TIOL-DDT 1445 · 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 1445 </font><br>
15.09.2010 <br>
Wednesday</strong></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Booming Indirect Tax Collections - But Why Service Tax Lagging Behind </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> CBEC and all Chief Commissioners are smiling and are not unduly worried and Trade is not being harassed to pay more – after all Revenue is booming. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Revenue During April – August</font></p>
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<td bgcolor="#663300"><p align="left"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><br>
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<td bgcolor="#663300"><p align="left"><font color="#FFFFFF" size="2" face="Verdana, Arial, Helvetica, sans-serif">April-August 2010 <br>
(Crores) </font></p> </td>
<td valign="top" bgcolor="#663300"><p align="left"><font color="#FFFFFF" size="2" face="Verdana, Arial, Helvetica, sans-serif">Percentage increase </font></p></td>
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<td bgcolor="#996633"><p align="left"><font color="#FFFFFF" size="2" face="Verdana, Arial, Helvetica, sans-serif">Customs </font></p></td>
<td bgcolor="#ffcc99"><p align="left"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">51866 </font></p></td>
<td bgcolor="#ffcc99"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">66.5 </font></p></td>
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<td bgcolor="#996633"><p align="left"><font color="#FFFFFF" size="2" face="Verdana, Arial, Helvetica, sans-serif">Central Excise </font></p></td>
<td bgcolor="#ffcc99"><p align="left"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">49672 </font></p></td>
<td bgcolor="#ffcc99"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">41.7 </font></p></td>
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<td bgcolor="#996633"><p align="left"><font color="#FFFFFF" size="2" face="Verdana, Arial, Helvetica, sans-serif">Service Tax </font></p></td>
<td bgcolor="#ffcc99"><p align="left"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">22632 </font></p></td>
<td bgcolor="#ffcc99"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">19.8 </font></p></td>
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<td bgcolor="#996633"><p align="left"><font color="#FFFFFF" size="2" face="Verdana, Arial, Helvetica, sans-serif">Total </font></p></td>
<td bgcolor="#ffcc99"><p align="left"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">124170 </font></p></td>
<td bgcolor="#ffcc99"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">45 </font></p></td>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now, is there something wrong with Service Tax collections. If imports have increased and production has increased, can services lag behind and that too by less than half of Central Excise? This is a baffling question even for the Finance Minister and could be a possible point for discussion when the FM is meeting the CBEC top brass later this week. </font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CST - Exemption - eligible for penultimate sale to exporter - Supreme Court (Constitution Bench) - yesterday's judgement today </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IT</strong> is axiomatic that only goods and not taxes should be exported. There is an exemption from CST when goods are exported, but will this exemption be available if goods are sold to an exporter, who eventually exports the goods? And will it be available if the exporter does not actually export the same goods that he bought but processes them? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In the case on hand, the assessee got bus chassis on which it built body and sold the fully built bus to the exporter. Now is he eligible for the exemption for the bus bodies which he sold to the exporter? Should the exporter export the same goods which he bought? A Constitution Bench of the Supreme Court in a case decided yesterday, held that<strong> <font color="#FF6633">if it is clear that the local sale or purchase between the parties is inextricably linked with the export of the goods, then a claim under Section 5(3) for exemption from State Sales Tax is justified, in which case, the same goods theory has no application.</font> </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Supreme Court held that to <font color="#FF6633"><strong>constitute a sale in the course of export there must be an intention on the part of both the buyer and the seller to export; There must be obligation to export, and there must be an actual export; The obligation may arise by reason of statute, contract between the parties, or from mutual understanding or agreement between them, or even from the nature of the transaction which links the sale to export. </strong></font></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Keeping in tune with the <strong>TIOL</strong> tradition, we bring you today this landmark judgement of the Supreme Court, delivered yesterday. </font></p>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Please see <a href="http://taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=11411" target="_blank">Breaking News</a></font></strong></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Import of Timber - Fraudulent claim of 4% SAD by unscrupulous importers - Big Scam? </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>A</strong> concerned Netizen informs us, </font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Almost 80% of timber imports in India is made through Kandla Port. Most of the imports are done in the form of Round logs falling under CTH 44039929. These Round logs are sawn in the sawing mills located in around Kandla and sold subsequently to various buyers. These sawn woods have distinct classification in Customs Tariff and they attain separate identity. Since the identity of the goods sold and that imported are different and no co-relation between the imported goods and sold goods could be established, refund of 4% SAD in such cases is not permissible. </strong></font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Knowing fully well that sawn woods are not eligible for refund of SAD, an ‘idea' was floated by one ‘sharp minded' senior officer to select group of importers and CHA to file claim of SAD refunds on the basis of forged documents showing sale of sawn timbers as round logs. After this, refund were sanctioned on break neck speed. In this entire game, everybody was in a win-win situation: importers were getting undue benefit, brokers / CHA were getting 15% to 20% of the refund amount while about 20% was being distributed by the officers. (Major chunk-10% being gulped by the Senior most officer in the racket). The only loser in the entire game was Govt. Revenue. </font></strong></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Since this racket was going on such a high speed and so many parties were involved that it could not remain a secret. All the investigating agencies of CBEC got smell of this. It remains a mystery why DRI did not take up this case. However, DGCEI took up this case and started investigating. When the SIIB of Kandla Customs got hint of enquiry being done by DGCEI, they started their own investigation. </font></strong></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">As per conservative estimates made by DGCEI, the amount of fraudulent refund is not less than Rs. 100 Crores.