDT 1334 · 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> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="3">TIOL-DDT 1334 </font><br> 08.04.2010 <br> Thursday </strong></font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">CIC directs Department to furnish details of pending Refund Claims - disclosure of names of claimants would endanger their life or physical safety ?? </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>WITHHOLDING</strong> of refund claims under Rule 5 of <em>CENVAT Credit</em> Rules has been simmering for more than four years. Several times, the matter came up for consideration by CBEC after representations from the aggrieved assessees and the benevolent Board issued suitable clarifications and directions to the field formations to process and sanction the claims in accordance with the directions issued from time to time. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This did not yield the desired results. So, the Finance Ministry went to the extent of proposing retrospective amendments to <em><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=30&filename=notification/excise/2006/exnt06_05.htm" target="_blank"><strong>Notification No. 5/2006-CE(NT)</strong></a></em> in this Budget to facilitate smooth sanction of refund claims. But the high and mighty in the field formations have utter disregard to the directions issued from the Board. They blissfully reject the refund claims/ or simply sleep over the claims unmindful of the Board's directions. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Recently it has come to our notice that Service Tax authorities in Bangalore are returning refund claims to the assessees on flimsy grounds after keeping them for considerable amount of time and directing the assessees to re-submit them with appropriate supporting documents (CA Certificate etc); they have taken recourse to this action just to beat the Section 11B time limitation, otherwise they would end up paying refund with interest. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Frustrated by such delaying tactics a petition was filed under the RTI Act by an aggrieved person before the Central Excise and Customs, Noida seeking an assortment of details regarding pendency of refund claims in respect of service tax assessees. In his application, the appellant sought the names of the assessees, service tax registration nos., amount of refund claimed, date of filing of refund applications and reasons for their pendency. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Naturally this application got the boot from the lower authorities. The appellant unmindful of the reversals took it all the way to Central Information Commission for redressal. Before the CIC, both the appellant (appeared in person) and the respondent represented by an Assistant Commissioner put forth their contentions on the various issues taken up by the CIC for adjudication. After deliberating on the arguments from both sides CIC ordered as follows: </font></p> <p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Issue: </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">List of all such refund orders pending to be issued along with reasons for non issuance of refund orders yet. Showing name of the assessee, Service Tax Registration No., amount of refund claimed, date of filing the refund application. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CIC: The authorities' claim that disclosure of the names of the claimants would endanger their life or physical safety is not persuasive. If this information is made public, no harm is likely to be caused to anybody; rather it would help the claimants get to know the status of their respective claims as well the status of the other similar claims. </font></p> <p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Issue: </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Whether there is any delay in processing and sending the refund orders to assessees? If yes, who is responsible for the delay and what action you are taking/have taken/ propose to take against the official/s responsible for the delay? If no, how much time it should take as per law, normally to issue a refund order in such cases? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CIC: This query is interrogatory in nature and thus does not qualify to be information under Section 2(f) of the RTI Act. Nevertheless, the name of the officers handling the refund claims to be provided to the appellant within two weeks. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Issue: </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">By which date will the assessees get their refund orders? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CIC: This query demands the future course of action of the public authority which cannot be directed to be answered. </font></p> <p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Issue: </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">List of documents required to be enclosed with the refund application in form ‘A'. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CIC: The authorities are directed to examine each category of refund claim and prepare their exhaustive lists (of supporting documents required for the claim), which shall be placed on the website of the public authority within six weeks of the receipt of this order for appellant's access. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Responding to the appellants claim for penal action against the authorities for not furnishing the requisite information and seeking of compensation for the inconvenience caused to him by not supplying the information, the CIC was benevolent to the authorities and declined to pass any order in favour of the appellant on this issue. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Will this CIC order be an eye opener for the Board that there is something seriously rotting in the field? In a year from now, we are moving to the GST regime which expects the authorities to be more transparent and responsive to the assessees. Let us hope CBEC sensitizes the field formations the dynamics of a GST regime before it is rolled out in 2011. </font></p> <p><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">See <a href="http://www.cic.gov.in/" target="_blank">CIC Order Dated January 21, 2010 </a> </font></strong></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Refund Position to be uploaded in CBEC website </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IT</strong> is understood that consequent to the above decision, the CIC had asked the CBEC Chairman to comply with the directions and to place the requisite information in the Board's website within six weeks from the CIC's letter dated 9.3.2010. </font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Let us hope they are compliant as they expect their assessees to be. </font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Is Land Value includible by Construction Service Provider? </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN</strong> Budget 2010, there is a proposal to insert explanations in sub-clauses (zzq) and (zzzh) of Section 65(105) of Finance Act, 1994 which provides that unless the entire consideration for the property is paid after the completion of construction (i.e. after issuance of completion certificate by the competent authority), the activity of construction would be deemed to be a taxable service provided by the builder/promoter/developer to the prospective buyer and the service tax would be charged accordingly. