TIOL-DDT 1472 · 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=utf-8"> </head> <body bgcolor="#FFFFFF"> <div><p><font face="Verdana, Arial, Helvetica, sans-serif" size="2"><strong><font color="#663399" size="3">TIOL-DDT 1472 </font><br/>22.10.2010 <br/>Friday </strong></font></p><p align="center"><strong><font color="#006600" face="Verdana, Arial, Helvetica, sans-serif" size="2"> Appeal to CESTAT and High Court - Monetary limits prescribed by CBEC</font></strong></p><p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2"><strong>IN</strong> <em>CCE Vs Techno Economic Services Pvt. Ltd.</em> - </font><font face="Verdana, Arial, Helvetica, sans-serif" size="1"><strong><a href="https://taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=33&filename=legal/hc/2010/2010-TIOL-464-HC-MUM-CX.htm" target="_blank"><em>2010-TIOL-464-HC-MUM-CX</em></a></strong></font><font face="Verdana, Arial, Helvetica, sans-serif" size="2">, the High Court observed, </font></p><blockquote><p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2"><em>“It has become necessary for the Board to impress upon the departmental heads not to go for appeals and litigation wherein tax or duty impact is not substantial, otherwise it results in harassment to the assessees and creates unnecessary burden on the infrastructure of the Revenue department. The “let the Court to decide” attitude needs to be given go by. </em></font></p><p align="justify"><em><font face="Verdana, Arial, Helvetica, sans-serif" size="2">On the aforesaid backdrop, we hope that the Chairman of the Central Board of Excise and Revenue shall consider the necessity of issuing circular, on the lines of the circulars issued by the CBDT, so as to reduce litigations arising out of indirect tax legislations. This will definitely go a long way to reduce pendency of the cases in the various Courts and at the same time will help the officers of the department to concentrate more on the cases involving heavy stakes. Eventually, litigation expenses, burden of the Courts as well as that of the Revenue department to a considerable extent would get reduced.” </font></em></p></blockquote><p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">Though not exactly reacting to the High Court judgement alone, the CBEC did respond and keeping in tune with the National Litigation Policy that Government should become an “efficient” and “responsible” litigant, the Board issued instructions on appeals to the CESTAT and High Courts. </font></p><p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">Board has decided that <em>“appeals in the Tribunal shall not be filed where the duty involved or the total revenue including fine and penalty is Rs 1 Lakh and below. Similarly in the case of High Courts appeals should not be filed in cases where the duty involved or total revenue including fine or penalty is Rs 2 lakhs and below. While deciding the thresholds mentioned above, the duty involved shall be the <strong>decisive element</strong>. For example, in a case involving duty of Rs 1 lakh with mandatory penalty of Rs 1 lakh besides any other penalty imposed under the relevant provisions of Law, no appeal shall henceforth be filed in the Tribunal as the duty involved is within the monetary limit of Rs 1 lakh . Similarly, if the duty involved in a case is Rs 2 lakhs with equal mandatory penalty and any other penalty imposed under the Law in force at the relevant time, no appeal shall be filed before the High Court.” </em></font></p><p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">See how confusing the instructions are! If the decisive element is the duty involved, why can't they simply say that instead of bringing in fine and penalty? Why can't they simply say that appeal should not be filed in the CESTAT if the duty involved is less than one Lakh rupees and in the High Court if the duty is less than Two Lakhs rupees? </font></p><p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2"><strong><font color="#ff6633">But isn't the threshold limits too low</font></strong>? They should be at least Rs 5 lakhs and Rs. 10 Lakhs respectively. In the Techno Economic Services case referred to above, the High Court also observed, <em>“One of the appeals involved stake of Rs.5,000/-only. It is noticed that most of the times the duty impact ranges between Rs. 2 to 3 lakh; wherein, normally, senior advocates appear on behalf of Revenue assisted by two junior advocates. In spite of engaging multiple advocates, adjournments are sought. The matters are allowed to remain pending in the Court for a substantially long period of time. With the result, they come up for hearing on more than two or three occasions. Adjournments are always taken and granted by the Court considering the substantial cause shown for the adjournment. All this results in payment of heavy professional charges to the advocates appearing for the