TIOL-DDT 1351 · the untouched capture
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<p align="justify"><font size="3"><strong><font color="#663399" face="Verdana, Arial, Helvetica, sans-serif">TIOL-DDT 1351 </font></strong><font face="Verdana, Arial, Helvetica, sans-serif"><strong></strong></font></font><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif"><strong><br>
04.05.2010 <br>
Tuesday </strong></font></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Knowledge Flowing from North East – Will
Board take Cognizance and Wake Up to Finish Half Baked Job of Amending
Sec 84 of Finance Act, 1994 </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>WE</strong> received a mail from an enlightened officer from a field formation in the North East, the excerpts of which are as follows: </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em><font color="#FF6633">“The following forms are prescribed for filing Appeals before the Commissioner (Appeals): <br>
<br>
Rule 3 of Central Excise (Appeal) Rules, 2001 prescribes that an Appeal under Sec. 35 (1) of Central Excise Act to the Commissioner (Appeal) shall be made in Form E.A.-1. <br>
<br>
Rule 4 of Central Excise (Appeal) Rules, 2001 prescribes that an application under sub-section (4) of Sec. 35 E of the Central Excise Act, 1994 to the Commissioner (Appeals) shall be made in Form No. EA-2. </font></em></font></p>
<p align="justify"><font color="#FF6633"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Rule 3 of Customs (Appeals) Rules 1982 prescribes that an application under Section 128(1) of the Customs Act, 1962 shall be made in Form No. CA-1. </font></em></font></p>
<p align="justify"><font color="#FF6633"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Rule 4 of Customs (Appeals) Rules 1982 prescribes that an application under Section 129D(4) of the Customs Act, 1962 shall be made in Form No. CA-2. </font></em></font></p>
<p align="justify"><font color="#FF6633"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Rule 8(1) of Service Tax Rules, 1994 prescribes that an Appeal under Section 85 of the Finance Act, 1994 shall be filed in Form ST-4. </font></em></font></p>
<p align="justify"><font color="#FF6633"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">However, there <strong>is no Form prescribed under Section 84 </strong> of the Finance Act, 1994
or Service Tax Rules 1994 for filing appeals before the Commissioner
(Appeals). <br>
<br>
In the absence of any prescribed Forms for filing appeals under Section 84 before the Commissioner (Appeals) by the Department, the local departmental authorities are following different forms in filing appeals viz., Form ST-4 in certain cases and Form EA-2 in certain cases, which appears to be not applicable for appeals filed for service tax cases. </font></em></font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In Budget 2009, Board/Ministry decided to dump the much criticized “revision mechanism” vested in the Commissioner in terms of Section 84 of the Finance Act, 2004 with a “review mechanism” by substituting the existing provisions with new provisions on the lines of Section 35E of the Central Excise Act, 1944. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">While the Board gave a decent burial to the draconian revision provisions, though prospectively, it forgot to amend Rule 8(1) of Service Tax Rules, 1994 to prescribe a proper Form for filing an appeal under Section 84. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In the absence of a proper Form for filing an appeal under Section 84 what could be the proper course of action for the field formations. While it is true that Rule 8(1) of Service Tax Rules prescribes Form ST-4 only for appeals to be filed by assessees under Section 85, for the time being, it would be appropriate to take recourse to Section 84 itself for overcoming the obstacle of lack of a proper Form, till such time a proper Form is prescribed for filing an appeal under Section 84. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In fact Section 84(3) of the Finance Act 1994 states that an application filed by the adjudicating authority or any officer authorized in this behalf by the Commissioner, shall be heard by the Commissioner (Appeals), as if such application were an appeal made against the decision or order passed by the adjudicating authority and the provisions of this Chapter regarding appeals shall apply to such application . </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The above provision states that provisions of Chapter V of the Act with regard to appeals shall apply to such application (i.e. appeal) under Section 84. Though Section 85 deals with appeals to the Commissioner (Appeals) by assessees, and Rule 8(1) of STR is enacted in pursuance of the said section, to overcome lack of specific prescription of a Form for an appeal under Section 84, the Form prescribed under Rule 8(1) of STR could be utilized for filing appeals under Section 84 by reading Section 84(3) harmoniously with Section 85 and Rule 8(1) of Service Tax Rules, 1994. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">However, filing of appeals in Form EA-2 may not be appropriate for service tax cases since the said Form is prescribed for filing appeals for central excise cases only in terms of Section 35E(4) of Central Excise Act, 1944 read with Rule 4 of Central Excise Appeals Rules, 2001. Moreover this could lead to a technical snag and there is a danger of the appeals getting rejected by the CESTAT for technical violations. