TIOL-DDT 1554 · 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 align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="3">TIOL-DDT 1554 </font><br> 22.02.2011 <br> Tuesday </strong></font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Irregular CENVAT Credit - Interest Payable from date of taking credit, not utilizing it - Supreme Court in Landmark Decision </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>PLEASE</strong> have a look at Rule 14 of the CENVAT Credit Rules, </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>"Rule 14. Recovery of CENVAT credit wrongly taken or erroneously refunded: - Where the CENVAT credit has been taken or utilized wrongly or has been erroneously refunded, the same along with interest shall be recovered from the manufacturer or the provider of the output service and the provisions of Sections 11A and 11AB of the Excise Act or Sections 73 and 75 of the Finance Act, shall apply mutatis mutandis for effecting such recoveries." </em></font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now the moot question is, “ What is the relevant date for payment of interest on the wrongly taken credit; is it the date of taking the credit or the date of utilizing it ?". </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Punjab and Haryana High Court in <em>Ind - Swift Laboratories Ltd vs Union of India - <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=33&filename=legal/hc/2009/2009-TIOL-440-HC-P-H-CX.htm"><strong><font size="1">2009-TIOL-440-HC-P&H-CX</font></strong></a>, held , “ where CENVAT credit has been taken and utilized wrongly, interest should be payable on the Cenvat credit taken and utilized wrongly. Interest cannot be claimed simply for the reason that the CENVAT credit has been wrongly taken as such availment by itself does not create any liability of payment of excise duty. On a conjoint reading of Section 11AB of the Act and that of Rules 3 and 4 of the Credit Rules, we hold that interest cannot be claimed from the date of wrong availment of CENVAT credit. The interest shall be payable from the date CENVAT credit is wrongly utilized."</em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We carried the above judgement on August 27, 2009 and in the last eighteen months several assessees have successfully made use of this order and many a tribunal bench respectfully followed the High Court order. </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. In <em><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=34&filename=legal/cestat/2011/2011-TIOL-120-CESTAT-BANG.htm" target="_blank"><font size="1">2011-TIOL-120-CESTAT-BANG</font></a></strong></em>, the Tribunal held, “the appellant is liable to pay interest on the amount, which has been utilized by him for discharge of duty liability as held by the Hon'ble High Court of Punjab & Haryana in the case of <em>Ind -Swift Laboratories Ltd. Vs. UOI</em> - <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=33&filename=legal/hc/2009/2009-TIOL-440-HC-P-H-CX.htm"><strong><font size="1"><em>2009-TIOL-440-HC-P&H-CX </em></font></strong></a>."</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. In<em><strong> <font size="1"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=34&filename=legal/cestat/2010/2010-TIOL-1448-CESTAT-MAD.htm" target="_blank">2010-TIOL-1448-CESTAT-MAD</a></font></strong></em>, the Tribunal held, “ interest liability arises only from the date of wrong utilization of credit.."</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. In<em><strong> <font size="1"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=34&filename=legal/cestat/2010/2010-TIOL-1272-CESTAT-BANG.htm" target="_blank">2010-TIOL-1272-CESTAT-BANG</a></font></strong></em>, the Tribunal held, “It can be seen from the above reproduced portion of the judgment of the Hon'ble High Court of Punjab & Haryana, that their lordships have settled a law as regards the provisions of Rule 14 of Cenvat Credit Rules, 2004. Revenue has not produced any contrary decision. ."</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. In <em><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=34&filename=legal/cestat/2010/2010-TIOL-548-CESTAT-MUM.htm" target="_blank"><font size="1">2010-TIOL-548-CESTAT-MUM</font></a></strong></em>, the Tribunal held, “In the light of the above ruling of the Hon'ble High Court, the Commissioner's order relating to interest on CENVAT credit has got to be set aside and it is ordered accordingly. ."</font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But this is history - Now the Supreme Court has set aside the famous and much cited order of the Punjab and Haryana High Court. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Supreme Court observed, <em>“Rule 14 specifically provides that where CENVAT credit has been taken or utilized wrongly or has been erroneously refunded, the same along with interest would be recovered from the manufacturer or the provider of the output service. The issue is as to whether the aforesaid word "OR" appearing in Rule 14, twice, could be read as "AND" by way of reading it down as has been done by the High Court. If the aforesaid provision is read as a whole there is no reason to read the word "OR" in between the expressions 'taken' or 'utilized wrongly' or 'has been erroneously refunded' as the word "AND". On the happening of any of the three aforesaid circumstances such credit becomes recoverable along with interest."</em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now the law of the land is that even by mistake, if you take credit and never utilise it, you are liable to pay interest from the date of taking credit. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">There is an interesting twist: In <em><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=34&filename=legal/cestat/2010/2010-TIOL-670-CESTAT-BANG.htm" target="_blank"><font size="1">2010-TIOL-670-CESTAT-BANG</font></a></strong></em> , the Tribunal had remanded the case to the Commissioner as the decision of the High Court was not available before the Commissioner. Now as per the Tribunal order, the Commissioner is required to pass the order based on the High Court order – which is now set aside. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We bring you this landmark judgement of the Supreme Court today. (Should we say delivered yesterday?) </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=12113" target="_blank"> Breaking News </a></font></strong></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Online Payment of DBK and TED </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>FOR</strong> faster and better disbursal of deemed export drawback and terminal excise duty as per provisions of FTP and HBP Vol. I, it has been decided that payment of such claims, henceforth, shall be made online. DGFT has given instructions to the RAs. </font></p> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=46&filename=notification/dgft/2010/dgft10cir022.