TIOL-DDT 1470 · 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 1470 </font><br>
20.10.2010 <br>
Wednesday </strong></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Every Day is Grievance Redressal Day in Hyderabad Central Excise Zone </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>HYDERABAD </strong>Customs,
Central Excise and Service Tax Chief Commissioner AP Varma simply won the
hearts of his assessees in an open house meeting organised by the FAPCCI
yesterday. At a time when the image of the Department is very low, the Chief
Commissioner impressed every assessee with his humility, brutally frank and
honest admissions and a promise to set right things. The Department could
not have found a better salesman to promote its rating among the stakeholders.
The assessees were so happy that he was very nice and understanding that
one of them called him Andhra Pradesh Varma. He was humility personified,
he was very understanding and sympathetic and disarmingly honest in admitting
his limitations. At the same time he did not give in anything or solve many
problems, but the assessees honestly believed that here was a sincere officer
willing to listen and understand and perhaps that is all what the assessee
is looking for. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">For nearly two hours he batted a variety of questions without batting an eyelid or taking assistance from his officers. And for somebody who is leaving the Department in a few days ( Varma will be joining the Settlement Commission by this month end), it was commendable effort on the part of the Chief Commissioner to present a good side of the Department. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">When somebody pointed out that Grievance Committee meetings are not held regularly, the Chief Commissioner said that every day is Grievance Redressal Day in his Zone and any assessee with any grievance is welcome to meet the Chief Commissioner and Commissioners any day. He said that it would be the experience of the assessees that compared to any other Department, Central Excise officers – even senior officers like Commissioners are easily accessible. Every assessee in the audience agreed! </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Chief Commissioner said that he and his officers are facilitators and the assessees were clients and not subjects as hitherto believed by some officers. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399">Breach of Trust by Commissioner:</font></strong> An assessee told the Chief Commissioner that while his appeal was pending in the Supreme Court, the Department initiated coercive action for recovery. The Commissioner asked him to pay the duty and interest and said that he could give a bank guarantee for the penalty amount, which he complied with. Immediately the Commissioner encashed the bank guarantee. Realisation of bank guarantee adversely affects the reputation of his company. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">To this, the Chief Commissioner replied that it was breach of trust by the Commissioner and was backstabbing which should not have happened. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Chief Commissioner also proved his leadership qualities by praising his four executive Commissioners as excellent officers always ready to sort out the difficulties of the assessees. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We bring you here some of the questions put to him and the gist of some of the answers – the answers as such are not that important but what really impressed everyone was the way he answered them – after all there are no real answers to many questions and most often an officer addressing a public meeting and an officer taking a decision are actually two conflicting personalities merged into one. Generally when an officer takes a decision, he forgets all the preaching, counselling, advice, direction and orders of Chief Commissioners and Board Members or even the orders of the higher judiciary. The attitude seems to be “Board members and Chief Commissioners may say so many things, but I have a career to pursue and protect.” </font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"> The Problems</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>EXPORT</strong> and BRC: For Rebate claims for Exports, department is insisting on production of Bank Realisation Certificate (BRC) whereas the Rules do not require for the same as it is clear from Supplementary Instructions. BRC is relevant for RBI and has no relevance for Excise purposes. In fact, Drawback Rules make such a condition but not Excise Rules. This is causing lots of inconvenience and delay in getting refunds besides other reasons. </font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Normally the Department does not insist on production of Bank Realisation Certificate ( BRC ). It is done only in certain rare cases when there are doubts. </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399">Input Services:</font></strong> Audit Team are insisting on reversal of credit taken on "input services" which are not connected with manufacturing activity. The law is settled on this issue that as long as services are used for Business purposes, credit should be allowed. </font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">In Service Tax, there are many issues which are yet to settle down. Apart from the appellate remedies, the assessees can approach senior officers of the Department for sorting out difficulties. </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399">Summons</font></strong><font color="#663399">:</font> Despite <em>CBEC Circular 137/39/2007- Cx - 4 dt.26.2.2007</em> that no summons is to be issued for service tax matters, department is regularly issuing summons which is causing problems for the industry. </font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">It is only as a last resort that summons are issued.