TIOL-DDT 139 · the untouched capture
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<p align="justify"><font color="#000000" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#663399" size="3">TIOL-DDT
139</font><br>
20 06 2005<br>
Monday</b></font></p>
<p align="center"><font color="#336633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Lok
Satta Recommends</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">
Let’s continue with the recommendations of Lok Satta in the two-day workshop
at Hyderabad.</font></p>
<p align="center"><font color="#006633" size="2" face="Verdana, Arial, Helvetica, sans-serif">
<b>Accountability</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">
<b>The Problem</b><br>
<br>
++ There are no clear lines of responsibility within department;<br>
<br>
++ Large number of unsustainable show cause notices are being issued;<br>
<br>
++ Errant personnel are going unpunished and there are no support structures
for honest and hard working personnel;<br>
<br>
++ Assessees feel that they do not have a say in the system.<br>
<br>
<b>Recommendations: </b><br>
<br>
++ A charter of duty manual for all officials to be in place and updated once
in two years. <br>
<br>
++ The Range Superintendent/Inspectors and senior officials should be held accountable
for gross irregularities which have taken place over a period of time.<br>
<br>
++ When a Show Cause Notice is clearly unsustainable and dropped – full
refund with interest at bank rate should be given to the assessee. References
should be made in Confidential Character Reports (CCR) of the officers issuing
frivolous/unsustainable show cause notices.<br>
<br>
++ (Note: Some of the Show Cause Notices are being issued as per the CAG objections
and Board (CBEC) directions. These notices are beyond the control of the issuing
authority. The matter needs to be debated.)<br>
<br>
<b>When a Show Cause Notice is dropped, there is no demand and what refund are
they asking?</b><br>
<br>
<b>Problem</b><br>
<br>
++ The assessees are being harassed on trivial or illogical and clearly unsustainable
queries<br>
<br>
<b>Recommendation</b><br>
<br>
++ All queries should be submitted in writing to next higher authority. <b>(It
is normally the higher authority who is asking the query)</b><br>
<br>
++ Along with Show Cause Notice review, a review of audit queries should also
be done <b>(It is being done)</b><br>
<br>
++ There should be tracking system on refunds – how many and in what time-frame
have they been disbursed. <b>( Refund claims are never delayed as there is interest
liability and the officers are scared of interest)</b><br>
<br>
++ The officials should be held accountable in case of arbitrary and unsustainable
acts eg., raids and show cause notices (Provisions of Sections 22 and 40 of
The Central Excise Act, 1944 may be reiterated). (<b>Are they not?)</b></font></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><font color="#006633"><b>Adjudication</b></font></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">•
The time limit for seizure of goods can be applied for documents taken during
the time of inspection. <br>
<br>
• Certified copies should be given within 30 days from the date the documents
are taken by the department. <br>
<br>
• The investigation should be completed within the time period stipulated
for the seizure of the goods (6 months). <br>
<br>
• As far as possible, further adjudication should be completed within
6 months from the date of Show Cause Notice. <br>
<br>
• The adjudication procedures should be expedited if the assesses files
the replies within one month. <br>
<br>
• All the communications from the assesses should be acknowledged within
7 days of their receipt and in case the acknowledgement is not given within
the specified time, the same should be brought to the notice of the Commissioner.
<br>
<br>
• Refund amounts must be paid within 30 working days of receiving a valid
claim. The officer responsible for delays should be held accountable and penalized.
Modalities can be chalked out<br>
<br>
• There appears little justification for difference in rates of interest
for delayed payments (13% by assessee) and delayed refund (9% by department).
This should go. <br>
<br>
• Pre-deposit provisions to be simplified by accepting cash and/or bank
guarantee or other securities. The assessee should have the option to pay the
deposit in cash or through Bank Guarantee. <br>
<br>
• Provisions should be made that if the pre-deposit is made and the case
is not decided within 6 months, the amount of pre-deposit shall be refunded.
<br>
<br>
• The Section 35-C(2A) giving CESTAT a time limit of 180 days to decide
the appeal should be amended and the stay should be valid till the appeal is
decided. <br>
<br>
• Instead of 4 regions, CESTAT should be in other regions also. A study
of the appeals arising in that particular region be made for deciding the location.<br>
<br>
• Adequate training on judicial and quasi-judicial procedures to be given
to department officers. <b>(Are bad orders because of lack of training? And
who will give the training?)</b></font></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><font color="#006633"><b>Penalties</b></font></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">•
For procedural and technical lapses not causing loss in revenue, there should
be no penalty or punitive action. <b>(Where are we? Who is penalized for technical
lapses?) </b><br>
<br>
• New entrepreneur should be dealt with leniently while imposing penalties.
