TIOL-DDT 1546 · 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 1546 </font><br>
09.02.2011 <br>
Wednesday </strong></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">All Industry Service Tax Rate - likely in this Budget </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>YESTERDAY</strong> the Finance Minister Pranab Mukherjee released the Report of the Task Force on <strong>Transaction Cost in Exports</strong>. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Task Force had recommended that a scheme should be formulated to provide refund of service tax in the form of All Industry Service Tax Rate refund like All Industry rate of Duty Drawback. Those exporters who are not satisfied with the All Industry Service Tax rate may opt for a brand rate of Service Tax, as in the case of fixation of brand rate of Duty Drawback for export goods. A timetable to operationalise All Industry Service Tax rate may be outlined. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The report also says that this is to be implemented soon. Apparently this will be announced in the budget.</font></p>
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<td><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><img src="http://www.taxindiaonline.com/RC2/image/stories/task_force.jpg" alt="Legal Corner Icon" width="440" height="301" hspace="5" border="0" align="center"></font></td>
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<td><div align="justify"><font color="#FF6633"><strong><font size="1" face="Verdana, Arial, Helvetica, sans-serif">Picture shows Ministers Anand Sharma, Pranab Mukherjee and Jyotiraditya Scindia with report</font></strong></font></div></td>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>ANOTHER</strong> recommendation of the Task Force which is to be implemented soon is, “ Till the time, EDI connectivity between Customs and Excise is put in place, a system as prevalent in Excise may be introduced for EP schemes to enable filing of a single running bond for all Custom locations.” </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Report says that the following recommendations are already implemented: </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. Since factory and transportation operations are usually round-the- clock, a shift-wise working system should be developed for customs and excise officials especially to cater to import /export workload on weekends. This can be done initially, on a trial basis, for some identified locations. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. For faster import/export clearances and decongestion at Ports, more firms should be enlisted under Accredited Client Programme ( ACP ) of Customs. For this, eligibility criteria for ACP should be relaxed e.g. issue of Show Cause Notice for procedural irregularities should not be a criteria for ineligibility under ACP . In addition, Risk Management System ( RMS ) of Customs should include, export status of the firm i.e Export House/ Trading House etc. as one of the risk parameters in the RMS module. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. Scheduling of factory stuffing inspection should be provided online by Excise and a single factory stuffing permission should be provided by Customs which will be valid for all Custom Houses. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. A large number of cases exist where unutilized CENVAT credit has not been refunded to the exporter by the Excise. Clear procedures and guidelines need to be prescribed by CBEC for grant of refund of credit balance lying in CENVAT Credit (beyond a period of 3 months); and a system of monitoring where refunds are not granted on time may be institutionalized. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">5. Requirement of Mate receipt by Central Excise for establishing actual date of export should be dispensed with. </font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The following recommendations under consultation with the Ministries for agreement / implementation: </font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. Drawbacks should be processed without the requirement of EGM filing by shipping /Air lines and should be processed based on ‘Let Export Order' given by Customs. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. Till EDI is implemented between SEZs and Customs, clearances by gateway ports should be permitted based on electronic transmission (email/fax) of export documents received from SEZ . </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. Till EDI is implemented between SEZs and Customs, short shipment of consignment received from SEZ should be permitted at gateway port and, exporter may be asked to file rectified shipping documents </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. to the SEZ port for short-shipped quantity within a stipulated period of time. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">5. In line with the provisions of Foreign Trade Policy, payments received through ECGC /General Insurance Companies and specific write-off from RBI on account of default by buyer (for not remitting export proceeds) should be counted for providing Duty Drawback benefits also and exporter not to be penalized by asking for refund of export incentives. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">6. Timelines to establish EDI connectivity between Central Excise and other agencies like Customs and DGFT should be decided on a priority basis so as to enable electronic flow of trade documents like ARE, Shipping Bill, Bond information etc. to various user departments. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">7. Courier Imports and Exports (Electronic Declaration and Processing) Regulations, 2010 need to be amended so as to allow duty free commercial shipments brought through courier (as listed in Ch IB of Foreign Trade Policy) to be processed/cleared in EDI mode. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">8. Customs Circular 5/2010- Cus should be amended which provides for detailed verification of export obligation fulfillment of EPCG Licences in the 1st block and, instead of a detailed verification, a statement of exports made against EPCG license should suffice. </font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Please <a href="http://www.taxindiaonline.com/RC2/pdfdocs/wnew/report_task_force.pdf" target="_blank">Click here</a> for the Report. </strong></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Refund if assessment Order not Challenged – Supreme Court declines to reconsider Flock and Priya Blue - Department bound by High Court Order </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> Supreme Court had in<em> CE v. Flock (India) (P) Ltd</em>.<em> <strong>(<font size="1"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=32&filename=legal/sc/2002/2002-TIOL-208-SC-CX.htm" target="_blank">2002-TIOL-208-SC-CX</a></font>)</strong></em>, had held that a refund claim under the Central Excise Act, 1944 is not maintainable, if an assessment order, which is appealable, has not been challenged. In other words, it was held that such assessment order is not liable to be questioned and reopened in a proceeding for refund, which is in the nature of execution of a decree or order. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Supreme Court in <em>Priya Blue Industries Ltd. v. Commissioner of Customs (Preventive)</em> <strong><em>(<font size="1"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=26&filename=legal/sc/2004/2004-TIOL-78-SC-CUS.htm" target="_blank">2004-TIOL-78-SC-CUS</a></font>)</em></strong>, adopting the ratio of the Flock case, had held that a refund claim under the Act is not an appeal proceeding and the officer considering a refund claim cannot sit in appeal or review an assessment order made by a competent authority. Such assessment order is final unless it is reviewed and/or modified in an appeal. