TIOL-DDT 1486 · 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=iso-8859-1"> </head> <body> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="3">TIOL-DDT 1486 </font><br> 12.11.2010 <br> Friday </strong></font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Adjudication/Appeal in Audit Related issues - CBEC Instructions</font></strong></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IT</strong> seems it has come to the notice of the Board that:-</font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Show Cause Notices issued pursuant to admitted audit objections have been dropped by adjudicating authorities, without having referred the matter to the Ministry for taking up with the office of the CAG. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Show cause notices had been issued pursuant to admitted audit objections, and confirmed by adjudicating authorities, were dropped by the Commissioner (Appeals) and such orders accepted by the Committee of Commissioners, without seeking the status of the audit objection from the Ministry.</font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This is really a revelation. Generally what we understand in the Department is </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ No Show Cause Notice is ever dropped. It is derisively referred to as Notice Cum Demand.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ By mistake, if a SCN happens to be dropped, religiously the order is appealed against. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ If the appellant authority is a departmental officer, as a rule, the appellate order is in favour of Revenue. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ If the appellate order is against Revenue, then again it is religiously appealed against. A Commissioner (A), told me that if there is the slightest possibility, he would pass the order in favour of Revenue, but even in the rare cases, when he passes an order in favour of the assessee, a Committee of two Commissioners would find the order improper and illegal and it is appealed against.</font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In such a situation, it is rather surprising to know that orders are being passed against Revenue and that too in cases where there are Audit objections! </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now by way of reiterating existing instructions and in order to further streamline the quasi-judicial processes relating to matters emanating from Audit Paras of the CAG, Member, CBEC has prescribed a procedure to be noted for strict compliance. </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>++ Upon the Commissionerate admitting an audit objection, the SCN should be issued immediately and in no case later than 30 days. </em></font></p> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ In cases where the Commissionerate contests the audit objection, protective SCN are still required to be issued pending decision by the office of the CAG, and they should be kept in call book till settlement of the objection by the CAG. </font></em></p> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ In cases where a SCN is issued pursuant to admitting an audit objection, the same should be adjudicated at the earliest. </font></em></p> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ During the course of adjudication proceedings and examination of facts and law, should the adjudicating authority come to the conclusion that the SCN (issued pursuant to an admitted objection) is not sustainable, instead of deciding the case immediately in favour of the assessee, the Commissioner should refer the matter to the Commissioner (PAC) seeking that the para be contested. The Commissionerate shall in the meantime, transfer the case into 'call book' pending a decision by the CAG. </font></em></p> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ In cases, where an adjudicating authority has confirmed a SCN, issued pursuant to an admitted audit objection, but the appellate authority sets aside the order, before the Commissioner or the 'constituted committee' decides to accept such an order, a self contained and well reasoned proposal should be sent to the Commissioner (PAC) recommending that a revised ATN contesting the Audit Objection be sent to the CAG. Further, as these matters are under statutory time limits, simultaneous preparation for filing of appeal should be initiated. </font></em></p> </blockquote> <p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=31&filename=notification/excise/2010/memberaudit.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBEC Member's D.O.F No. 232/127/2009-CX.7 dated 13 April 2010 </font></strong></a></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Audit Effect on Corporate Image </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>FOR</strong> the Audit, it is just another objection; once the CAG raises an objection (however objectionable it is), the Department promptly slaps a Show Cause Notice and adjudicating authorities and appellate authorities blindly confirm the demands. Most of these orders fall flat in higher appellate forums. CAG had raised objections on notifications issued by the government, abatement on MRP and several other unimaginable issues. The CAG's original job was to check the expenditure of the Government, but it slowly entered into the income field and has now become a dreaded word in the bureaucracy. Even politically, the opposition uses the CAG report to score a few brownie points over the ruling party. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The CAG has a very damaging effect on Corporate India. These Audit objections and SCNs and confirmed orders have to be shown in the Balance Sheet. Confirmed demands are to be shown as contingent liabilities and that really affects the beauty of the balance sheet. This is like a black spot on a prospective bride, which damages her matrimonial prospects. Huge contingent liabilities damage the company's ratings and investor confidence and of course bank loans. To that extent, the CAG has contributed enormously to the woes of Industry and Trade in the Country. The CAG is a hundred and fifty year old institution and the attitude seems to have frozen somewhere in the last century. If the CAG himself conducts an audit on the fiscal damage his institution has caused the country, the results will be startling. