TIOL-DDT 1370 · the untouched capture
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<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663366" size="3">TIOL-DDT 1370</font> <br>
01.06.2010 <br>
Tuesday </strong></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Document for taking credit on input services – Pure (Poor) Agents! </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>AS</strong> per Rule 5 (2) of the Service Tax (Determination of Value) Rule 2006, the expenditure or costs incurred by the service provider as a pure agent of the recipient of service shall be excluded from the value of the taxable service subject to certain conditions. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">There may be many cases where the service provider also acts as pure agent in respect of services other than those rendered by him. To give an example, a CHA service provider may also procure the service of a cargo handling service as pure agent. As per rule 5(2), this value of cargo handling service is to be excluded from the value of CHA. The cargo handling service provider pays service tax and bills it to the CHA. The CHA in turn issues a consolidated bill for his CHA service with service tax and also for the cargo handling charges and collects the total amount from the client. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">When the service recipient takes credit on both CHA and cargo handling service, it seems that many in the field formations are objecting to the CENVAT Credit on the ground that in respect of cargo handling, the bills issued by the cargo handling service provider do not contain the name and address of the service receiver (these bills are raised in the name of CHA) and no credit on this amount can be taken based on the consolidated bill raised by CHA as he is not the service provider as far as the cargo handling is concerned. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Can the Board do something? </font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Service Tax - service abroad, Tax in India - no tax prior to 18.4.2006 - SCN quashed – High Court </font></strong></p>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">EVERYONE</font></strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> will remember <em>Indian National Shipowners Association v. Union of India</em> (UOI (<em><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=43&filename=legal/hc/2008/2008-TIOL-633-HC-MUM-ST.htm" target="_blank"><font size="1">2008-TIOL-633-HC-MUM-ST</font></a></strong></em>), except Revenue. For the rest of the world, the issue is settled as the SLP filed by Revenue is dismissed. The Department seems to be still anxious to agitate the issue – for them the Supreme Court is not the final appellate authority! </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Referring
to the Indian National Shipowners case, an audacious Commissioner wrote in
his Adjudication Order – “<strong><em><font color="#663399">The issue of
taxing the receiver in the case of service received from abroad has been
a subject matter of litigation and different views were expressed in the
matter by the judicial fora at various points of time. Be it as it may, the
fact remains that there exists a statutory provision in the form of Rule
2(1)(d)(iv) w.e.f 16.8.2002!!!!</font> </em></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Hundreds of cases are pending in the Tribunal and with Commissioners on this issue. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But last week the Delhi High Court quashed a Show cause Notice on this issue. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The High Court observed that it is no longer a debatable issue inasmuch as this Court in the case of <em>Unitech Limited v. Commissioner of Service Tax, Delhi</em>: <em><strong>(<font size="1"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=43&filename=legal/hc/2009/2009-TIOL-293-HC-DEL-ST.htm" target="_blank">2009-TIOL-293-HC-DEL-ST</a></font>)</strong></em>, following the decision of the Bombay High Court in the case of <em>Indian National Shipowners Association v. Union of India ( UOI <strong>(<font size="1"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=43&filename=legal/hc/2008/2008-TIOL-633-HC-MUM-ST.htm" target="_blank">2008-TIOL-633-HC-MUM-ST</a></font>)</strong></em>, held that the provisions of Section 66A would be applicable only from 18.04.2006 and that prior to that date, services rendered by a non-resident service provider to a resident recipient could not be taxed as a service at the hands of the resident recipient. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And quashed the SCN . So next time you get an SCN on the issue, don't reply to it – go to the nearest High Court. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We bring you the High Court order today. Please see <em><strong>Breaking News.</strong></em> </font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">No Disparaging Remarks by Judges against lower authorities - Supreme Court advises </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>USUALLY</strong> judges, when disagreeing with the orders passed by their subordinate judicial authorities, refrain from expressing any comment on the conduct of the subordinate judiciary. Usually court rooms are citadels of courtesy and good manners. All judges are lords or honourable; all lawyers are learned and so are all subordinate judicial authorities. Everything is respectfully submitted and the opposition lawyer is always a ‘learned friend'. But once in a way, judges do comment and sometimes these are castigating comments. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Recently the Andhra Pradesh High Court in a judgement observed about a District Judge, </font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">This attitude of the learned District Judge is out of sheer arrogance and disrespect to the lawful orders passed by subordinate Courts. </font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">It must be remembered that it is the duty of every member of the legal fraternity to ensure that the image of the judiciary is not tarnished and its respectability eroded. </font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">The manner in which proceedings were taken by the learned Judge exposes a total lack of respect for judicial discipline. </font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Judicial authoritarianism is what the proceedings in the instant case smack of. It cannot be permitted under any guise. </font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Judges must be circumspect and self disciplined in the discharge of their judicial functions. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The ‘learned District Judge' appealed to the Supreme Court. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The question whether in exercise of the appellate jurisdiction qua the orders of courts subordinate to it, the High Court should make disparaging remarks/comments casting aspersions on the credibility of the Judicial Officer, whose order is under challenge, has been considered in several cases. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Almost 47 years ago, Justice Gajendragadkar , speaking for a Bench of three-Judges in Ishwari Prasad Misra v. Mohd . Isa , stressed the need to adopt utmost judicial restraint against using strong language and imputation of corrupt motives against lower judiciary by observing that in such matters, the concerned Judge has no remedy in law to vindicate his position. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In K.P. Tiwari v. State of M.P., the Supreme Court reminded all concerned that using intemperate language and castigating strictures on the judges of the lower judiciary diminishes the image of judiciary in the eyes of public. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Some of the observations made in that judgment: </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Our legal system acknowledges the fallibility of the judges and hence provides for appeals and revisions. A judge tries to discharge his duties to the best of his capacity. While doing so, sometimes, he is likely to err. It is well said that a judge who has not committed an error is yet to be born. And that applies to judges at all levels from the lowest to the highest. Sometimes, the difference in views of the higher and the lower courts is purely a result of a difference in approach and perception. On such occasions, the lower courts are not necessarily wrong and the higher courts always right. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It has also to be remembered that the lower judicial officers mostly work under a charged atmosphere and are constantly under a psychological pressure with all the contestants and their lawyers almost breathing down their necks -- more correctly up to their nostrils. They do not have the benefit of a detached atmosphere of the higher courts to think coolly and decide patiently. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Every error, however gross it may look, should not, therefore, be attributed to improper motive. It is possible that a particular judicial officer may be consistently passing orders creating a suspicion of judicial conduct which is not wholly or even partly attributable to innocent functioning. Even in such cases, the proper course for the higher court to adopt is to make note of his conduct in the confidential record of his work and to use it on proper occasions. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The judges in the higher courts have also a duty to ensure judicial discipline and respect for the judiciary from all concerned. The respect for the judiciary is not enhanced when judges at the lower level are criticised intemperately and castigated publicly. No greater damage can be done to the administration of justice and to the confidence of the people in the judiciary than when the judges of the higher courts publicly express lack of faith in the subordinate judges for one reason or the other. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It must be remembered that the officers against whom such strictures are publicly passed, stand condemned for ever in the eyes of their subordinates and of the members of the public. No better device can be found to destroy the judiciary from within. The judges must, therefore, exercise self-restraint. There are ways and ways of expressing disapproval of the orders of the subordinate courts but attributing motives to them is certainly not one of them. That is the surest way to take the judiciary downhill. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>In Braj Kishore Thakur v. Union of India the Supreme Court observed: </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">No greater damage can be caused to the administration of justice and to the confidence of people in judicial institutions when Judges of higher courts publicly express lack of faith in the subordinate Judges. It has been said, time and again, that respect for judiciary is not enhances by using intemperate language and by casting aspersions against lower judiciary. It is well to remember that a judicial officer against whom aspersions are made in the judgment could not appear before the higher court to defend his order. Judges of higher courts must, therefore, exercise greater judicial restraint and adopt greater care when they are tempted to employ strong terms against the lower judiciary. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In A.M. Mathur v. Pramod Kumar Gupta, the Supreme Court sounded a note of caution against making derogatory remarks against persons or authorities whose conduct comes under scrutiny and observed: "Judicial restraint and discipline are as necessary to the orderly administration of justice as they are to the effectiveness of the army. The duty of restraint, this humility of function should be constant theme of our Judges. This quality in decision-making is as much necessary for Judges to command respect as to protect the independence of the judiciary. Judicial restraint in this regard might better be called judicial respect, that is, respect by the judiciary. Respect to those who come before the court as well to other coordinate branches of the State, the executive and the legislature. There must be mutual respect. When these qualities fail or when litigants and public believe that the Judge has failed in these qualities, it will be neither good for the Judge nor for the judicial process." </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In another case, the Court had observed: </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>"The primary purpose of pronouncing a verdict is to dispose of the matter in controversy between the parties before it. A Judge is not expected to drift away from pronouncing upon the controversy, to sitting in judgment over the conduct of the judicial and quasi-judicial authorities whose decisions or orders are put in issue before him, and indulge in criticising and commenting thereon unless the conduct of an authority or subordinate functionary or anyone else than the parties comes of necessity under review and expression of opinion thereon going to the extent of commenting or criticising becomes necessary as a part of reasoning requisite for arriving at a conclusion necessary for deciding the main controversy or it becomes necessary to have animadverted thereon for the purpose of arriving at a decision on an issue involved in the litigation. This applies with added force when the superior court is hearing an appeal or revision against an order of a subordinate judicial officer and feels inclined to animadvert on him. </em></font></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Under the constitutional scheme control over the district courts and courts subordinate thereto has been vested in the High Courts. The control so vested is administrative, judicial and disciplinary. The role of High Court is also of a friend, philosopher and guide of judiciary subordinate to it. The strength of power is not displayed solely in cracking a whip on errors, mistakes or failures; the power should be so wielded as to have propensity to prevent and to ensure exclusion of repetition if committed once innocently or unwittingly. "Pardon the error but not its repetition". </font></em></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A member of subordinate judiciary himself dispensing justice should not be denied this minimal natural justice so as to shield against being condemned unheard. Secondly, the harm caused by such criticism or observation may be incapable of being undone." </font></em></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">After noting several judgements, reverting to the present case, the Supreme Court observed, </font></p>
<blockquote>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">“ there was absolutely no justification for the Division Bench to make highly disparaging remarks against the appellant as a judicial officer casting doubts on his ability to decide the cases objectively. The use of the words `out of sheer arrogance and disrespect to the lawful order' and the expression `judicial authoritarianism' in paragraph 10 shows that the Division Bench ignored the words of caution administered by this Court in several judgments including those referred to hereinabove and castigated the appellant without any justification. The observations and remarks made by the Division Bench of the High Court are bound to adversely affect the image of the appellant in the eyes of the public, his credibility as a judicial officer and also affects his career. We are sure that if the Division Bench of the High Court had kept in view the judgments of this Court, it would not have made disparaging remarks against the appellant, which, in the facts and circumstances of the case, were not at all called for.” </font></em></p>
</blockquote>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We bring you this important Supreme Court<strong> judgement</strong> today. </font></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="4">tiol</font><font color="#006600" size="2"> – Wednesday'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"><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">Exempted and dutiable final products - when 8% is paid on exempted goods, credit on inputs used in exempted final products cannot be denied: High Court </font></strong></p>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The following question of law was before the High Court-</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">"<strong>WHETHER</strong> credit of duty is admissible to the inputs in the present case in terms of erstwhile Rule 57C & 57CC , used in exempted goods when the inputs (IC engine below 1800 cc) are not common with those used in the dutiable products, when on amount of 8% of the price of exempted product has been paid and when no separate account has been maintained in respect of the exempted goods?" </font></p>
<p align="justify"><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">Lease rental earned by letting property along with furniture and fixtures to be treated as 'income from house property' and not 'income from other sources': ITAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>INCOME</strong> from 'developed' property has necessary properties for long-drawn disputes. The issue in this case is -Whether income which is earned by providing amenities like DG sets transformers and furniture and fixtures, which are integral part of the building, is to be taxed under the head “income from house property'' or such lease rental is to be treated as 'income from other sources' and depreciation is to be allowed. And the answer is - it is 'income from house property'. </font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Service Tax </font></strong></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Del Credere Agent not liable to tax as C&F Agent prior to 2005: High Court </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>COMBINED</strong> reading of the definition of C & F agent under the Finance Act under section 65(25) and the meaning of Del Credere Agent and the amendment brought into in the year 2005, whereunder Del Credere Agent is also included would clearly establish that prior to the amendment, the service rendered by a Del Credere Agent had been excluded from service tax. </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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