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In a case in the Supreme Court, Senior Counsel Harish Salve submitted t hat the decisions of the Supreme Court in Flock and Priya Blue are incorrectly decided and require reconsideration. He submitted that the present appeal should be referred to a larger bench to finally and correctly decide the questions of law arising in this appeal. He further submitted that the appellant is entitled to claim refund by virtue of Section 27 of the Act, even after the assessment order of imported goods has attained the finality. He contends that the claim of refund under Section 27 after final assessment order is different from the refund claim under Section 18, which is after provisional assessment of the imported goods. He submits that Section 27 of the Act provides that the claim for refund shall be made within a period of one year or six months. This short period of limitation indicates that a claim for refund is maintainable even without preferring an appeal against the assessment order. In other words, if the claim for refund is permissible only after filing of an appeal by the party, then Section 27 of the Act will become redundant as the appeal proceedings would never be over within abovementioned period. In this regard, he further argued at great length by analyzing Section 27 of the Act in view of its legislative history and the philosophy and the broad scheme of the Act <em>vis -a- vis </em>Central Excise Act, 1944 and Income Tax Act, 1961. He further contended that decisions of the Court in Flock and Priya Blue have ignored or not considered the decision of nine Judge-Bench of this court in <em>Mafatlal Industries Ltd. v. Union of India, <strong>(<font size="1"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=32&filename=legal/sc/2002/2002-TIOL-54-SC-CX.htm" target="_blank">2002-TIOL-54-SC-CX</a></font>)</strong></em>, which suggests that if the duty has been collected contrary to law, i.e., on account of a misinterpretation or misconstruction of a provision of law, rule, notification or regulation and the assessment order has attained finality, then the assessee is entitled to claim refund in accordance with section 11B of Central Excise Act, 1944 read with Rule 11 of the Central Excise Rules, 1944 on account of subsequent discovery of such mistake of law by any judgment of High Court or of this Court.” </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Supreme Court felt that the correctness of Flock and Priya Blue need not be considered for the purpose of the case at hand. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In the present case, the Deputy Commissioner rejected a refund claim invoking Flock and Priya Blue in spite of a clear direction from the High Court. And the High Court order was not challenged and so attained finality. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Supreme Court observed, “if for any reason, the subordinate authority is of the view that the directions issued by the Court is contrary to statutory provision or well established principles of law, it can approach the same Court with necessary application/petition for clarification or modification or approach the superior forum for appropriate reliefs. In the present case, as we have already noticed, the respondents have not questioned the order passed by the High Court, which order has reached finality. In such circumstances, we <strong>cannot permit the adjudicating authority to circumvent the order passed by the High Court</strong>.”</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This judgement was delivered by the Supreme Court yesterday – we bring it to you today. </font></p>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Please see <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=12052" target="_blank">Breaking News</a>.</font></strong></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Magistrate's Order sentencing Customs Commissioner to Six Months Imrisonment Quashed - High Court Passes Strictures Against Magistrate </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THIS</strong> is a strange case. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In a Customs Offence case before the ACMM, the Department asked for an adjournment because the Public Prosecutor was on leave. The Magistrate imposed costs on the Department t o be reimbursed to the accused on the ground that accused had to come from Mumbai to attend the proceedings and unnecessary adjournment was sought. When the amount was not paid, he ordered imprisonment of the Customs Commissioner for six months. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Commissioner is in writ petition before the High Court.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The High Court observed that the order passed by<font color="#FF6633"><strong> learned</strong></font> ACMM seems to be actuated by extraneous reasons as a series of orders of this ACMM in respect of customs cases have been found to be suffering from similar malice. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Does the fact that, an ACMM can actually order imprisonment of a Customs Commissioner, especially when he did not have the power to do so, enhance the majesty of law or make a mockery of the justice system? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We bring you the High Court order today.</font></p>
<p><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Please see <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=12050" target="_blank">Breaking News</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><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">Customs </font></strong></font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Warehousing - Rate of Duty - goods are cleared from warehouse after expiry of permitted period deemed to have been improperly removed - Duty on date of expiry of permitted period applicable: SC</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>SECTION</strong> 72 of the Act, provides for the consequences for improper removal of goods from warehouse. It is plain that Section 15(1)(b) would be applicable only when the goods are cleared from the warehouse under Section 68 of the Act, i.e., within the initially permitted period or during the permitted extended period. It is trite to say that when the goods are cleared from the warehouse after the expiry of the permitted period or its permitted extension, the goods are deemed to have been improperly removed under Section 72(1)(b) of the Act, with the consequence that the rate of duty has to be computed according to the rate applicable on the date of expiry of the permitted period under Section 61.</font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Income Tax</strong></font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Whether waiver of principal component of loan as settled by bank is capital in nature, and cannot be taxed as income receipt u/s 41(1)- YES, rules 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 waiver of principal amount of loan as settled by the bank is capital in nature and cannot be taxed u/s 28 & 41(1) of the Income tax Act. The second issue is - Whether the expenses can be disallowed when the business was temporarily closed down due to lull in the business. And the verdict goes in favour of the assessee.</font></p>
<p align="justify"><font color="#663366" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Service Tax</strong></font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Commissioner (Appeals) has power to remand in Service Tax cases: CESTAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>PROVISIONS</strong> of Section 35A of the Central Excise Act, 1944 are not applicable for appeals relating to Service Tax - Commissioner (Appeals) derives power to decide the appeals from Section 85 of the Finance Act, 1994 which does not preclude the Commissioner (Appeals) from passing a remand order if he thinks fit. Revenue appeal has no merit. </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 Time.</font></p>
<p align="justify"><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"><strong> <a href="mailto:vijaywrite@taxindiaonline.com">vijaywrite@taxindiaonline.com </a></strong></font></p>
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