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Perhaps it is time we changed the role of the CAG, To start with, they should not be allowed to visit the factories of the manufacturers and the premises of the service providers. Their job is to check government income and expenditure – let them do their checking in government offices, not the factories and offices of harried businessmen. </font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Customs' Efforts in Anti Corruption - WCO Secy General Explains </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>ADDRESSING</strong> the 14th International Anti-Corruption Conference (IACC) in Bangkok , on Customs' efforts in fighting corruption and preserving integrity, WCO Secretary General Mikuriya explained the three remedies contained in the revised WCO Arusha Declaration: </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Firstly, a moderate regulatory arrangement, including reductions in excessively high tariffs and restraining wide-spread exemptions; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Secondly, the simplification of procedures using information technology to gain efficiency and reduce opportunities for corruption; and </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Thirdly, adequate human resource management, including the introduction of decent working condition, merit-based recruitment and performance-based promotion and disciplinary measures. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">He suggested that inefficiency is the cause of corruption rather than the other way round. He also emphasized the need to tackle integrity as part of a comprehensive Customs reform programme rather than taking a piece-meal approach. This requires political will and leadership by top management, and Business and civil society could help in this respect. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">To illustrate the combination of efficiency gains by computerization and strengthened human resource management by performance measurement, the Secretary General mentioned the recent Cameroon experience, which resulted in reduced corruption and increased revenue. Cameroon Customs introduced an automated system in 2007 to streamline procedures and then applied performance measurement of line officers by analyzing records in the automated system in 2010 to reward officers with good performance records with potential promotion while removing officers who were found cheating. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Secretary General also underlined the importance of Customs-business partnerships as business should increase its compliance in the same manner as Customs improves integrity. In the context of supply chain security, Customs should identify traders with good compliance records and work with them in partnership to reduce security risks and in turn provide them with facilitation benefits. </font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Customs Complications - Board solutions? - Seized Cargo lying in Chennai airport for more than 10 years!</font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>RECENTLY</strong> Member (Cus & EP) of CBEC , SK Goel chaired a meeting of the Customs Consultative Group in Mumbai. We bring you some of the queries raised and the Member's crisp replies.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Q: There is no time definite procedures for clearance of cargo detained by various agencies viz. CIU/DRI/SIB/AIU etc.</strong> At present there are more than 100 C/Ns consisting of 1500 pkgs. which have been detained by various agencies at Chennai airport which are <em>lying there for more than 10 years</em>. Alternatively such C/Ns may be shifted at the detaining authority warehouse to decongest the air cargo complex. The various detained C/Ns lying for years together are occupying a considerable storage area at the scarce airport land while the contents of the goods are either decaying/deteriorating or becoming obsolete, it is suggested that the concerned agency should take over such C/Ns and shift to their respective godown outside the airport premises with a view to de-congest the cargo warehouse. </font></p> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A: There are a large number of consignments of seized/detained goods pending for disposal in different Customs formations. Member (Customs/EP) has issued directions that in cases, where goods can be disposed of, after obtaining the orders of the Court, the same should be done immediately, so as to de-congest the area. Simultaneously, investigating agencies have also been asked to expedite proceedings in pending matters. As far as Chennai Air Cargo is concerned, necessary directions have already been given for speedy disposal of seized/detained cargo. Commissioner, Chennai (Airport) has informed that the construction work of the new building is still going on and once it is finished, after the relocation of cargo, necessary steps for disposal of cargo will be taken up. </font></em></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">With this issue, we end the coverage of the meeting. </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"> – Monday'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">Customs </font></strong></p> <p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Refund of SAD – VAT paid by debiting the VAT credit account and certificate obtained from Assistant Commissioner of Sales Tax in this regard – Conditions of notification 102/2007-Cus complied with: CESTAT </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> Bench after examining the records held that the respondents had complied with the conditions of <em><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=23&filename=notification/custom/2007/ctariff07_102.htm" target="_blank"><strong>Notification No. 102/2007-Cus</strong></a></em> and the same were examined by the Assistant Commissioner while sanctioning their refund claim. Holding that there is no infirmity with the order of the lower appellate authority, the Revenue appeal was rejected.</font></p> <p><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">Whether payment of net present value of future liability can be classified as cessation of liability so as to attract provision of Sec 41(1)? - NO, says 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 is -Whether the payment of net present value of the future liability can be classified as remission or cessation of the liability so as to attract the provisions of section 41(1)(a). NO, says the Tribunal. </font></p> <p><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Central Excise </font></strong></p> <p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Capital goods purchased prior to obtaining registration - CENVAT credit available: CESTAT </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>AS</strong> per CBEC clarification, SSI units can accumulate credit of duty paid on capital goods which can be used after it crosses the aggregate value of exempted clearances as per the notification. It was further held that as per Rule 4(2) of CCR, 2004, an assessee can avail capital goods credit up to 50% in the year of receipt of the goods and the balance in the subsequent financial years. There is no prescription that credit to any extent has to be availed in the year of receipt of capital goods. </font></p> <p><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">See our columns Monday for the judgements</font></strong></p> <p><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Monday with more <strong>DDT</strong></font></p> <p><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a nice Weekend.</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> </body> </html>