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DGFT Policy Circular No. 22/(RE-2010)/2009-14 Dated: February 21, 2011. </font></strong></a></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Anti Dumping Duty on Sodium Nitrite – Extended – Resurrection Again </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>BY</strong> Notification No. 143/2009-Customs, dated the 22nd December, 2009, anti dumping duty was imposed on Sodium Nitrate originating in, or exported from People's Republic of China . </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Notification in para 2 clearly stated that the notification will remain in force up to and inclusive of the 16th January, 2011. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So the notification lapsed/died on 16 th January 2011 and obviously the Board was fast asleep. They woke up a month later and extended the validity of the notification to 30th June, 2011. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It simply beats logic as to why the Board cannot extend a notification before it expires. Is it the arrogance that they can get away with lapsing and resurrection and with absolute impunity cause any amount of hardship to the importers? Even if the Notification was not valid, the Customs formations would not have allowed clearance without anti dumping duty illegally hoping that one day the Board will wake up and extend the validity of the notification. If they don't, the importer can claim refund, which can be safely denied on the ground of unjust enrichment. Do we have a people's government? </font></p> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=23&filename=notification/custom/2011/ctariff11_011.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Notification No. 11/2011- Cus ., Dated: February 17, 2011. </font></strong></a></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Export under Bond to Bhutan - Two more hydel power projects included </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>GOVERNMENT</strong> has extended benefit of duty free clearance of excisable goods to two more hydel power projects viz., Punatsangchhu-II Hydro-Electric Project and Mangdechhu Hydro-Electric Project in Bhutan subject to specified conditions. </font></p> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=30&filename=notification/excise/2011/exnt11_02.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Notification No. 02/2011-Cx., Dated: February 18, 2011 </font></strong></a></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Rs. 150 Coin to Celebrate 150 Years of Income Tax </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>UNDER</strong> the Coinage Act, the Government has decided to bring out two coins of the denomination of Rs. 150 and Rs.5 . The coins will carry the portrait of Chanakya and will have the words “INCOME TAX – 150 YEARS OF BUILDING INDIA "and its translation in Hindi. CBDT Member Durgesh Shankar says, “This is an unprecedented development in the history of the Income Tax Department and a crowning glory to its celebration of 150 years. "Member wants the information to be uploaded on the Department's web site and the Chairman has approved it. But getting information uploaded on a departmental website is not an easy task – not even for the CBDT Chairman. And the website is silent about this great unprecedented historical event! </font></p> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/pdfdocs/cbdt_letter_402_2010.pdf" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBDT letter in F No. 402/63/2010 - ITCC Dated February 21, 2011 </font></strong></a></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"> – Wednesday's cases</font></strong></font></strong></font></p> <p align="justify"><strong><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"></font><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Foreign Trade (Development and Regulation) Act </font></strong></p> <p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Failure to fulfill Export Obligation - High Court should not have ordered more pre-deposit than what had been ordered by Appellate Authority : Supreme Court </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> Division Bench of the High Court should not have passed the impugned order for deposit of Rs.20,00,000 /- for each of the appeals when the Appellate Authority had directed the appellant to make pre- deposit for Rs.5,00,000 /- for both the appeals. </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 12AA - Whether when assessee incorporated u/s 25 of Companies Act generates some surplus while carrying out micro-financing activities to help poor in society, and uses same to attain charitable objects, AO is right in denying registration on ground of profit-making - NO: ITAT </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> issues before the Tribunal are - Whether companies incorporated under section 25 of the Companies Act are entitled to registration u/s 12AA of the Income Tax Act and whether when assessee generates some surplus while carrying out micro-financing activities to help poor in the society, and uses the same to attain its charitable objects, AO is right in denying registration merely on the ground of profit-making. And the verdict goes in favour of the assessee. </font></p> <p align="justify"><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">Aluminum Circles - Exemption not entitled if Modvat Credit is availed - No interference against concurrent findings of fact of three lower authorities: Supreme Court </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> order-in-original, the orders passed by the appellate authority and as also by the Tribunal concurrently held that admittedly the appellants are availing such Modvat Credit in respect inputs used in the manufacture of the aluminum circles. Consequently, the appellants are not entitled to avail the benefit of Notification granting exemption inasmuch as for availing such benefit under the said notification the pre-condition is that the aluminum circles are to be cleared for intended use in the manufacture of utensils and no credit of duty paid on inputs has been taken in respect of the inputs used in the manufacture of the aluminum circles. All the aforesaid three authorities below having held concurrently in the same manner; finding recorded by the Tribunal and the two authorities below are findings of fact and such findings in absence of evidence on record to the contrary is not subject to interference. </font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>See our columns Tomorrow for the Judgements </strong></font></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"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a Nice Time.</font></font></p> <p align="justify"><font color="#FF6666"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Mail your comments to</font></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>