TIOL-DDT 1416 · 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 1416 </font><br>
04.08.2010 <br>
Wednesday </strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>No Review of Pro-Revenue orders even if improper or illegal - CBEC Legal Cell </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> CBEC in its letter <strong>F.No.275/55/2008-CX.8A dated 28.07.2008</strong> had communicated to its field formations the contents of paragraph 4(x) of the Minutes of the Conference of Chief Commissioners held on 29th & 30th May, 2008 and sought views on the subject matter. </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Paragraph 4(x) reads – </font></p>
<blockquote>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">“It
was suggested that <strong>the orders</strong> passed by the adjudicating
authorities <strong>in favour of Revenue but apparently not proper and
legal can also be taken up for review</strong> by the CCs/Commissioners. Legal
Wing may issue a Circular in the matter after examination.” </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We had carried the above communication in our <strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=7774" target="_blank">DDT-937 dated 26.08.2008</a></strong> and commented thus – </font></p>
<blockquote>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">“If the orders are in favour of the revenue, but not legal and proper, obviously the assesses will take up the issue in appeal. <strong>Will the Revenue also help the appellant to win his case?</strong> </font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Now with the CBEC calling for comments on this issue once again, it is a foregone conclusion that the field formations will agitate the issues further and Tribunals will be saddled with even cases where proceedings are dropped at the lower levels.” </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Legal Cell of the CBEC, it is understood, has examined the issue minutely and vide letter <strong>F. No. 275/55/2008-CX.8A dated 23.02.2009</strong> and addressed to all the Chief Commissioners of Central Excise, Customs, LTU and Customs Preventive has communicated its views, which reads – </font></p>
<blockquote>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">“2. On examination of the issue, it has been observed that the propriety and legality of all the adjudication orders irrespective of the fact whether these are in favour or against the department, are required to be taken up for examination by the Committee of Chief Commissioners/Commissioners under Section 35E(1), 35E(2) of the Central Excise Act, 1944 and section 129D(1), 129D(2) of Customs Act, 1962. However, as regards filing of appeal/cross objection against such orders, it may be noted that as per Section 35(1)/35B(1) of Central Excise Act, 1944/Section 128(1)/129A(1) of Customs Act, 1962, an appeal can only be filed by an aggrieved person. The issue has been deliberated by the Hon'ble Supreme Court in the case of <em>Jamshed Hormusji Wadia vs. Board of Trustees, Port of Mumbai</em> </font><font color="#663399" size="1" face="Verdana, Arial, Helvetica, sans-serif"><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=50&filename=legal/sc/2004/2004-TIOL-115-SC-MISC.htm" target="_blank">2004-TIOL-115-SC-MISC</a></strong></font><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"> and <em>Northern Plastics Ltd. vs. Hindustan Photo Films Mfg. Co. Ltd</em>. </font><font color="#663399" size="1" face="Verdana, Arial, Helvetica, sans-serif"><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=26&filename=legal/sc/2002/2002-TIOL-604-SC-CUS.htm" target="_blank">2002-TIOL-604-SC-CUS</a></strong></font><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">,
wherein it has been observed that “a ‘person aggrieved' must be a man who has suffered a legal grievance, a man against whom a decision has been pronounced which has wrongfully deprived him of something, or wrongfully affected his title to something”. <strong>Since the Revenue is not an aggrieved party in cases where orders are issued in favour of revenue; the question of filing an appeal does not arise</strong>.” </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So, what should be done if the adjudicating authority chooses to pass an<font color="#FF6633"><strong> injudicious </strong></font>order? The referred letter has an answer to this poser also and that is – </font></p>
<blockquote>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">“4. Though no appeal can be filed by the department against such orders, being not an aggrieved party, it is expected that the reviewing authorities i.e. <strong>the Chief Commissioners/Commissioners must communicate their observations on such injudicious orders to the adjudicating authorities concerned and advise them to follow judicial discipline and pass orders that should withstand judicial scrutiny. This exercise by the reviewing authorities would inculcate a sense of accountability amongst the adjudicating authorities. Recurrence of passing of non-speaking orders has to stop</strong>.” </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">If the issue is as simple as has been projected by the Legal Cell, the provisions in section 35E(1)/(2)/(4) of the CEA, 1944 [or for that matter in 129D(1)/(2)/(4) of the Customs Act, 1962] ought to have been worded accordingly. The aforesaid provisions employ the words “<font color="#FF6633"><strong>apply</strong></font> to the Appellate Tribunal/Commissioner(A)” and do not use the words “may <font color="#FF6633"><strong>appeal</strong></font> to” as observed in section 35B(1) of the CEA, 1944. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Further, section 35E(4) of the CEA, 1944 [129D(4) of the Customs Act, 1962] <strong>treats</strong> such ‘<strong><font color="#FF6600">applications</font></strong>' made to the Appellate Tribunal/Commissioner(A) as ‘<font color="#FF6633"><strong>appeals</strong></font>' by employing the following wording – “<font color="#663399"><em>such application shall be heard by the Appellate Tribunal or the Commissioner (Appeals), as the case may be, as if such application were an appeal made against the decision or order of the adjudicating authority and the provisions of this Act regarding appeals, including the provisions of sub-section (4) of section 35B shall, so far as may be, apply to such application .” </em></font></font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">It appears that the Legal Cell of CBEC has not fully appreciated the provisions of Section 35E ibid especially sub-section (4) thereof before issuing these instructions. Further, if the CBEC is worried that its officers would spend time in unnecessarily reviewing pro-revenue orders, it would be in the fitness of things that the caption and the contents of Section 35E of the CEA, 1944/129D of the Customs Act, 1962 is made to say so explicitly and propose amendments accordingly! </font></strong></p>
