TIOL-DDT 1399 · 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 align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="3">TIOL-DDT 1399 </font><br> 12.07.2010 <br> Monday </strong></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Action on expiry of stay orders given by CESTAT – Board instigates further litigation </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>A</strong> great amount of time and money in litigation is wasted on ‘STAY' matters. In 2002, the government brought in a most impractical amendment to Section 35C of the Central Excise Act to stipulate that where stay is granted, the CESTAT should dispose of the appeal within 180 days and if it is not done so, the stay is automatically vacated. Nobody in the Board questioned as to why the assessee should be punished if the CESTAT is not able to decide his case within 180 days. But the CESTAT and Supreme Court were kind and held that CESTAT can extend the stay. So the procedure was like this. </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>1. Appeal to the CESTAT with an application for stay. </em></font></p> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. Once Stay is granted, don't relax – remember to file an application for extension of stay, which means fee for lawyers and wasting the time of the Tribunal. </font></em></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">To avoid this farce, Tribunal has adopted a system of granting stay in the first instance itself, till the appeal is decided. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now the Board wants the second stage litigation – not exactly; they even propose a series of litigation – maybe the Board's gift to the Consultants. </font></p> <p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board states loftily; </font></strong></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>1. Nothing prevents Tribunal from granting stay beyond six months. However, the extension of stay has to be applied for by the party. </em></font></p> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. When the Stay period (180 days) is over, the Department may by a simple letter ask the party to pay and the party would be at liberty to go back to the Tribunal for seeking extension of stay. </font></em></p> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. Coercive measures, without giving an opportunity to the party to seek further extension of stay should be avoided. </font></em></p> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. Where the Commissionerate feels aggrieved by an order of the Tribunal granting stay indefinitely till disposal of appeal, the said Tribunal order could be challenged before the jurisdictional High Court, citing the amended provisions. </font></em></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So, now the Board wants to take this stay litigation to the High Court and flood the High Courts with useless litigation. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This missive was actually issued on May 26, but for some good reason, was not available for more than a month. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Can there be a law that if A does not do something, B will be punished? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In the IPCL case </font><font size="1" face="Verdana, Arial, Helvetica, sans-serif"><em><strong>[<a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=34&filename=legal/cestat/2004/2004-TIOL-556-CESTAT-MUM-LB.htm" target="_blank">2004-TIOL-556-CESTAT-MUM-LB</a>]</strong></em>,</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> the Tribunal had observed, “Unless the Tribunal has the power to extend stay beyond 180 days, the assessee's interest will be in jeopardy for no fault of his. Even the order granting exemption from pre-deposit will be rendered nugatory as the assessee will be compelled to satisfy the demand during the pendency of the appeal. It has been always the judicial view that no party should be prejudiced due to action or inaction on the part of the court” </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Immediately after this provision was brought into the statute, in our Seminar in Delhi, the Chairman, CBEC was asked why such draconian measures were brought in. He pointed out to the CBDT Chairman and said, “He did it last year and nobody questioned him; So I did it this year!” </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=31&filename=notification/excise/2010/excircular925.htm" target="_blank">CBEC Circular No. 925/15/2010/ CX , Dated : May 26, 2010</a></strong> </font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Broken Bottles – Revenue wants its pound </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>BOARD</strong> has come to know that some assessees are claiming the benefit of duty exemption in respect of breakage of PET bottles up to 0.5% citing the Board's Instruction letter No. ID/3/70- CX8 . Now Board clarifies that these instructions issued in 1975 are no more valid because at the time of issue of this Circular, there was no MODVAT/CENVAT facility. And so all judicial pronouncements are <em>per incuriam </em> and for the record, the offending circular is rescinded. So the Board wants field formations to <strong>safeguard </strong> Revenue. What are they safeguarding? If Rs. Ten lakhs credit is taken, the maximum loss allowed for breakage of bottles is Rs. 5000.-. Should the wise Board be so bothered about such peanuts? Even the assesses should not be litigating about such small amounts of money. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=31&filename=notification/excise/2010/excircular930.htm" target="_blank">CBEC Circular No. 930/20/2010- CX ., Dated: July 9, 2010 </a></strong></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CENVAT credit on inputs used in the manufacture of capital goods – Board Clarifies </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>BOARD </strong>refers to the <strong>landmark </strong> judgement of the CESTAT in <em>Vandana Global Ltd. V/s CCE , Raipur </em><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=34&filename=legal/cestat/2010/2010-TIOL-624-CESTAT-DEL-LB.htm" target="_blank"><strong><em><font size="1">2010-TIOL-624-CESTAT-DEL-LB</font></em></strong></a> holding that ‘capital goods' defined in the CENVAT Credit Rules, in the context of providing credit of duty paid, have to be excisable goods. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board also draws attention to the Tribunal's judgement in the case of <em>Vikram Cement V/s CCE </em>, <em>Indore </em><strong><font size="1"><em>(<a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=34&filename=legal/cestat/2009/2009-TIOL-1959-CESTAT-DEL.htm" target="_blank">2009-TIOL-1959-CESTAT-DEL</a>)</em></font></strong>, where the Tribunal held that credit on welding electrodes used for repair and maintenance, is not available as input. It may also be noted that in the case of <em>Vikram Cements V/s CCE , Indore </em> - <em><strong><font size="1">(<a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=32&filename=legal/sc/2005/2005-TIOL-112-SC-CX.htm" target="_blank">2005-TIOL-112-SC-CX</a>)</font></strong></em>, it has been conclusively held by the Apex Court that the definition of capital goods is not inclusive and only the items covered under the definition and used in the factory of the manufacturer can be treated as capital goods. </font></p> <p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So Board Clarifies:- </font></strong></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>1. Credit on capital goods is available only on items, which are excisable goods covered under the definition of ‘capital goods' under CENVAT Credit Rules, 2004 and used in the factory of the manufacturer. </em></font></p> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. As regards ‘inputs', they have to be covered under the definition of ‘input' under the CENVAT Credit Rules, 2004 and used in or integrally connected with the process of actual manufacture of the final product for admissibility of CENVAT credit. </font></em></p> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. The credit on inputs used in the manufacture of capital goods, which are further used in the factory of the manufacturer is also available, except for items like cement, angles, channels, CTD or TMT bars and other items used for construction of factory shed, building or laying of foundation or making of structures for support of capital goods. </font></em></p> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. Further, credit shall also not be admissible on inputs used for repair and maintenance of capital goods. </font></em></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">These important clarifications are contained in a letter to the Chief Commissioners and Commissioners – fortunately they have made it public. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Will the Board consider orders against it also as <strong>landmark </strong> orders? </font></p> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=31&filename=notification/excise/2010/cxinstruct02.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CBEC F.No.267/11/2010-CX-8 Dated: July 08, 2010 </strong></font></a></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Other Articles of Iron or Steel – Import - Free </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>GOVERNMENT</strong> has amended the Import Policy for Other Articles of iron or steel, Forged or stamped, but not further worked, other under heading 7326 90 99 as <em>free </em> instead of <em>restricted</em>. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=45&filename=notification/dgft/2009/dgft09not052.htm" target="_blank">DGFT NOTIFICATION NO. 52/2009-2014, Dated: July 8, 2010</a> </strong></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Income Tax – Liquidated Damages for delay in Supply of plant is Capital receipt – Supreme Court – Our Case Today </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN</strong> a judgement delivered on Friday, the Supreme Court held that <em>Compensation paid for the delay in procurement of capital asset amounted to sterilization of the capital asset of the assessee as supplier had failed to supply the plant within time as stipulated in the agreement. The amount received by the assessee towards compensation for sterilization of the profit earning source, not in the ordinary course of their business, was a capital receipt in the hands of the assessee. </em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We bring you this judgement today. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">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"> –Tuesday'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"></font><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Central Excise </strong></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Preventive officers fall in Molasses Pit – Furious Tribunal marks a copy of the order to the FM, Rev Secretary, CBEC Chairman for appropriate action against the officers. </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IT</strong> is normal tendency of the revenue officers to issue show cause notice at the drop of the hat. The popular belief is that by doing so, they have nothing to lose. It is the headache of the assessee to contest the demand however ridiculous it may be. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But, every story does not end on the expected lines. In a strange turn of events, in a recent case, the CESTAT upheld the demand on merits, but was unhappy with the inaction on the part of the preventive officers and suggested appropriated action against them. </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 80I - Is assessee entitled to Ss 80HH and 80I benefits even if it only modernises existing unit - NO, says HC </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> issue before the High Court is - Whether the assessee established a new industrial unit in the present assessment year (AY), and even if new Industrial Unit was not established and the assessee only modernized the existing unit and erected new plant and machineries whether the assessee was entitled to claim deduction u/s 80HH and 80I . And the answer is NO. </font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Service Tax </strong></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Passing of revision order by the jurisdictional Commissioner after passage of Order-in-Appeal by Commissioner(Appeals) – embarrassing to declare exercise of jurisdiction by one Commissioner as good and another bad – Revisionary order bad in law: CESTAT </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN</strong> a Service Tax matter, the first appellate authority passed an order on 16.04.2009 and since it was favourable to the assessee, they did not file any appeal before the CESTAT. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Incidentally, the department was not happy with the order-in-original passed by the lower adjudicating authority and this they sought to rectify by invoking the provisions of section 84 of the Finance Act, 1994. So, in furtherance of the revisionary proceedings, the Commissioner on 16.06.2009 issued a show cause notice proposing to impose a penalty on the appellant invoking provisions of sections 76 and 78 of the Finance Act, 1994. This resulted in passing of a revisionary order. </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 size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="mailto:vijaywrite@taxindiaonline.com">vijaywrite@taxindiaonline.com </a></font></p> </body> </html>