TIOL-DDT 1603 · 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 1603</font><br>
06.05.2011<br>
Friday</strong></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Was Amount Paid to Customs Officer a Bribe – Supreme Court issues Notice </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN</strong> an order dated 02/05/2011, the Supreme Court declared, </font></p>
<blockquote>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In the present case, one of the issues which arose for determination before the High Court in the Income Tax Appeal under Section 260A of the Income Tax Act was, whether the amount paid to the Customs Officer was by way of speed money [bribe]? This question has not been answered. Hence, issue notice. </font></em></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Bombay High Court had in the impugned order held;</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Tribunal, while considering the issue, in paragraph No.8 of its order, has recorded a finding reading as under: </font></p>
<blockquote>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">8........Secondly, since an estimate by the assessee has only been substituted by another estimate by the Assessing Officer it cannot be said that there was any mens-rea on the part of the assesse in filing the return of undisclosed income. </font></em></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Considering the aforesaid finding, it is not possible to hold that any substantial question of law is involved; in the appeal. The appeal is, therefore, dismissed for want of substantial question of law. No order as to costs.</font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Customs Corrupting Young Minds </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>HE</strong> is hardly 23 years old. A bright young man, a product of a premier IIT, now studying in a top university in USA. He hardly has any spare money in US. He saved through starvation and came on a visit to India with some cheap goodies for his family and friends. He browsed the CBEC website thoroughly and armed with knowledge that he was a law abiding person, tried to walk through the green channel, when he was accosted by a khaki uniformed officer who took him to a small group of white uniformed high rank looking white uniformed officers who grilled him and wanted to search his baggage. After sometime he realized that all this was for a small speed money of a hundred dollars which he paid, because he was eager to meet his anxious parents waiting outside. Even as he was eating the tasty food prepared by his doting mother, the taste of the bribe he had to pay was spoiling the mood for him. He has decided never to work in India and now advises his friends in USA on how to get through Indian Customs. “just like in any Indian Market, you can haggle with them on the amount of bribe”, he advises. </font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>2G Scam - Supreme Court astounded by so many zeroes </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>WE</strong> have never seen so many zeroes in our life. Not even half of what has been mentioned here except in school mathematics classes", said the Supreme Court while reprimanding the Income Tax Department for its slow investigation into tax violation in the 2G scam. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> Supreme Court further stated, “ This is not a normal case of tax evasion. It should have been done fast. These are not ordinary cases to be handled in an ordinary way; no person, irrespective of their chair and wealth, could get immunity in any way. </font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Interest rates to be prescribed under new section 11AA - Rule 14 of CCR, 2004 requires amendment </font></strong></p>
<p><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">A Netizen has sent us this:</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">By the Finance Act, 2011 w..e.f 08.04.2011, the erstwhile sections 11AA and 11AB of the Central Excise Act have been substituted by a new section 11AA. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Incidentally, no notification has been issued under the new section 11AA prescribing the rate of interest an assessee has to pay on the amount of central excise duty voluntarily paid or determined under the new section 11A of the CEA, 1944. It can also be deduced that the contents of new section 11AA of the CEA, 1944 would apply only to cases covered by the new section 11A of the CEA, 1944 effective 08.04.2011. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It may also be noted that two notifications 5/2011-CX(N.T) and 6/2011-CX(N.T), both dated 01.03.2011 were issued raising the rate of interest to be paid by an assessee under the erstwhile sections 11AA and 11AB of the CEA, 1944. The interest rate that is in force is 18% and is effective from 01.04.2011. These notifications have not been withdrawn after the enactment of the Finance Act, 2011 and obviously so. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In view of the saving provisions contained in section 38A of the CEA, 1944, the earlier sections 11A, 11AA and 11AB continue to remain in operation and would apply to the duty demands in respect of clearances made up to the 7 th April, 2011. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Having said that, it would also be essential to highlight that rule 14 of the Cenvat Credit Rules, 2004 relating to recovery of CENVAT credit wrongly taken or erroneously refunded still makes a mention of the old section 11AB of the CEA, 1944. This needs to be corrected retrospectively (w.e.f 08.04.2011) by making a reference to the new section 11AA of the CEA, 1944. Needless to mention, thereafter, the applicability of section 11AB to rule 14 would legally cease on 07.04.2011. </font></p>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It would be in the fitness of things that the Board intervenes and does the needful in the matter. </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Another Netizen asks, “C onsequent to enactment of Finance Act, Sec 11AB and 11AA of Central Excise Act have been substituted with new Sec 11AA. Reference of these two Sections is there at many places in Central Excise Rules, Cenvat Credit Rules , Service Tax Rules etc. Is Govt going to amend all these relevant rules / notifications replacing the Sec 11AB with Sec 11AA w.e.f. 8.4.2011 either by general notification or specific notifications? </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We are getting several such queries. </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Will the Government clarify? </font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Time limit for adjudication of Central Excise cases – officers are a happy lot now </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>WE</strong> received this mail from yet another netizen. