TIOL-DDT 1361 · the untouched capture
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<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399">TIOL-DDT 1361 </font><br>
18.05.2010 <br>
Tuesday </strong></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Rule 6 of the CENVAT Credit Rules 2004 - 'optional' tamasha</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="3">1</font><sup>ST</sup></strong> September 1996. Rule 57CC of the Central Excise Rules, 1944 was born. This rule stipulated that if the assessee is manufacturing both dutiable and exempted goods and taking credit on common inputs, he shall maintain separate accounts and take credit only on those inputs which are used in dutiable goods or pay 10% amount on the price of the exempted goods. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">From the day one, the rule had created a variety of problems for the assessees. Demands running into crores of rupees were raised for the sin of taking credit of only a few thousand rupees on the common inputs. Even when the entire credit was reversed, the revenue was insisting on collecting 10% amount. Many cases were settled in favour of the assessees on the ground that paying back the credit is as good as not taking credit, the most important one to date being <em>Chandrapur Magnet Wires (P) Ltd </em>- </font><font size="1" face="Verdana, Arial, Helvetica, sans-serif"><em><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=32&filename=legal/sc/2002/2002-TIOL-41-SC-CX.htm" target="_blank">2002-TIOL-41-SC-CX</a></strong></em></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">.
The fact that this rule has been creating more problems than it solved has
been realised in 2008 and an amendment was made to the CENVAT Credit Rules,
2004 in Budget 2008, making a provision to allow the assessee to reverse
the credit attributable to the inputs used in exempted goods. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But rules 6(3) and 6(3A) of the <em>CENVAT Credit</em> Rules, 2004 stipulate that the assessee has to exercise his option of either paying 5%/6% amount or paying back proportionate credit and such option shall not be withdrawn during the remaining part of the Financial Year. The assessee is required to intimate the Superintendent in writing with relevant details as mentioned in the rule 6(3A). </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It appears that in cases where the assessees have been reversing the credit under Rule 6(3A) on their own without filing any intimation to the Superintendent, the departmental auditors as well as the CAG auditors are denying such benefit to the assessee and insisting on payment of 5%/6% as the case may be. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is pertinent to note that amendments were made to the Central Excise/CENVAT Credit Rules through the Finance Act, 2010 to extend the benefit of pro-rata reversals retrospectively from the date of insertion of the rule in 1996, to put an end to the disputes and the meaningless demands generated out of this infamous rule. However, the field formations are still raising the demands of 5%/6% on the ground that the assessee did not exercise the option in writing in terms of Rule 6(3A). </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It will be interesting to note that payment of 5%/6% or reversal of pro-rata credit are <strong>two different</strong> <strong>OPTIONS</strong> provided to the assessees under Rule 6(3). Even assuming for a moment that the assessee has not exercised the option of reversing pro-rata credit under Rule 6(3A) beforehand, how can the department thrust upon him the other <em><strong>OPTION </strong></em><strong>of paying 5%/6%?</strong> In the absence of giving any intimation to the department, can the assessee be denied from choosing either of the two options? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">After all when the assessee is allowed to choose between two modes of payment at his option, can the department mandate the assessee to follow a particular mode of payment favourable to the Revenue, merely because assessee has not followed the procedural requirement of intimating his choice beforehand? Can a substantive benefit be denied to an assessee for not following a procedural requirement? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Having made a retrospective amendment, it is time the Board makes a suitable amendment to Rules 6(3) and 6(3A) to do away with the procedural requirement of intimation, which is intimidating the assessees. </font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Customs - Tariff Value – Brass Scrap increased, Poppy seeds decreased</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>GOVERNMENT</strong> has increased the tariff value of Brass Scrap from 3920 to 3979 dollars and decreased the tariff value of poppy seeds from 3468 to 3412 dollars. </font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=24&filename=notification/custom/2010/cnt10_037.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Notification No. 37/2010 – Cus.,(N.T.), Dated: May 14, 2010 </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Online transmission of DES (Advance Authorization), EPCG and DEPB authorizations at 9 ICES new location w.e.f . 17.5.2010 </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN</strong> view of Customs readiness to accept online transmission of DES (Advance Authorization), EPCG and DEPB authorizations at 9 new ICES locations, all RAs of DGFT may note that for all the newly added ports, authorizations issued w.e.f . 17.5.2010, will be communicated online to Customs for necessary processing at their end. It may also further be noted that for all DEPB Shipping Bills issued w.e.f 17.5.2010 from these ports, application will have to be filed mandatory in EDI mode. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The new ICES locations are the ICDs at Moradabad, Rewari, Ghari Harsaru, Patli, Chinchwad, Talegaon, Dighi, Thar Dry Port and Jaipur. </font></p>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=46&filename=notification/dgft/2009/dgft09cir032.