TIOL-DDT 1589 · 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 1589 </font><br>
15.04.2011 <br>
Friday</strong> </font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Duty drawback - Export Proceeds not realised - No Recovery when realisation is written off </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>GOVERNMENT</strong> has amended the Customs, Central Excise Duties and Service Tax Drawback Rules, 1995. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Rule 16A of the Drawback Rules as amended read as, </font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>16A. Recovery of amount of Drawback where export proceeds not realised</strong>. - (1) Where an amount of drawback has been paid to an exporter or a person authorised by him (hereinafter referred to as the claimant) but the sale proceeds in respect of such export goods have not been realised by or on behalf of the exporter in India within the period allowed under the Foreign Exchange Management Act, 1999 (42 of 1999), including any extension of such period, such drawback shall, <font color="#FF6633"><strong>except under circumstances or conditions specified in sub-rule (5)</strong></font>, be recovered in the manner specified below. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> Provided that the time-limit referred to in this sub-rule shall not be applicable to the goods exported from the Domestic Tariff Area to a special economic zone. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> (2) If the exporter fails to produce evidence in respect of realisation of export proceeds within the period allowed under the Foreign Exchange Management Act, 1999, or any extension of the said period by the Reserve Bank of India, the Assistant Commissioner of Customs or the Deputy Commissioner of Customs, as the case may be or Deputy Commissioner of Customs shall cause notice to be issued to the exporter for production of evidence of realisation of export proceeds within a period of thirty days from the date of receipt of such notice and where the exporter does not produce such evidence within the said period of thirty days, the Assistant Commissioner of Customs or Deputy Commissioner of Customs, as the case may be or Deputy Commissioner of Customs shall pass an order to recover the amount of drawback paid to the claimant and the exporter shall repay the amount so demanded within thirty days of the receipt of the said order: <br>
<br>
Provided that where a part of the sale proceeds has been realised, the amount of drawback to be recovered shall be the amount equal to that portion of the amount of drawback paid which bears the same proportion as the portion of the sale proceeds not realised bears to the total amount of sale proceeds. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> (3) Where the exporter fails to repay the amount under sub-rule (2) within said period of thirty days referred to in sub-rule (2), it shall be recovered in the manner laid down in rule 16. <br>
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(4) Where the sale proceeds are realised by the exporter after the amount of drawback has been recovered from him under sub-rule (2) or sub-rule (3) and the exporter produces evidence about such realisation within one year from the date of such recovery of the amount of drawback, the amount of drawback so recovered shall be repaid by the Assistant Commissioner of Customs or Deputy Commissioner of Customs to the claimant.</font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"> (5) Where sale proceeds are not realised by an exporter within the period allowed under the Foreign Exchange Management Act, 1999 (42 of 1999), but such non- realisation of sale proceeds is compensated by the Export Credit Guarantee Corporation of India Ltd. under an insurance cover and the Reserve Bank of India writes off the requirement of realisation of sale proceeds on merits and the exporter produces a certificate from the concerned Foreign Mission of India about the fact of non-recovery of sale proceeds from the buyer, the amount of drawback paid to the exporter or the claimant shall not be recovered. </font></strong></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The portions in <font color="#FF6633"><em><strong>red bold</strong></em></font> have been added now. This means that there will be no recovery of the drawback paid if</font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ the non-realisation is compensated by the ECGC of India under an insurance cover; </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ the RBI writes off the requirement of realisation on merits; and </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ the exporter produces a certificate from the <font color="#FF6633"><strong><em>concerned</em></strong></font> Foreign Mission of India about the fact of non-recovery of sale proceeds from the buyer. </font></p>
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<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=24&filename=notification/custom/2011/cnt11_030.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Notification No. 30/2011 - Cus., (NT), Dated: April 11, 2011 </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Service Tax - CENVAT Credit through wrong Classification - DGST </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>COMMISSIONER</strong>, Service Tax in the CBECwrote a letter to the DGST in 2009 about irregular availment of Cenvat Credit by leading hotel chains, as reported to him by the Chief Commissioner, Chandigarh. The DGST promptly circulated this letter to all Chief Commissioners and called for Action Taken Reports. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>The Issue:</strong> TajGVK were taking credit of the entire amount of Service Tax paid in respect of the services provided by the service provider viz. M/s Indian Hotel Corporation Ltd.(IHCL) even though services of M/s IHCL were being used by M/s GVK for providing both taxable and exempted services. M/s GVK were availing the aforesaid full credit on the ground that the services provided by M/s IHCL was "Management or Business Consultant's Services' while, in fact, such services would more appropriately fall under 'Business Auxiliary Services'. This practice of wrong classification of the service provided by M/s IHCL was apparently resorted to meet the requirement of Sub Rule 5 of Rule 6 of Cenvat Credit Rules, 2004.</font></p>
