TIOL-DDT 1414 · the untouched capture
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<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="3">TIOL-DDT 1414 </font></strong><br>
<strong>02.08.2010 <br>
Monday</strong> </font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>GST Implementation Report </strong></font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Implementation of Cadre Review</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> cadre review proposal needs to be pursued vigorously so that the additional manpower is available at the earliest for smooth switch-over to GST. </font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">HR Management is at its worst in the Department. The reward or appreciation for good work is “<strong>more work</strong>” in Government Departments, which offer the officers are made to accept. The penalty for incompetence is <strong>less work</strong>. With nearly 50 lakhs assessee base needing professional guidance, it will be a herculean task to retain the cream in the Department. There should be a serious re-thinking on the HR Management before switching over to GST. </font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Territorial / Functional Divisions: </font></strong></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">The Report proposes One tier/ Two Tier and Three Tier Commissionerates, with Functional Divisions in One Tier and Territorial Divisions in Two Tier Model. Within the Territorial Divisions, there will be again Functional Divisions like Registration / Refund etc. The common usage of <em><strong>Division </strong></em>may lead to some confusion among tax payers and there is a need to reframe the Functional “Divisions” proposed. The confusion the word <strong>Division</strong> creates can be illustrated by the following conversation: </font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Tax Payer goes to a GST office for filing a refund claim </font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Tax payer: Sir, I need to file a refund claim. Where Should I file? </font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Officer: Go to Refunds Division </font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Tax Payer: Where is the Refunds Division? </font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Officer: Refunds Division of your territorial Division – Say Division B </font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Tax Payer goes to the Territorial Division. He meets an officer; </font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Tax Payer : I need to file a refund claim </font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Officer: Address a letter to Division </font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Tax Payer: Which Division? </font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Officer: Refunds Division in Territorial Division. </font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Tax Payer: ??? </font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">In order to avoid such confusion among the tax payers, may a new word has to be coined for functional divisions, say <strong>SECTION</strong> could be a better word. </font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">The Group also felt that Commissionerates can also be organized based upon combination of more than one type. For example, if a Commissionerate has 3 Divisions in the city and 2 Divisions away from that city, for the 3 Divisions in the city functional organization (one-tier) can be adopted and for other 2 Divisions, 2- tier organization can be followed. </font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">This type of combinations will surely create confusion as there will not be uniformity within the same Commissionerate. This kind of situation of having 3 Divisions in the City and 2 Divisions away from the City had arisen due the fact of trying to keep the Commissioners in the Cities only. There is no harm in grouping Divisions outside the City into a single Functional / Territorial Commissionerate outside the city. But no Commissioner would be willing to work in such B class stations having no airport facilities. Unless the officers change their mindset, and change the policy of keeping the Commissioners only in cities, the tax payers have to suffer. Even today, there are Commissionerates in a City though the territorial jurisdiction is totally outside the city. </font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Mysteries of Uniform – CIC wants Board to issue guidelines – Will there be a GST Uniform? </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>ONE</strong> of the relics which the Central Excise and Service Tax Department should perhaps get rid of in the GST regime is the funny uniform that you see Inspectors, Superintendents and Assistant Commissioners in. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In a recent order, the CENTRAL INFORMATION COMMISSION, observed, <font color="#663399">“It is seen that the CBEC has not formulated clear guidelines about the use of uniform by officers, Equipment Advances and its relationship with the uniform usage, etc. Apparently, these rules did exist a long time ago before Independence and had been followed more in the form of conventions than any set written directions. <strong>Now that this point has been raised, CBEC may consider issuing detailed and clear guidelines in this regard.”</strong> </font></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This order was given by the Commission in January 2010 and apparently, so far nobody in the Board has considered this issue. This should be an important issue for consideration for GST Implementation – It will be ridiculous if the CGST officers wear uniform and the SGST officers don't. Any way the uniform in Central Excise command more ridicule than respect. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Sometime
back Dr. DD Rishi, Commissioner of Customs and Central Excise, writing in
the <a href="http://www.irsonline.in/forum/gup-sup/713-mysteries-uniform.html"><strong>irsonline</strong> </a> observed, </font></p>
<blockquote>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">“About 27 years ago, while being posted as the Senior Superintendent of Central Excise, I was attending a meeting with the Commissioner. I saw another Senior Superintendent there. To my surprise she was wearing an Ashoka Emblem along with a star on her shoulder while I was wearing only an Ashoka Emblem. “Madam, Senior Superintendent's uniform should have only the Ashoka Emblem while that of Assistant Collector (now Assistant Commissioner) has a star in addition”. “Is it so? But nobody told although I have been wearing it for last one year!” “Are you sure?” “I am not sure but I think so.”.”OK, then, let us be uniform'', she stripped the star off her shoulders mercilessly. A sacrifice for the sake of uniformity of uniform. </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Recently I was attending a function organized for Presidential Awards in Delhi. Some of the awardees were wearing uniforms while others were wearing what they considered to be “uniform”. Anyhow, no two uniforms matched in colour, shade or style. But that is what we call ‘Unity in Diversity'. Yesterday, from the latest batch of probationers, some were wearing Ashoka Emblem plus a star, while others were wearing just a star. Those wearing just a star explained that they had been under the impression that they could wear Ashoka Emblem plus a star only on completion of their probation. I don't know who will make the sacrifice for the sake of uniformity of uniform this time. </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Impressions determine the rules. And the impressions are as mysterious as the uniform of a uniformed service.” </font></p>