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DGFT Policy Circular No. 32 (RE- 2010)/ 2009-2014 Dated: May 14, 2010 </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Promotion from AC to DC - CBEC does not have ACRs of 278 officers </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> Board is planning to promote Assistant Commissioners in the Customs and Central Excise Department to the grade of Deputy Commissioners. In the normal course an Assistant Commissioner is promoted as Deputy Commissioner on completing four years as Assistant Commissioner. But this time around the hitch is that the Board does not have the Annual Confidential reports of 278 officers who are to be considered for promotion. For most of the officers, the ACRs from 2002 are not available! And quite a few of them are retiring this year! </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now what can you say about a Board which does not have the reports about its officers from the year 2002? The reports are to be given latest by May every year. What was the Board doing for eight years when it did not have the ACRs of its Assistant Commissioners for eight long years? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now the Board has asked the Chief Commissioners to furnish the missing ACRs to the Board latest by 21st May. Board's communication is dated 17 th May (yesterday) and it may not even reach the CCs by 21st May. How will they find out the officers, find out who wrote their reports and who reviewed them and compile all the information and send it to the Board? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The 278 officers in the list can be sure that they cannot be considered for promotion in the near future! </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">These reports are to be written by Commissioners and reviewed by Chief Commissioners. Why these senior officers should not be taken to task for not writing the ACRs of their subordinate officers? And should these ACs suffer for want of ACRs over which they have no control? </font></p>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBEC F. No. A – 32012/30/2009 – Ad.II Dated May 17 2010. </font></strong></p>
<p align="center"><font face="Verdana, Arial, Helvetica, sans-serif"><strong><font face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600" size="2">Jurispruden</font><font color="#FF6633" size="3">tiol</font><font color="#006600" size="2"> – Wednesday's
cases</font></strong></font></strong></font></p>
<p align="left"><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">Central Excise</font></strong></font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Equivalent penalty imposed under Rule 57I(4) and/or Rule 173Q of CER, 1944 - it cannot be called composite penalty but much worse – adjudicating authority not clear in his mind as to which of provisions was applicable – such imposition was upheld by lower appellate authority with equal non-application of mind – composite penalties not permissible in law: CESTAT</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THIS</strong> is an old case of the early nineties and is before the <em>CESTAT</em> for the second time inasmuch as when the case was adjudicated for the first time, the Commissioner(A) remanded it and after it was re-adjudicated and confirmed by the Commissioner(A), the CESTAT remanded the matter to the original authority and this denovo proceeding resulted in another order which too was confirmed by the original and first appellate authority. So, there were a total of three occasions when the matter was adjudicated by the original authority. By the way, the amount involved is Rs.4.09 lakhs and the allegation is that the appellant cleared inputs allegedly for job work but under “Advice Notes” without paying any duty or reversing the credit availed on the inputs or for that matter without following any procedure under rule 57F(4) or the notification 214/86-CE. </font></p>
<p align="left"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Income Tax </font></strong></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Can an amount received in advance for providing services in future be taxed on ground that under cash system of accounting every receipt is taxable irrespective of its nature - NO, says ITAT</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>WHAT</strong> is the difference between an advance and an income? Whether an amount received in advance for rendering services in future is taxable on the ground that under cash system of accounting each and every receipt is taxable irrespective of it's nature? </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">Abetment - penalty - Intentional aiding is the gist of abetment: </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> charge of abetment would stand substantiated if it is proved that the alleged abettor had instigated the doing of a particular thing or he had engaged with one or more persons in a conspiracy for doing of that thing or he had intentionally aided doing of that thing by an act or illegal omission. In order to constitute abetment by conspiracy, there must be a combination of two or more persons in the conspiracy and an act or illegal omission must take place in pursuance of that conspiracy. Where the parties concert together and have a common object, the act of one of the parties done in furtherance of the common object and in pursuance of the concerted plan, is the act of the whole. It is not sufficient to prove that the charged act could not have been committed without intervention of the alleged abettor. What is necessary is that the intervention should have been made with intent to facilitate the commission of that act. </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><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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