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<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">[just as a recap – As per Rule 6 of the CENVAT Credit Rules, credit is not allowed on input services used in exempted goods or services and you know the options of maintaining separate accounts or paying 5% on the exempted goods or services. Certain services like Security Agency, Management or Business Consultant, etc,. were exempted from this requirement. And that should be the reason for misclassification according to the Chief Commissioner] </font></em></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Many formations were kind to the DGST and sent in their reports and after nearly two years, the DGST admits that it is still waiting for reports from a few formations. [<font color="#FF6633"><strong><em>What do you do when field formations do not send their reports? Apparently NOTHING!</em></strong></font>] </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Anyway, based on reports from the field, DGST observes that “<em>the service provider, in most of the cases, is M/s Indian Hotel Corporation Ltd. (M/s IHCL), an assessee registered with Service Tax-I Commissionerate, Mumbai. However, there are others as well viz. M/s Apeejay Sunder Corp. Services, Kolkata, M/s Sarovar Hotels Pvt. Ltd., Mumbai, M/s Nirulas Comer House P. Ltd. etc. who also provide similar services to hotel chains and enable the service recipient to take full Cenvat credit by treating the services as 'Business Consultancy Services'. The field formations are of a uniform view that the services provided by M/s IHCL and other such service providers to the owners of hotels cannot be considered to be 'Management Consultant Services' but such services are actually in the nature of Business Support Service or Business Auxiliary Service or Franchise Service, as the case may be, depending on the exact nature of services provided in a particular case. In this context, Chandigarh and Jaipur-I Commissionerates had requested Mumbai-I Service Tax Commissioner to change the classification of the services provided by M/s. IHCL from 'Management Consultant's Services' to 'Business Support Service' or 'Business Auxiliary Service'. </em></font></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In so far as services provided by M/s Indian Hotel Company Ltd. is concerned, Service Tax-I Commissionerate, Mumbai has also opined that the services rendered by M/s IHCL, Mumbai were not in the nature of 'Management Consultancy Service', as claimed by them, and that the same would appropriately be classified under 'Business Auxiliary Service. He has further informed that they have already taken up the issue and are in the process of verifying the records of M/s IHCL so as to classify the services rendered by them correctly. The moment they change classification of their services, the issue would cease to exist. Even other similar service providers would follow suit. Till then, action is required to be taken by the field formations to prevent / recover the inadmissible excess Cenvat Credit availed by the recipient of such services.” </font></em></p>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now an interesting Twist in the Tale:</font></strong></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In the meantime, the Commissioner, Chandigarh-I, who had originally taken up the issue, had, dropped the demand notice issued in this respect to M/s TajGVK Hotels and Resorts (service recipient) by passing an Order-in-Original dt.20.09.2010 by holding, inter-alia, that 'the cause which has initiated the present proceedings was beyond the control of the noticee; the noticee cannot be held responsible for the misclassification of taxable service at the hands of provider of such service; so the demand is not sustainable and it is even hit by time bar also apart from being not sustainable on merits' etc. </font></p>
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<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Do you think they will keep quiet if a Commissioner has the audacity to pass such reasonable, just, fair and legal order? Such high handed behaviour is not tolerated in the field.</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A Committee consisting of two erudite Chief Commissioners has reviewed the Order-In-Original passed by the Commissioner, on the grounds of both facts and law, with directions to the Commissioner, Central Excise, Chandigarh I to file appeal before CESTAT. </font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Do you wonder what legal grounds the learned Committee could have found to challenge the Commissioner's order? Revenue officers are ingenious! </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In the review order, the committee observed that:- </font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ 'M/s IHCL, the service provider was not mentioning the classification of the service provided on the invoices issued by them to the noticee; that non indication of classification in the invoices <strong>tantamount to suppression of material fact</strong> with intent to wrongly avail <strong>(to read 'wrongly pass on')</strong> the benefit of Rule 6 (5) of Cenvat Credit Rules, 2004; </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ The adjudicating authority <em><strong>erred</strong></em> in deciding the case which should have kept the case pending till the decision of Commissioner, Service Tax, Mumbai ( to whom a reference was made earlier) is communicated to him. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ The burden of proof regarding the admissibility of the Cenvat Credit shall lie upon the manufacturer or provider of output service taking such credit; thus it was the noticee who was required to ensure the description of service and as to what is the classification of input service to discharge this burden even if there was some misclassification at the service provider's end; </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ The entire onus of correct availment was on the noticee'. </font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Considering the issue in this backdrop, the DGST wants </font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ All the field formations to take appropriate action in the matter to protect the revenue. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Commissioner, Service Tax-I, Mumbai to complete the ongoing investigation/ verification immediately and communicate the result thereof at the earliest. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Reports about the final outcome of the action taken to be forwarded by all concerned. </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Tailspark:</strong> The whole issue has now lost relevance as the all important Rule 6(5) of the CENVAT Credit Rules has now been deleted from the Rules with effect from 1 st April 2011 by Notification No. 3/2011-CENT dated 01.03.2011. All the exercises would be for digging the past. </font></p>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=41&filename=notification/servicetax/2011/circular_dgst.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">F.No.V/DGST/30-MISC-45/2009/756 , Dated: February 08, 2011 </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Property Returns of All Group A Officers to be placed in Public Domain</font></strong></p>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DO</font></strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> you want to know how rich or poor the babus are? All Group A and B officers are to submit an annual Immovable Property Return by 31 st of January each year. It has been decided that the IPRs of all Group A Officers for the year 2010 will be placed in Public Domain by 31.05.2011. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">You don't even need to ask the information under RTI. You can now have the property details of IAS, IPS, IFS, IRS and such other officers – that is the declared property of course. Even officers can know how rich their colleagues are. </font></p>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=70&filename=pitara/oms/office_memorandum_2010.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DOPT OM No. 11013/3/2011 – Estt.A-IV , Dated: February 11, 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"> – Monday'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">Custom House Agent - Suspension of licence - Considerable delay in issuing suspension order against time frame fixed by Board - suspension revoked: CESTAT</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>TRIBUNAL</strong> was of the view that stay on suspension order has the same effect as revocation of suspension. So Tribunal disposed of the Appeal itself revoking the suspension order dated 15-12-2010. Tribunal added that it was not passing any opinion on the culpability of the CHA and it is open to the department to take action as per Regulation 20(1) of CHALR, after following the procedure laid down by the Board. </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"><font color="#FF6633"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Sec 22 - Whether, for arriving at ALV of property, notional interest on interest-free security deposit is to be added to actual rent received - NO, rules Delhi High Court Full Bench</font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> issue before the Full Bench of the HC is - Whether for the purpose of arriving at the annual letting value of the property, notional interest on interest free security deposit is to be added to the actual rent received. And the verdict goes against the Revenue. </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">Condonation of Delay - Pending appeal in High Court for a different period, is not a ground for condonation: Inadvertent Delay is no ground: CESTAT</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>WHEN</strong> jurisdiction is vested with the Tribunal, and the appeal is dismissed as time barred, merely because appeal is pending for subsequent year cannot be a ground for condonation of delay. Inadvertent delay without showing sufficient cause cannot be a ground for condoning the delay. It is well settled in law that though courts are liberal in condoning the delay in the cases filed by the Government Department, but still explanation is required to be given to make out sufficient cause for condoning the delay. </font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">See our columns Monday for the judgements</font></strong></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Monday with more <strong>DDT</strong></font></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a Nice Weekend.</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"> <a href="mailto:vijaywrite@taxindiaonline.com"><strong>vijaywrite@taxindiaonline.com</strong></a></font></p>
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