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Finance Bill, 2001 proposed substitution of section 11A with a new one and section 11A (11) therein read thus – </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">“(11) The Central Excise Officer <font color="#FF6633"><strong>shall determine</strong></font> the amount of duty of excise under sub-section (10)- </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(a) <font color="#FF6633"><strong>within six months from the date of notice</strong></font> in respect of cases falling under sub-section (1); </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(b) <font color="#FF6633"><strong>within one year from the date of notice</strong></font> in respect of cases falling under sub-section (4) or sub-section (5).” </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A similar provision viz. sub-section (2A) that existed in the earlier section 11A read – </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">“ (2A) Where any notice has been served on a person under sub-section (1), the Central Excise Officer,- </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(a) in case any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, by reason of fraud, collusion or any willful mis-statement or suppression of facts, or …, <font color="#FF6633"><strong>where it is possible to do so</strong></font>, shall determine the amount of such duty, <font color="#006600"><strong>within a period of one year</strong></font>; and </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(b) in any other case, <font color="#FF6633"><strong>where it is possible to do so</strong></font>, shall determine the amount of duty of excise …,<font color="#006600"><strong> within a period of six months</strong></font>, <u><strong>from the date of service of the notice</strong></u> on the person under sub-section (1).” </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The proposed provision generated a lot of debate in the Adjudication Section of the local Central Excise Commissionerates. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Sample the contents of the heated discussion – </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">+ there is no excuse left for the adjudicating authority to delay the adjudication process – removal of the words “where it is possible to do so” does away with the liberty that existed, if any; </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">+ the words “from the date of service of the notice” have been unwittingly replaced by the words “from the date of the notice”. </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">An officer remarked - the yard stick prescribed by the Central Government to decide the cases within the period of six months (normal period) and within one year (extended period) is not an easy task for an adjudicating authority and all the more surreal because the period is to be computed from the date of the notice. At least the period could have been made to commence from the date of communication of the notice to the noticee. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Another officer had this sound advice – </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">+ <font color="#FF6633"><strong>This provision would apply only to Show Cause notices issued after 8th April, 2011 and would not cover SCNS where the duty demand pertains to clearances made before 8th April, 2011; </strong></font></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">+ The word “shall determine” needs to be read as “may determine”. As per Justice G.P.Singh's treatise 'Principles of Statutory Interpretation' the word 'may' may also be used in the sense of 'shall' or 'must' by the Legislature. When the context shows that the power is coupled with an obligation, 'the word 'may' which denotes discretion should be construed to mean a 'command'. Sagar Textiles Mills (P) Ltd. AIR 1977 SC 1516. As such, it is not at all mandatory that the notices should be decided within the time frame prescribed by the new section. </font></p>
</blockquote>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Fortunately, before the Finance Bill, 2011 was enacted, by introducing a Notice of Amendments on 21.03.2011 the words “where it is possible to do so” were inserted and the Finance Bill came to be enacted accordingly on 08 th April, 2011. </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The provisions of section 11A(11) now read – </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">“(11) The Central Excise Officer <font color="#FF6633"><strong>shall determine</strong></font> the amount of duty of excise under sub-section (10)- </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(a)<font color="#FF6633"><strong> within six months from the date of notice, where it is possible to do so</strong></font> in respect of cases falling under sub-section (1); </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(b)<font color="#FF6633"><strong> within one year from the date of notice</strong></font><strong> <font color="#FF6633">where it is possible to do so</font></strong> in respect of cases falling under sub-section (4) or sub-section (5).” </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399">Resultantly, the earlier time limit for adjudication of the SCNs is retained. However, the fact remains that the words “service of” (notice) remains to be incorporated. </font></strong></font></p>
<p align="justify"><font color="#663399"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But that is not a worrisome issue, the officers unanimously agreed. </font></strong></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><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a></a><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">Central Excise</font></strong></font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Revenue
representative has put his best foot forward while arguing for Revenue
but at same time lack of evidences cannot carry case of Revenue any further – buyback
of final products from contract manufacturer in itself would not indicate
that prices of aromatic compounds are influenced - Appeal rejected:
CESTAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>WE</strong> would like to compliment the learned SDR in as much that he has put his best foot forward, while arguing for the revenue, but at the same time lack of evidences could not carry the case of revenue any further. It is also to be noted that there is no evidence is brought on record by the Revenue, to hold that the price was not the sole consideration for the sale of such aromatic compounds to the contract manufacturers. </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">Whether income from subletting of excess office space with business assets is business income, and depreciation on assets leased is to be allowed - YES: ITAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> two issues before the Bench are - Whether income arising from subletting of excess office space with business assets is to be treated as business income, and depreciation on the assets given on lease is to be allowed - Whether provisions of section 14A are not applicable to the income falling under chapter-III by virtue of amendment made by Finance Act 2000. And the answers go in favour of the assessee. </font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Customs</font></strong></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Customs
- Anti Dumping Duty on tyres, tubes and tyre-flaps - DA has fairly recorded
his findings on evaluation of various economic factors and has then taken
an overall view. No reason to interfere: CESTAT</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DA</strong> has taken into consideration the provisions of Rule 11 of the Anti-Dumping Rules and the Annexure-II to the Rules referred to therein in regard to determination of injury. He has examined both the volume effect and the price effect of the dumped imports referred to in clause (i) of the said Annexure II and he has examined the relevant economic factors referred to in clause (iv) of the said Annexure II. It is well settled that the DA is required to examine the overall impact of the dumped imports by evaluation of all the economic factors as a whole and not be guided by evaluation of any particular economic criterion. That is what has been done in this case. </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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