</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Some companies are manufacturing 'X' item which is cleared on payment of duty on the basis of Transaction Value (Price agreed between seller and buyer). However, customer asks the company to supply certain other items also. The company buys these items from open market and sends directly to the factory/ godown of customer. With the delivery of his own item and bought out item, the seller's responsibility is completed. What the buyer does with these goods is not the concern of the manufacturer. The audit is invariably asking "value" of these bought out items to be included in the value of manufactured item cleared from the factory. The excise duty, as we understand, is on the act of manufacture. Secondly, the duty has to be paid at the time of clearance at the rate the prevailing at that time. Thirdly, bought out items dispatched directly are already duty paid. Further, sometimes, the manufacturer may go to the site of the customer and many also undertake installation, or fix bought out items, on the "manufactured item" on the request of the customer. The manufacturer in such cases enters into three different contracts i.e </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ sale of his own goods (Excise duty is paid); </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ sale of bought out items (Sales Tax is paid) and </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ installation (service tax is paid). </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Kindly note that in such cases no new product is emerging at site. Further, bought out items are duty paid and not brought into the factory of the manufacturer and no credit is availed. Thirdly, the service tax is paid on installation/commissioning of the item. Kindly clarify whether on bought out items, duty should be paid again? </font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">The question of manufacture has to be studied in each case. </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399">Coercive Action when appeal is pending:</font></strong> Department is insisting that duty should be paid immediately after an order is passed against a company. The department is sending letter stating that if dues are not paid, coercive action will be taken. When an assessee is filing an appeal With Tribunal, along With stay petition, Tribunal may take few months to decide the stay. But department is insisting on payment of dues, while appeals are pending. If assessee pays the due pending disposal of stay by Tribunal the very right of appeal after dispensation of pre deposit provided under the law becomes infructuous . Suppose Tribunal grants stay (after pre deposit). Will the department grant refund? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In the case of a first appeal, no coercive action will be taken during the period when there is time to appeal. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Company A has a factory in Balanagar . He is shifting his factory to Uppal which is in another Commissionerate. Following issues may be clarified:- </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Should he take a new Registration? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Should he take prior permission to shift? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Should he take permission to shift capital goods, inputs? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Should he take permission or give intimation to Asst. Commissioner? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Sometimes, a unit is closed permanently. He will have some unutilized <em>CENVAT Credit</em>? Can he claim refund? A proper procedure is to be put in for such cases. </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">(a) to (d): He has to take a new registration and there is a procedure in place for this. </font></strong></font></p>
<p align="justify"><font color="#FF6633"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(e) : When the unit is closed, along with the credit, he should also be having some goods and the credit can be used to clear those goods. <font color="#663399">But what happens when there are no goods but credit balance?</font> In that case refund will be given. </font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399">Personal Hearing – Adjudicating Authority not available: </font></strong>Many a time when assesses are going for attending personal hearings, they are told that personal hearing is postponed, as officer is not available. The, industry has no complaints on this issue. It is suggested that there should be a system in place to inform the assessee (wherever possible) before hand, so that inconvenience caused is avoided. Further, it is suggested that in all personal hearings intimations telephone no/cell nos of some officer is given so that assessee can check before coming whether the concerned officer is available or not. Sometime consultants are coming from outside Hyderabad, hence, please look into this issue. </font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Whenever PH is postponed by the officer, the assessee will be informed in advance. It is certainly not correct to call an assessee for personal hearing and then postpone it without informing him. </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399">Duty on Samples</font></strong>: As per Excise Rules, no duty, is required to be paid on 'samples' if they are kept within the factory premises, for attending to any complaints etc. Such samples are required tobe kept as per Pesticides Act or under other statutes like Drugs Act etc. After one or two years, these samples lose their validity and they become scrap/waste. These are thrown or destroyed. Private records are maintained for these samples. These samples are taken from the manufacturing area in loose condition and taken to the lab. Since these samples are not packed in the normal packing, no entry is made in RGl Register. The department is demanding "duty" on samples on the ground that assessee can not destroy these samples. The department has issued show cause notices. Please clarify the correct legal position. </font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">The correct legal position is that duty is payable on manufacture unless exempted. </font></strong></p>