department. Sometimes the expenses incurred by the Revenue are disproportionate to the stakes involved in the appeal and/or petition filed by the department .” </em></font></p><p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">If an assessee has won a small case involving a duty of Rs. 1.5 lakhs with a Commissioner and Rs. 2.5 Lakhs with the Tribunal, should the Department drag him to a higher court? Should a High Court which can unseat an elected government be saddled with a petty case involving a small sum of Rs. 3 Lakhs? </font></p><p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">There is also a vested interest involved in these low value appeals - the CBEC has recently appointed a large number of counsels in almost all High Courts and to keep them employed, there must be enough appeals. </font></p><p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">Strangely the Department treats the High Court with less respect than the Tribunal. A decision to appeal against an order of a Commissioner has to be taken by a Committee of two Chief Commissioners, but a decision to file an appeal against an order of the Tribunal is taken by a Commissioner. When the Commissioner is faced with the question - to appeal or not, he does not want to take a decision not to appeal for fear of Audit, Vigilance and such other unfounded fears. So he needs support if he decides not to appeal. So he asks the opinion of the Counsel whether to appeal or not and this counsel will lose his fees if he advises against filing the appeal. Thus in most cases, he will recommend filing the appeal and all concerned are happy ever after - and this includes the assessee's advocate. The Tribunal is almost on par with the High Court and headed by a former High Court Judge and orders of the Tribunal need to be treated with more respect. </font></p><p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2"><strong><font color="#ff6633">Appeal You Must in Certain Cases</font></strong>: The Board wants adverse judgments relating to the following should be contested irrespective of the amount involved: </font></p><blockquote><p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">++ Where the constitutional validity of the provisions of an Act or Rule is under challenge. [<strong><font color="#663399">Now what are these cases? Does the Tribunal decide on the Constitutional validity? Of course, of late some Benches are questioning the Rule making powers of the Government. Will the Department appeal in such cases even when the decisions are in favour of the department?</font></strong>] </font></p><p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">++ Where notification/instruction/order or Circular has been held illegal or ultra vires . </font></p><p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">++ Where audit objection on the issue involved in a case has been accepted by the Department </font></p></blockquote><p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2"><strong><font color="#ff6633">No precedential value for the decision not to appeal:</font></strong> Board declares that such cases shall not have any precedent value. In such cases, Commissioners should specifically record that “even though the decision is not acceptable, appeal is not being filed as the amount involved is less than the monetary limit prescribed by the Board.” Further, in such cases, there will be no presumption that the Department has acquiesced in the decision on the disputed issues in the case of same assessee or in case of any other assessees, if the amount involved exceeds the monetary limits. Thus, in case any prior order is being cited on facts and law, it must be checked whether such order(s) were accepted only on account of the monetary limit before following them in the name of judicial discipline. </font></p><p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2"><strong><font color="#ff6633">And Create a Data</font></strong><font color="#ff6633">:</font> Board wants Commissioners to create a data when it is decided not to appeal in a case so that all the Commissionerates are made aware of the orders that are accepted solely on the ground that the revenue involved is below the threshold prescribed herein and which should not be taken as having precedent value. The details of such orders in respect of CESTAT and the High Courts are required to be furnished by the Zonal Chief Commissioners in the Monthly Technical Report being sent to the Directorate of Legal Affairs. </font></p><p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">Board wants these instructions be adhered to strictly for all appeals filed on or after 1.11.2010. </font></p><p align="justify"><strong><font face="Verdana, Arial, Helvetica, sans-serif" size="2"><a href="https://taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=31&filename=notification/excise/2010/cxinstruct05.htm" target="_blank">CBEC