Similar approach should be adopted while levying penalties for violation of
new levies. There should be specific provisions in law to this effect. <b>(This
is certainly a very valid suggestion. Is the converse true?)</b><br>
<br>
• Release of seized goods should be made mandatory in all cases. In cases
release of goods is refused, it should be accompanied with a written rationale
for non-release of goods. (<b>is there any assessee who could not get his goods
released? In fact the department has no machinery to maintain seized goods and
they are almost always released provisionally)</b><br>
<br>
• Only in blatant evasion cases (monetary limit of Rs 1 crore or above),
the officers should resort to arrest of the assessee where sufficient documentary
evidence is available. (<b>Even in such cases no arrest is being made. How many
persons were arrested in the last one year for an offence under Central Excise
?)<br>
</b><br>
• Circumstances warranting arrest should be publicized widely so that
in non-deserving cases, there is no threat or fear of arrest to the assessee.
This will go a long way in preventing the mis-use of these provisions. (<b>This
is an excellent recommendation. In most cases, more than the arrest, it is threat
of arrest which is more dreaded than the arrest itself. Recently a Service Tax
assessee was threatened with arrest, when there is no provision for arrest under
the Service Tax laws.)</b> </font></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><font color="#006633"><b>Exports</b></font></font></p>
<p align="left"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Problems
</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">
++ Exporting against bond requires resources/skilled staff to handle the detailed
documentation which most small and medium sized companies cannot afford. Hence
they export against payment of duty and claim rebate or refund;<br>
<br>
++ Getting the refund is a long drawn out process involving a lot of paper work;<br>
<br>
++ Documentation and stuffing procedures are resulting in undue delay and often
harassment. <br>
<br>
<b>Recommendations</b><br>
<br>
++ Once Range Superintendent certifies the stuffing of the cargo into a container/vehicle,
no de-stuffing/breaking of the seal should be allowed unless authorized by the
concerned Assistant Commissioner or his superiors.<br>
<br>
<font color="#FF0000"><b>This kind of issues is raised because the NGO has no
idea about the procedure.</b></font><br>
<br>
<b>Exporting against bond or duty payment involve the same amount of work. Many
assessees resort to export on payment of duty to use up their unutilized credit.
And rebate claims are passed with unholy haste (for different reasons of course)<br>
<br>
A container sealed by a Superintendent is rarely opened. They are recommending
a system which is already in place. See another recommendation.</b><br>
<br>
<font color="#FF6666"><b>The self removal procedure practiced for central excise
may be applied for exports</b></font><br>
<br>
<b>This is in vogue for more than twenty years and they are recommending it
now! </b></font></p>
<p align="center"><font color="#006633" size="2" face="Verdana, Arial, Helvetica, sans-serif">
<b>Advance Ruling for Indians</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">
<b>Recommendations</b><br>
<br>
<b>++ At present the facility of Advance Ruling is only available to Joint Ventures
or Subsidiary of a Foreign Company. A similar facility should be extended to
Indian Corporates<br>
</b><br>
<font color="#6633CC">There was a lot of debate on this and with much difficulty
and on persuasion by a Chief Commissioner, this recommendation was accepted.
There is the concept of advance ruling in the VAT laws of many states and it
will be a welcome feature if it is extended to Excise, Customs and Service Tax.