</blockquote>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Tariff Value of Brass Scrap increased </strong></font></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 US Dollars 3678 to 3685 per MT and marginally increased the value of Poppy Seeds from 2744 to 2745 dollars. There is no change in the tariff value of other items. </font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=24&filename=notification/custom/2010/cnt10_068.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">NOTIFICATION NO. 68/2010-CUSTOMS (N.T.) Dated: July 30, 2010 </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Service Tax - Services provided by State Governments under Centrally Sponsored Schemes - CBEC Clarifies </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN</strong> the recent past, instances have come to the notice of the Board, where field formations have demanded service tax from State governments or their departments/ agencies, for providing certain services under the centrally sponsored schemes (CSS). To cite an illustration, in the case of the centrally sponsored National Biogas and Manure Management Program operating under Ministry of New and Renewable Energy, State government agencies were involved in setting up of bio-gas plants in villages. Certain expenses incurred by the State governments or their departments/ agencies during the course of setting up of such bio-gas plants were reimbursed by the central government by way of a grant under the CSS. Jurisdictional service tax authorities demanded service tax from the State government department/agency, saying that the reimbursements received by the <font color="#663399"><em><strong>concerned</strong></em></font> State government department/agency (as service provider) are nothing but consideration for installation and commissioning service received from the central government (service receiver). </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Implicit in this service tax demand is an assumption that the relationship between Central government and the State government is an equivalent of a relationship between principal and the agent. This assumption is questionable as under administrative arrangement, State governments are bound to implement the centrally sponsored schemes on receipt of a grant. The fact that State governments are implementing agencies for the Central government within the framework of CSS does not make them service providers. Consequently, Central government cannot be taken as service receiver. Grant released by the Central government under a centrally sponsored scheme cannot be presumed as consideration for providing a taxable service. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBEC clarifies, “Levy and collection of service tax on State government agencies/departments implementing CSS under a central grant, is not legally tenable and therefore in such cases <strong>service tax should not be demanded</strong>.” </font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=41&filename=notification/servicetax/2010/sercir125.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBEC Circular No. No. 125/7/2010 - ST – Service Tax Dated: July 30, 2010 </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Restore
Exemption of Withholding TAX on FCL - ASSOCHAM </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> Associated Chambers of Commerce and Industry of India (ASSOCHAM) has sought restoration of exemption on payment of withholding tax on Foreign Currency Loans (FCL) in a bid to make such loans much more competitive and reasonable. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In a representation made to Finance Minister, Mr. Pranab Mukherjee, the chamber has argued that withholding tax on FCL needs to be withdrawn immediately so as to make cost of such loans more competitive and reasonable. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">ASSOCHAM President, Dr. Swati Piramal has, however, pointed out that interest on FCL works out to be over 26 per cent which used to be exempted until fiscal 2000. The Finance Act of 2001, however, has withdrawn the benefits of exemption under section 10(15)(4)(f) of the Income Tax Act. Since then, industry has been demanding restoration of exemption in respect of interest paid on foreign currency loans but is of no use. </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></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><br>
The ASSOCHAM President further pointed out that withdrawal of benefit of exemption under aforesaid section has substantially increased cost of borrowing funds from outside India, since interest paid on such loans is subject to withholding tax at the effective tax rate of 26.77 per cent. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The chamber has further stressed that Organization for Economic Co-operation and Development (OECD) also supports economic justification of interest on cross-border loans and, therefore, it is reiterated that the demand of ASSOCHAM has full economic justification for restoring exemption in respect of interest paid on foreign currency loans. </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"><strong><font color="#663399">Customs</font></strong></font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Adjudication Order passed by Chief Commissioner is appealable to CESTAT; An officer can exercise powers of only his immediate subordinate - CC can exercise power of a Commissioner, not an AC – High Court </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> mere fact that the Chief Commissioner of Customs has signed the original order of adjudication as Chief Commissioner of Customs cannot make the said order as the one passed by the Chief Commissioner of Customs in its own capacity. But the same has to be construed as the one passed by the Commissioner (Adjudication). In other words, the Chief Commissioner of Customs has stepped into the shoes of the Commissioner of Customs and exercised his power as an adjudicating authority in this case. He has got no independent power of adjudication except to take the power of the Commissioner (Adjudication) under Section 5(2) of the Act. </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"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Revenue vs Capital Expenditure - complete purchase of existing business with plant and machinery - non-compete fee paid - it is capital in nature: ITAT Special Bench </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> issue before the Special Bench of the ITAT is - Whether the assessee by entering into a non-compete agreement, has acquired any benefit of enduring nature which can be treated as capital expenditure. Whether the non-compete amount should be considered separately from what was paid by the assessee to acquire the business activity of transformers and its related facilities from Whirlpool India Ltd . </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Central Excise </strong></font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Imposing penalty on appellant without quoting provisions of law is illegal: CESTAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>ENTHUSIASM</strong> knows no bounds and who can vouch more than the Department. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The present case is a critical example of the same. The facts are that the appellants had supplied excisable goods on payment of duty to Railways and during warranty period the defective goods were received back for repairs in which the appellants had used inputs on which Cenvat credit was taken. It was alleged that the appellants had not reversed the Cenvat credit of Rs.72,360/- on the inputs used in repairs of defective goods during the warranty period. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The appellants submitted that in terms of the agreement entered into by them with the Railways, they were bound to replace the components free of cost during the warranty period. Inasmuch as since the original price charged to Railways had already included the cost of repairs with material during warranty period and on which duty had already been paid, they were not in the wrong. However, to buy peace, they paid the Cenvat credit availed before issue of show cause notice. </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"><strong>vijaywrite@taxindiaonline.com</strong> </a></font></p>
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