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">However, while giving a decent burial to the erstwhile Section 84 an explanation was introduced, which declared that any order passed by an adjudicating officer subordinate to the Commissioner of Central Excise immediately before the commencement of Clause (C) of Section 113 of the Finance (No. 2) Act, 2009, shall continue to be dealt with by the Commissioner of Central Excise as if this section had not been substituted. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In this connection, another enlightened Netizen asked <font color="#FF6633">“where does the Appeal lie if such orders are passed now by the Commissioner in terms of erstwhile Section 84, because for filing appeal before CESTAT, Section 86 does not have any saving clause to take care of such orders since Section 84 has been deleted from Section 86.”</font> </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In this regard, recourse may be taken to Sections 6 and 6A of the General Clauses Act, 1897 to take care of such exigencies. This means that the appeals against Orders-in-Revision passed by the Commissioners for orders passed by the subordinate officers prior to this amendment coming into effect could be filed in CESTAT in terms of Section 86 of Finance Act, 1994. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In any case, Board should act swiftly and prescribe a proper Form for filing appeals under Section 84 of the Finance Act, 1994. Further, a clarification may also be issued to deal with any eventuality arising in the intervening period so that appeals filed using improper forms are not rejected by CESTAT on technical grounds. </font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DCs to Ensure Uninterrupted EXIM operations in SEZs on all days </strong></font></p>
<p><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">COMMERCE</font></strong> <font size="2" face="Verdana, Arial, Helvetica, sans-serif">Ministry has directed all the Development Commissioners that in the SEZs it needs to be ensured that SEZ Developers and units are able to carry out their operations on all the seven days in a week irrespective of any holiday. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DCs should make an arrangement that on all holidays at least one shift of the Customs is working from 10 AM to 6 PM . Also at least one ADC or DDC be available in office to attend to issues of units/Developers so that export and import activities are continuous in the SEZs. DCs may work out the arrangement in their respective SEZs and inform the arrangements about the functioning of Customs on the holidays to their respective units and Developers. </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Unhindered temporary Removals to DTA </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Rule 50 of the SEZ Rules, 2006, permits temporary removals to the DTA for the purpose of repair, testing etc. Sometimes units may have to remove a part/spare in the DTA for repair etc urgently on any holiday. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DCs have to ensure that the facility of temporary removal is extended to the unit even on holidays so that the production is not stopped. DCs must put a system in place in their respective SEZ and notify the same. </font></p>
<p align="justify"><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=260&filename=sez/sez_instructions/2006/sez09ins053.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">SEZ Instruction No. 53, Dated: April 29, 2010 </font></a></strong></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>FICCI wants Rules for Import of second hand equipments </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>FICCI</strong> wants formulation of rules for the import of second hand equipments to strengthen and standardize the inspection, supervision and administration of importation of used machinery to safeguard the safety and quality of imported used machinery and the workers. In a note to the Government, FICCI has suggested some <strong><font color="#FF6633">common principles</font> </strong>that can be considered while formulating Rules for Import of second hand equipments </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Pre-shipment inspection for used machinery before the imported machinery is loaded onto ships for shipment at the port of departure. The inspection and quarantine agency or pre-shipment inspection agency recognized by Indian authorities can conduct preliminary assessment of the safety, sanitation, environmental protection and other items of the used machinery in line with the compulsory requirements of technical standards of India. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Restriction on port of entry (like limiting the number of ports for importing second hand machinery for effective monitoring). </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ In general the age limit of 5 years for old machinery could be considered, with relaxations on need basis in sub-sectors where domestic capacity is insufficient. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Custom duty applicable on import of second hand machinery should be at least 25%-30% percent higher than the rate applicable to new machinery, depending on the sub-sectors. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Lower depreciation rate for used machinery vis-à-vis new machinery. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Value of the second hand capital goods being imported shall be certified by an appropriate authority of the country from where the good is being imported, by a recognized valuation authority. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Price of import not more than the written down value (WDV) of the machinery calculated based on Indian Rules (Income Tax Act) of depreciation. Value of used equipment may be assessed as derived from the original value of the equipment reduced by depreciation for the length of usage of equipment and customs duty should be levied on such value. The importer could be made to attach a copy of original Invoice of the proposed machine to the import request with a condition that the first invoice, in original, to be produced to Customs at the time of payment of duty to enable clearance from the port, failing which the importer will have to pay heavy penalty. This will help regulate import of used equipment to essential and genuine needs only. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Guaranteed availability of parts for the life of the used equipment. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Certificate/Affidavit from prior user about health/quality of operation during its operating life with him/her. </font></p>
</blockquote>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Income Tax - payment of advance-tax and self-assessment tax is not an expenditure incurred for purpose of business. This is an item of appropriation of income – penalty on Microsoft sustained: ITAT </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> assessee had taken loan of about Rs. 13.13 crore from Microsoft Corporation, U.S.A. . Due to fluctuation in rate of the foreign exchange, a loss of Rs. 39.90 lakh was incurred in this year on account of the restatement of the liability on the closing day of the previous year. This amount was claimed as a revenue loss. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The assessee also utilized a portion of the loan for payment of advance-tax. The general proposition canvassed before the Tribunal about the issue being debatable is not applicable at all in respect of this payment because payment of advance-tax and self-assessment tax is not an expenditure incurred for the purpose of business. This is an item of appropriation of income. Therefore, there could be no dispute in regard to the loss pertaining to the payment of advance-tax. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We bring you this important ITAT judgement today. Please see <strong>Breaking News. </strong></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"> – Wednesday's cases</font></strong></font></strong></font></p>
<p align="justify"><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"><strong><font color="#663399">Service Tax </font></strong></font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Job worker paying Service Tax although entitled for exemption under notification 8/2005-ST – No infirmity in supplier manufacturer taking CENVAT credit of ‘Input Service' and clearing final products on payment of duty: CESTAT </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE </strong> issue is whether an assessee is entitled to take CENVAT credit of the Service Tax paid by the job worker although the job worker was exempted from paying any Service Tax. </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 color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Sec 273B - TDS deducted and deposited in Govt account but assessee fails to file return in time - it is only a technical or venial breach of law and penalty not to be levied automatically: ITAT </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IT</strong> is well settled that ordinarily an assessee is duty bound to know the provisions of statute but in the event of making a claim of ignorance of law it is for the Revenue to examine the plea judiciously keeping in mind the fact that assessee who has deducted tax and deposited the same within the stipulated time could have normally been said to be a law abiding citizen/assessee and the delay, under such circumstances, cannot ordinarily be attributable to wanton negligence, particularly when the penalty leviable can be equivalent to the tax deducted or deductible. </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Customs </strong></font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Import without licence and without fulfilling conditions of policy – Customs entitled to collect entire duty : High Court </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN</strong> the present case, the Bank Guarantee was executed before issuance of the licence and goods were released for home consumption, subject to the conditions that the entire Bank Guarantee would be paid if no import licence is issued. But, unfortunately, the petitioner has not complied with the conditions. Therefore, the 3rd respondent refused to issue the import certificate as the petitioner company was not found eligible for the certificate. Therefore, the Customs authorities are entitled to collect the entire duty liability involved in import of capital goods. </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>See our columns Tomorrow for the judgements </strong></font></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until tomorrow with more DDT </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 color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"> </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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