Instructions in F.No.390 /Misc./163/2010- JC : dated October 20, 2010</a> </font></strong></p><p align="center"><strong><font color="#006600" face="Verdana, Arial, Helvetica, sans-serif" size="2">Pharma Fantasy - More Credit than Required. Inputs at 10% Final Products @ 4% - Anomaly or omission? </font></strong></p><p><font face="Verdana, Arial, Helvetica, sans-serif" size="2"><strong>WE</strong> received this mail from a harried assessee. </font></p><p align="justify"><em><font face="Verdana, Arial, Helvetica, sans-serif" size="2">We are manufacturers of both Bulk Drugs (APIs) & Formulations and presently attracting the Excise Duty 10% and 4% respectively. With respect to our formulations, we are facing CENVAT Credit accumulation problem due to inverted duty structure. We are getting the CENVAT Credit on all the inputs @ 10% whereas we are paying 4% on the Final Products. </font></em></p><p align="justify"><em><font face="Verdana, Arial, Helvetica, sans-serif" size="2">The Finance Minister as part of Stimulus Package reduced the Excise Duty Rates from 14 to 12% and then 12 to 8 % and in certain cases, 8 to 4% . P or P Medicaments (Formulations) are covered under this bracket. Reference Sl. No. <strong>62 A to 62 E</strong> of <strong><a href="https://taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=30&filename=notification/excise/2006/etariff06_004.htm" target="_blank">Notification No. 4/2006-CE Dated 1.3.2006</a></strong> (included vide <strong><a href="https://taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=30&filename=notification/excise/2008/etariff08_04.htm" target="_blank">Notification No. 4/2008-CE Dated 01.03.2008</a></strong>) </font></em></p><p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2"><em>During this year Union Budget, Government increased Duty rates again to 10% in majority of the products by amending various Notifications vide Notification No. 6/2010-CE Dated 2010. </em></font></p><p align="justify"><em><font face="Verdana, Arial, Helvetica, sans-serif" size="2">Unfortunately, while increasing duty rates for majority of the excisable goods, the Board had not increased the duty rate of Formulations and kept the same @ 4% duty rate without considering to include in the <strong><a href="https://taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=30&filename=notification/excise/2008/etariff08_58.htm" target="_blank">Notification No. 58/2008 -CE Dated 07.12.2008</a></strong> vide which the duty on formulations was reduced from 8% to 4%. Because of this, the Pharma Industry is facing CENVAT accumulation problem which is adversely affecting the Working Capital Management.</font></em></p><p align="justify"><em><font face="Verdana, Arial, Helvetica, sans-serif" size="2">Sir, I am of the sincere opinion that the Board might have by oversight forgotten to include this Notification while increasing the duty rates in the <strong><a href="https://taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=30&filename=notification/excise/2010/etariff10_06.htm" target="_blank">Notification No. 6/2010-CE Dated 27.02.2010</a></strong><a href="https://taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=30&filename=notification/excise/2010/etariff10_06.htm">.</a> </font></em></p><p align="justify"><em><font face="Verdana, Arial, Helvetica, sans-serif" size="2">I have raised this issue in different forums but so far nothing has happened. </font></em></p><p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">Will the Board clarify and rectify this anomaly at least prospectively? </font></p><p align="center"><strong><font color="#006600" face="Verdana, Arial, Helvetica, sans-serif" size="2">Is Aid for Trade Working? </font></strong></p><p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2"><strong>THIS</strong> is the question that WTO Director-General Pascal Lamy asked at the General Council on 21 October 2010. The focus of the Third Global Review of Aid for Trade in July 2011 would be the answers of members to this question. Lamy added, “If the global crisis had made Aid for Trade imperative for developing countries, it has also made the need to show results essential in donor countries.” </font></p><p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">Aid for Trade aims to help developing countries, particularly least-developed countries, develop the trade-related skills and infrastructure that is needed to implement and benefit from WTO agreements and to expand their trade. </font></p><p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">The role of the WTO is to: </font></p><div align="justify"><blockquote><p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">++ encourage additional flows of Aid for Trade from bilateral, regional and multilateral donors to support requests for trade-related capacity building from beneficiary countries </font></p></blockquote></div><div