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Explaining the legislative intent of this insertion of explanations under the respective clauses, the D.O. Letter from JS (TRU) dated February 26, 2010 observes that the different practices followed by the builders/promoters/developers with regard to execution of contracts with prospective buyers, payment terms and legal formalities followed by the respective parties gave rise to confusion, disputes and discrimination in terms of service tax payment. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So, to bring about parity in tax treatments of different transactions resulting from various modes of execution of contracts, it was clarified by TRU that these explanations are being inserted to provide that the activity of construction would be deemed to be a taxable service provided by the builder/promoter/developer to the prospective buyer and the service tax would be charged accordingly unless the entire payment for the property is paid by the prospective buyer or on his behalf after the completion of construction (including its certification by the local authorities). It was further clarified by TRU that this would only result in expanding the scope of the existing taxable services. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It appears that the entire construction sector is up in arms against the proposed budget proposals and is toying with the idea of challenging the legality of these proposals in various Courts of law. In fact the budget proposals have come as a rude shock to the industry which cozied up to the clarifications issued in Circular No. 108 dated January 29, 2009 which negatived the view taken by the Advance Ruling Authority in M/s Harekrishna Developers - </font><font size="1" face="Verdana, Arial, Helvetica, sans-serif"><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=190&filename=legal/ara/2008cus/2008-TIOL-03-ARA-ST.htm" target="_blank">2008-TIOL-03-ARA-ST</a></strong>. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">One of the primary grouses of the Construction sector is that the Government is proposing to levy service tax on the entire value of consideration received in instalments by the builders including the element of cost of land value. This view is gaining currency with several leading consultants pitching in with their views that the proposed changes could tax the cost of land value included in the consideration paid by the prospective buyers. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Is this view adopted by the Construction sector and consultants appropriate? What is the exact legal position in this regard? It appears that there is a Board clarification precisely on this very issue. When the ‘Construction of Complex service' was brought into the service tax net for the first time in the year 2005, TRU in its letter dated July 27, 2005 clarified as follows: </font></p> <blockquote> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">13.6 The taxable service is the service provided in relation to construction of a residential complex. Service tax would be payable only on the gross amount charged by the service provider for the construction service provided and it would not include the cost of land and stamp duty paid for registration of land. </font></em></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Board way back in 2005 already clarified that for the purpose of levy of service tax, the gross amount charged by the service provider would not include the cost of land and stamp duty paid for registration of such land. In the light of this clarification, at least to this extent, the controversy should abate. Anyway, it is hoped that the Board would come out with a fresh clarification to resolve all controversies surrounding these proposals. </font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Adjudicating Authority appointed by Board </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>BOARD</strong> has notified Commissioner of Central Excise (Adjudication) – I, New Customs House, New Delhi as the adjudicating authority for a show cause notice issued by the DRI. </font></p> <p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=24&filename=notification/custom/2010/order_437_2010.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Letter F.No.437/18/2010-Cus.IV, Dated: April 6, 2010 </font></strong></a></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><font 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"></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">No time limit for claiming refund under Rule 5 of CENVAT credit rules 2004 – Refund is admissible in respect credit accumulated due to clearances to 100% EOUs: CESTAT </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> assessee applied for refund of input credit accumulated under Rule 5 of the <em>CENVAT Credit</em> rules, 2004. The credit had accumulated due to supply of finished goods to 100% EOUs without payment of duty. The refund was rejected by the original authority on merits as well as on limitation. As per the revenue, goods cleared to the EOUs cannot be equated with direct exports to allow refund under rule 5 and the refund claims were filed beyond the period stipulated under Section 11B of the Central Excise Act, 1944. </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">Customs – CHA – Licence cannot be suspended when Settlement Commission has granted immunity: High Court </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> Commissioner vide his order dated 4th May, 2005 suspended the respondent's CHA licence on the ground of involvement of the power of attorney holder of CHA firm Mr.Pradeep Ambre in the case of mis-declaration of goods imported viz. ball bearings. The show cause notice dated 25th July 2005 was issued to one M/s Sonam Enterprises and M/s Giriraj Enterprises, wherein one of the co-noticees was Pradeep H.Ambre along with 12 other persons. </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> </body> </html>