</font></strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"> </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBEC had issued <em>Circular No. 15/2010 dated 29.06.2010</em>, almost agreeing with the above allegations - anyway clarifying that refund was not eligible for sawn timber. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">However according to the Timber Association, the imported timber is huge – about 80 ft long while the trucks used for transportation are only 40 ft long. So the imported timber had to be invariably cut to facilitate transport. Just by cutting the timber, (for transport), does it become a new product, ineligible for SAD refund? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Timber Merchants draw strength from the judgement of the Supreme Court in <em>Collector of Central Excise v Kutty Flush Doors</em> – </font><font size="1" face="Verdana, Arial, Helvetica, sans-serif"><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=32&filename=legal/sc/2002/2002-TIOL-507-SC-CX.htm" target="_blank">2002-TIOL-507-SC-CX</a></strong>,</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> wherein
the Supreme Court held that no new product emerges by sawing timber into
several sizes. The Supreme Court judgement which we are carrying today also
may help the timber trade. But now the Board having ruled that no refund
is to be granted, there is a big scare and efforts are being made to recover
the refunds already granted. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As you <em><strong>saw</strong></em>, so you reap! </font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Judges
- A single adverse entry is enough for Compulsory Retirement - Supreme
Court </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> Supreme Court recently held that a single adverse entry regarding the integrity of an officer even in remote past is sufficient to award compulsory retirement. The case of a Judicial Officer is required to be examined, treating him to be differently from other wings of the society, as he is serving the State in a different capacity. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Supreme Court was dealing a case where an Additional District Judge was compulsorily retired. The Supreme Court observed, “It is evident from the service record of the petitioner that he remained an average officer throughout his service career and could never improve. His out turn had been poor; he had been given adverse entries regarding his integrity/reputation as not good in the years 1999-2000 and remarks to that effect by the Inspecting Judges in 1997 and 2001-2002“ </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Supreme Court upheld the retirement. </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"> – Thursday's cases</font></strong></font></strong></font></p>
<p align="justify"><strong><font color="#663399" 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">CST </font></strong></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Penalty – Mens rea - broad principle is that there is a presumption that mens rea is an essential ingredient in every offence – Supreme Court </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>WHETHER</strong> an offence can be said to have been committed without the necessary mens rea is a vexed question. However, the broad principle applied by the courts to answer the said question is that there is a presumption that mens rea is an essential ingredient in every offence but the presumption is liable to be displaced either by the words of the statute creating the offence or by the subject matter with which it deals and both must be considered. To put it succinctly, in examining whether mens rea is an essential element of an offence created under a taxing statute, regard must be had to the following factors: (i) the object and scheme of the statute; (ii) the language of the section and; (iii) the nature of penalty. </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">Can Revenue make additions based on mere observation of Tribunal in an unrelated case in hands of third party assessee - Is there no need to establish nexus between assessee and seized documents - additions not sustainable: ITAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>SECTIONS</strong> 143(3), 147 - Whether mere observation of the Tribunal in an unrelated case is sufficient to make addition for unexplained investment in the hands of a third party assessee - Whether no corroborative materials are required to establish any link between the assessee concerned and the documents seized during search of another 'person'.? </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">Adjudicating authority dropped the demand against which department filed appeal before Commissioner (A) – realizing their folly, appeal was withdrawn and revisionary proceedings were resorted whereby Commissioner confirmed demand – Prima facie case for grant of stay: CESTAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>WHILE</strong> most of the procedures under service tax law were aligned to that of the central excise, one of the exceptions was the treatment to an order-in-original passed by an officer subordinate to Commissioner, if the same is not acceptable to the Commissioner on account of its lack of legality or appropriateness. While section 35E of the Central Excise Act, 1944 prescribes a departmental appeal being filed against such order before the Commissioner (Appeals), section 84 of the Finance Act, 1994 prescribed revision of such orders, which amounts to recalling the order and re-adjudicating it. There were also other associated guidelines given in section 84 in this regard. </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="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Tomorrow with more<strong> DDT </strong></font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a nice Day </font></p>
<p><font color="#FF6633" 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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