<p><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBEC Letter F.No.275/55/2008-CX.8A., Dated: February 23, 2009 </font></strong></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Does it mean 'no review' of orders favourable to Revenue'? </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> Board seems to have got its facts and LAW wrong. Both the cases cited by the Board are irrelevant. In the Northern Plastics case, the Supreme Court actually held that when the Customs Act provided for a review, the Government making a direct appeal without a review is wrong. The Supreme Court virtually recognised the State's right to appeal through an application after review. The concept of aggrieved person is not applicable to the State. How can the State be an aggrieved person against an order passed by one of its officers? So the Customs and Excise Laws have prescribed two sets of remedies – one for the aggrieved person and one for the State. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Let us take the Central Excise Law for example. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Under Section 35, any <strong>aggrieved person</strong> can appeal to Commissioner (Appeals) against orders passed by officers lower in rank than Commissioner. This aggrieved person is not the Department and certainly the Department cannot appeal to Commissioner (A) under Section 35. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Under Section 35E(2), the Commissioner can review the orders of his subordinates for satisfying himself as to the legality or propriety of the order and he can direct any Central Excise officer to apply to the Commissioner (A), for determination of such points as may be specified by the Commissioner. And the Commissioner (A) is required to consider this application as an appeal. Here the Commissioner need not be an aggrieved person. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Similar provisions exist for appeal to the Tribunal. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So the point is that the Law provides for an appeal by an aggrieved person and appeal by the Revenue if the order is not legal or proper – even if favourable. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">If Review is only of unfavourable orders, these files need not go to the Commissioners and Chief Commissioners – Sepoys can stamp on them - “Order in favour of Revenue – No review” </font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Will the Revenue ever review an order in its favour and file an appeal'? </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IT</strong> is a foregone conclusion that no Commissioner or CC will decide to file an appeal against an order in favour of Revenue. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">I have in my archives, a rare collection – a review order passed by a Commissioner against rejection of a refund claim by an Assistant Commissioner. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In F. No. V/(KB)TRB-5/2002/Andheri, dated 22.03.2002, Mr YP Panghar, Commissioner of Central Excise, Mumbai V, reviewed an order passed by his Assistant Commissioner rejecting a refund claim as time barred. The Commissioner held that the deposit made during investigation is deemed to be made under protest and there is no time bar for its refund. He directed the Assistant Commissioner to file an appeal before the Commissioner (A) to set aside the order. </font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Amendment to Condition in Notification meant for exempting excisable goods cleared to mega power projects </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> Central Government has amended Condition No. 28 in Notification No. 6/2006-CE changing the ‘certifying authority' required to certify claims for exempting excisable goods cleared to mega power projects amongst others. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The previous Condition No. 28 reads as follows: </font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">If,- </font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">(a) <u><em>such goods are exempted from the duties of customs leviable under the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) and the additional duty leviable under section 3 of the said Customs Tariff Act when imported into India</em></u><em>; </em></font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">(b) an officer not below the rank of a Joint Secretary to the Government of India, in the Ministry of Power certifies that the goods are required for a project of the nature specified in column (3) against S. No. 91B of the table; </font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">(c) the Chief executive officer of the project furnishes an undertaking to the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, having jurisdiction, to the effect that- </font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">(i) the said goods will be used only in the said project and not for any other use; and </font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">(ii)<em> in the event of failure to observe sub-clause (i) above, the manufacturer will pay the duty which would have been leviable at the time of clearance of goods, but for this exemption. ”; </em>(emphasis supplied) </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now this Condition No. 28 is amended to read as follows: </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">(a) such