It will be a good idea to make every Commissioner an Advance Ruling Authority.</font><br>
<br>
<font color="#006633"><b>Service Tax </b></font><br>
<br>
• The date for payment of service tax should be 10th of the following
month instead of 5th. (<b>Will five days make all the difference?)</b><br>
<br>
• Advance Ruling Authority should be applicable for all persons. The Service
Providers should be allowed to get clarifications from the authority. <br>
<br>
• It may be necessary for the consignees to get a declaration from the
Goods Transport Agency on the invoice itself that he has not claimed the Cenvat
Credit or benefit under notification No.12/2003. If this declaration is available
and the Goods Transport Agency is showing the service tax amount on 25% of the
freight charges, then only the consignor or consignee can pay the said amount
of Service Tax. (<b>Why should the GTA show Service Tax when it is to be paid
by consignor/consignee?)</b><br>
<br>
• In the light of the rapid expansion of services under tax net, a comprehensive
revision of classification and publication of updated manual is needed. <br>
<br>
• In case, centralised accounting has been opted by service tax provider,
instructions should be issued so that individual branches are not put into trouble
by local Central Excise officers. <b>(Are they?)</b><br>
<br>
• Strengthening honest and efficient officials <b>(how? And by whom? )</b><br>
<br>
• Improve HRD policies in terms of placement & training policies,
expertise/professionalism, performance rewards, promotions with due regard to
the core competence and domain expertise and facilities like housing, transport
and such other perks as motivational and aspirational policies. <b>(blah blah!)</b><br>
<br>
• Increase in facilities like housing, transport, and payment of such
perks should be linked to performance <b>(more blah blah)</b><br>
<br>
• Uniform to be dispensed with except for customs and airport officers
and ceremonials. (they are now used only for ceremonial occasions like accompanying
VIPs)<br>
<br>
• Feedback should be collected formally from assessees, in terms of tangible
parameters such as accessibility, responsiveness, sensitivity and timeliness
of service delivery. Such a feedback will be valuable input to assess the performance
of officials. <b>(You got it?)</b><br>
<br>
<font color="#FF6666"><b>The same old recommendations, the same old discussions,
high sounding words, yet another workshop!</b></font> <br>
<br>
<b><font color="#006633">Valuation when inputs or capital goods are cleared
as such – Board responds</font></b><br>
<br>
<b>In DDT of 28.4.2005, it was pointed out </b><br>
<br>
- Board clarifies, that when inputs or capital goods are cleared as such under<br>
<br>
1. Rule 57AB of Central Excise Rules or <br>
<br>
2. Rule 3(4) of the Cenvat Credit Rules 2001 or <br>
<br>
3. Rule 3(4) of the Cenvat Credit Rules 2002, <br>
<br>
valuation should be as per Rule 3(5) of the Cenvat Credit Rules 2004. Now this
Rule does not speak of any valuation. An amount equal to the credit taken is
to be reversed. But how on earth can the provisions of Cenvat Credit Rules,
2004 be applicable to Central Excise Rules 1944, Cenvat Credit Rules 2001 &
Cenvat Credit Rules 2002? Only the good Board can think of such ingenious methods
of taxation. Somebody who was clearing inputs as such in the year 2000 was required
to anticipate the Board clarification to be issued in 2005 before paying an
amount or reversing the credit. <br>
<br>
• As per Rule 57AB of the Central Excise Rules 1944, the value for such
clearances had to be determined under Section 4. <br>
<br>
• Same was the case under Cenvat Credit Rules 2001. <br>
<br>
• But under Cenvat Credit Rules 2002 there was no valuation and an amount
equal to the credit taken was to be reversed. <br>
<br>
Now the Board wants to apply the present Cenvat Credit Rules to all these earlier
rules - obviously with retrospective effect. <br>
<br>
Board certainly does not have the power to retrospectively amend the law, however
much it wants to usurp the powers of Parliament. The instructions in this circular
are going to result in hundreds of audit objections and thousands of Show Cause
Notices. Central Excise consultants are assured of buttered bread as long as
the Board is active and gives such clarifications<br>
<br>
Now the Board clarifies that <br>
<br>
The situation prior to 1.3.2003 {when rule 57AB(1C) of Central Excise Rules,
1944, or rule 3(4) of CENVAT Credit Rules, 2001 or un-amended rule 3(4) of CENVAT
Credit Rules, 2002 was in force} shall continue to be governed by the provisions
as in force at the relevant time.<br>
<br>
<b>So there is no retrospective clarification after all. Then what was the clarification
all about?</b><br>
<br>
<a href="http://www.taxindiaonline.com/RC2/pdfnoti/pdfexcise/pdf2005/ecir816.pdf">CBEC
Circular No. 816/ 13/ 2005-CX, Dated: June 16, 2005</a><br>
<br>
<font color="#006633"><b>Analgin from China - Anti dumping duty</b></font><br>
<br>
Anti Dumping Duty was imposed on Analgin from China in 2001 and on the basis
of the recommendations of the Designated Authority, it is extended up to April
2006. <br>
<br>
<a href="http://www.taxindiaonline.com/RC2/pdfnoti/pdfcustom/pdf2005/ctariff05_055.pdf">Notification
55/ 2005 Customs, Dated: June 17, 2005</a><br>
<br>
<font color="#FF6666"><b>Until Tomorrow with more DDT<br>
<br>
Have a nice weekend. <br>
<br>
Mail your comments to</b></font> <b>vijaywrite@taxindiaonline.com </b></font></p>
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