align="justify"><blockquote><font face="Verdana, Arial, Helvetica, sans-serif" size="2">++ support improved ways of monitoring and evaluating the initiative. </font></blockquote></div><blockquote><p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2">++ encourage mainstreaming of trade into national development strategies by partner countries. </font></p></blockquote><p align="center"><font face="Verdana, Arial, Helvetica, sans-serif" size="2"><strong><font face="Verdana, Arial, Helvetica, sans-serif" size="2"><strong><font color="#006600">Jurispruden</font><font color="#ff6633" size="5">tiol</font><font color="#006600"> - Monday's cases</font></strong></font></strong></font></p><p><strong><font color="#663399" face="Verdana, Arial, Helvetica, sans-serif" size="2"><img align="left" alt="Legal Corner Icon" border="0" height="84" hspace="5" src="https://taxindiaonline.com/RC2/image/stories/ddt_hammer.jpg" width="100"/>Central Excise/Service Tax </font></strong></p><p align="justify"><strong><font color="#ff6633" face="Verdana, Arial, Helvetica, sans-serif" size="2">Summons - No deprivation of liberty - High Court not to interfere : High Court </font></strong></p><p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2"><strong>AN</strong> Excise officer issuing summons to appear with records cannot be said to be deprivation of liberty of an individual. The Court does not find any acceptable legal ground raised in the writ petition. It can be presumed that it was for egoistic reasons and not on any concrete legal foundation. If the petitioner is unfamiliar to explain the accounts maintained by them, it is always open to them to take along a person who is well versed with their accounts to explain to the officer his queries. But on that ground they cannot seek to dispense with their personal appearances. </font></p><p align="justify"><strong><font color="#663399" face="Verdana, Arial, Helvetica, sans-serif" size="2">Income Tax </font></strong></p><p align="justify"><strong><font color="#ff6633" face="Verdana, Arial, Helvetica, sans-serif" size="2">Whether expenditure incurred on restructuring of business is allowable as revenue expenses or to be amortised as per Sec 35D? - Allowable as revenue expenditure: ITAT </font></strong></p><p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2"><strong>THE</strong> issue before the Tribunal is - Whether the expenditure incurred on restructuring of the business is allowable as revenue expense or to be amortised as per the provisions of section 35D . Whether the AO was duty bound to determine the expenditure which had been incurred in relation to exempt income adopting a reasonable basis or method consistent with all the relevant facts and circumstances and not to disallow on ad hoc basis - Whether Rule 8D has retrospective application. And the Tribunal has answered the first question in favour of the assessee. </font></p><p align="justify"><strong><font color="#663399" face="Verdana, Arial, Helvetica, sans-serif" size="2">Customs</font></strong></p><p align="justify"><font size="2"><b><font color="#ff6633" face="Verdana, Arial, Helvetica, sans-serif">Customs – Confiscation of Currency – Redemption at the discretion of the Adjudicating Authority – Statement under Section 108 admissible: High Court <o:p></o:p></font></b></font></p><p align="justify" style="TEXT-ALIGN: justify"><font face="Verdana, Arial, Helvetica, sans-serif" size="2"><span style="mso-bidi-font-weight: bold">The petitioner was intercepted by the Customs Authorities at the departure hall of the Chennai Air Port on 6.5.2000 and on examination of his baggage, the authorities recovered Indian and Foreign currency equivalent to <span class="SpellE">Rs.2,03,358</span>/-. The Customs Authorities recorded a statement from the petitioner under section 108 of the Customs Act on 6.5.2000, wherein the petitioner appears to have stated that the money belonged to one Abdullah and he has to hand it over at Singapore to one Rahman for a monetary consideration.</span></font><font size="2"><span style="mso-bidi-font-weight: bold"></span></font><span style="mso-bidi-font-weight: bold"> <o:p></o:p></span></p><p align="justify"><strong><font color="#663399" face="Verdana, Arial, Helvetica, sans-serif" size="2">See our columns Monday for the judgements </font></strong></p><p align="justify"><font color="#ff6666" face="Verdana, Arial, Helvetica, sans-serif" size="2">Until Monday with more <strong>DDT</strong></font></p><p align="justify"><font color="#ff6666" face="Verdana, Arial, Helvetica, sans-serif" size="2">Have a nice weekend. </font></p><p align="justify"><font color="#ff6666" face="Verdana, Arial, Helvetica, sans-serif" size="2">Mail your comments to</font><font face="Verdana, Arial, Helvetica, sans-serif" size="2"> <a href="mailto:vijaywrite@taxindiaonline.com"><strong>vijaywrite@taxindiaonline.com</strong></a></font></p></div> </body> </html>