<p><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=wnew/env_tribunal.htm"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">We will bring more questions tomorrow.</font></strong></a></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CESTAT - Stay - What about Balance of Duty? </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN</strong> a recent case before the CESTAT, the appeal was against a demand of Service Tax of Rs.1 ,29,44,543 /- with interest and penalty. The Tribunal directed the appellant to make a pre-deposit of Rs. 60 Lakhs . Subject to compliance with this pre-deposit, realization of penalty as well as interest shall be stayed during pendency of appeal. Now penalty and interest are waived, but what about the balance of duty? Normally when the Tribunal orders stay, it clearly mentions that the ‘balance of duty' is waived or the ‘Department is barred from recovering the balance of duty'. In this case, there is no such order and technically the Department can recover the balance of duty also! </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We will bring you this order tomorrow. </font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Polluters Beware – National Green Tribunal Comes into Existence </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> National Green Tribunal has officially been notified by the Chairperson of the Tribunal, Justice Lokeshwar Singh Panta , former Supreme Court Judge. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In June 2010, the Environment and Forests ministry had written to the Revenue Secretary about the highlights of the Tribunal: </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ The NGT Act, 2010 is a path breaking legislation which shall usher in a new dimension in environmental adjudication. The Tribunal is expected to promote access to justice and fast-track disposal of cases of civil nature through its specialized architecture, wide range of powers and flexible procedures. It is proposed to sit at five places in India and it may adopt a circuit approach. The orders of the Tribunal are challengeable in the Supreme Court of India. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ The Tribunal shall be a specialized body consisting of both Judicial as well as Expert Members. It shall have the same powers as are vested in a civil court under the Code of Civil Procedure, 1908. It shall not be bound by the procedures laid down by the said Code, but shall be guided by the principles of natural justice. The statute mandates the application of the principles of sustainable development, the precautionary principle and the polluter pays principle, by the Tribunal. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ The Tribunal shall have jurisdiction over all civil cases where a substantial question relating to environment is involved. It shall have both original jurisdiction arising out of implementation of the seven enactments specified is Schedule-I as well as appellate jurisdiction against the orders of various authorities under certain Acts. These Acts, inter-alia, include the Forest (Conversion) Act, 1980 and the Environment (Protection) Act, 1986. The Act empowers the NGT to provide for relief, compensation and restitution of property to environmental victims without placing any ceiling on the award of compensation. Stiff penalties are provided for failure to comply with the orders of the Tribunal. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ The locus of approaching the Tribunal has consciously been kept extremely wide. </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This letter had been circulated to all Central Excise offices. </font></p>
<p><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=wnew/env_tribunal.htm">Ministry of Environment & Forests letter to Revenue Secretary.</a></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><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">Central Excise</font></strong></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Kutch Exemption - <em>CENVAT Credit</em> erroneously used for service tax paid back - No infirmity – no prejudice is shown to have been caused to revenue in any manner whatsoever - Revenue Appeal Dismissed: High Court</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IT</strong> is not in dispute that the assessee had in its Cenvat Credit account total credit of Rs.2.7 crores out of which amount of Rs.20 ,19,827 /- was utilized for payment of service tax. It is also not the case of the revenue that the central excise duty liability which was required to be discharged had not been discharged because the amount had been utilized for payment of service tax. The Tribunal has found as a matter of fact that service tax was paid by the assessee not only from cenvat credit account but subsequently also from PLA account with interest. Thus no prejudice is shown to have been caused to the revenue in any manner whatsoever. </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">Sec 36(1)(vii) - Can payee treat TDS deducted but not deposited in Govt account by payer as bad debt? - Yes, assessee is entitled to treat it as bad debt in books and claim the same by writing it off: ITAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> issue before the Tribunal is - Whether TDS deducted but not deposited in government account by the payer can be treated as debt by the payee. Whether payee which is entitled to credit for TDS deposited, can write it off such bad debt if payer fails to deposit the same in the treasury. YES, says Tribunal. </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">Mandap Keeper – Cost of Food supplied cannot be deducted under Notification No. 12/2003 – Only abatement under Notification No. 1/2005 can be allowed - Predeposit ordered: CESTAT</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>LEVY</strong> of sales tax or VAT on the value of food catered by a mandap keeper under State legislation does not alter or affect the levy of service tax under Finance Act, 1994; Taxable services u/s 65 (105)(m) of the Finance Act, 1994, not only includes providing of mandap premises on a temporary basis for organizing any official, social or business functions, but also includes other facilities and services provided in relation thereto including catering; Appellant's argument that because Sales Tax/VAT has been imposed on catering is illogical since service aspect of catering activity has been intended to be taxed by the taxing entry of section 65 (105) (m) of the Finance Act, 1994. </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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