goods are exempted from the duties of customs leviable under the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) and the additional duty leviable under Section 3 of the said Customs Tariff Act when imported into India; </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">(b) an officer not below the rank of Chief engineer in the Central Electricity Authority certifies that the said goods are required for the setting up of the said mega power project under Government of India initiative, indicating the quantity, description, and specification thereof ; and </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">(c) <u><em>the Chief executive officer of the project furnishes an undertaking to the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, having jurisdiction, to the effect that </em></u>– </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">i. the said goods will be used only in the said project and not for any other use; and </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">ii. in the event of non compliance of sub-clause (i) above, the project developer will pay the duty which would have been leviable at the time of clearance of goods, but for this exemption. (emphasis supplied) </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The other significant changes as per the new ‘Condition' are: </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(i) that the certifying authority should certify that the goods are required for setting up the said mega power project under Government of India initiative </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">What do they mean by this – are these mega power projects not being set up as a part of the National Electricity Policy 2005 of the Government of India – irrespective of who is setting them up – whether PSUs or Private Sector – so why this specification? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(ii) in case of non-compliance of the specified conditions, the <u>onus to pay excise duty is now shifted from the manufacturer of the excisable goods to the project developer</u>. </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Is there a mechanism to examine if the project developer has complied with the said conditions and if conditions are not complied with then, is there a mechanism to recover duty foregone from such project developer? Because, in our understanding, for all practical purposes Section 11A of the Act provides for recovery of duty not levied or not paid or short levied or short paid on account of any assessment relating to rate of duty (eligibility of exemption notifications would come under this aspect) from a manufacturer only. </font></p>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=30&filename=notification/excise/2010/etariff10_31.htm" target="_blank">Notification No. 31/2010-CX., Dated July 28, 2010 </a></font></strong></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">I am what I am today because of the investment that my family and my country made in my education. There are millions of Indians like me who enter their adulthood with no other asset than education. But, what an asset education is. It is the most important differentiator, the most effective multiplier. - Manmohan Singh. </font></strong></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"> – Thursday'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">Income Tax</font></strong></font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Income tax – Sec 14A – Assessee can claim deduction of interest paid on borrowed funds utilised for acquisition of shares only if shares are held as stock-in-trade and not investment: HC </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE issue before the HC is</strong> - Whether the assessee is entitled to deduction of substantial amount paid towards interest on borrowed funds utilised for acquisition of shares in a company in which assessee over a period of 10 years, acquired controlling interest upto 90%. </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"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>In view of fact that demand is confirmed under Central Excise Act & CENVAT Credit Rules there is no merit in contention of Appellant that provisions of s. 85 of Finance Act, 1994 come into play and delay upto 3 months in filing appeal can be condoned by Commissioner(A) – Appeal filed in ST-4 form of no consequence - Stay petition and appeal dismissed: CESTAT</strong> </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN</strong> this case, the appellant was issued a demand notice seeking to deny <em>CENVAT Credit</em> by invoking the CCR, 2004 as well as the provisions of section 73 of the Finance Act, 1994. Penal provisions u/s 11AC of the CEA, 1944 and section 78 of the Finance Act, 1994 were also invoked. In adjudication, the original authority confirmed the demand of duty of Rs.9,08,273/- after denying <em>CENVAT credit</em> under Rule 14 of CENVAT Credit Rules read with proviso to Section 11A of Central Excise Act and penalty was imposed under <em>CENVAT Credit</em> Rules. </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"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Plea of automatic accrual of interest is not relevant to context where a statutory provision for levy of interest is under scrutiny – pre-amended section 11AB of CEA, 1944 is not applicable when there are no allegations of fraud, collusion in SCNs: CESTAT </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> period of demand of Central Excise duty is from May, 1992 to March, 2000. The Dy. Commissioner while confirming the duty demand of more than one crore rupees raised in the various show-cause notices did not find it proper and legal to order recovery of interest u/s 11AB of the CEA, 1944. In appeal by the Department, the Commissioner (A) ordered for levy of interest on the above amount of duty. The appellant is now before the <em>CESTAT </em>contending that the order of the Commissioner (A) for levy of interest from the appellant is not sustainable in law or on facts. </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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