TIOL-DDT 1607 · 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 1607 </font><br> 12.05.2011 <br> Thursday </strong></font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">The (IRS) Indian Reporting Service – Multiplicity of Reports, Duplication of Work and Waste of precious resources – CBEC Instructions </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>SEVEN</strong> years ago, we carried a story, <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=317"><strong>THE INDIAN REPORTING SERVICE (IRS) IS IN ACTION</strong></a>. A lady IRS officer was offended and told me that it was uncharitable to call the service as reporting service as after calling for reports they send periodic reminders. So the service was very much the <strong>Indian Reminder Service</strong> too. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The number of useless reports generated by the Department is stupendous. In fact from a Range to the Chief Commissioner's office, the only major work being done in the offices is preparation and correction of reports. And like two watches, two reports never tally. Most of the reports sent to the Board are not even read, as many of them have been directed to be stopped, but in blissful ignorance, the field continued to send these reports.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now the CBEC directs that: </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>The MTR for Central Excise and Service Tax from the month of July 2011 shall henceforth include Annexure III A, III B, III C, III D, III E (as revised) and III F and III G and the MTR for Customs shall include Annexure VB(new), VC,VD,VE,VF,VG and VH. </em></font></p> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is desired that the above changes/directions are noted for strict compliance. It is once again reiterated that the Commissioners will not send any MTR to Legal, Judicial/review Cell of CBEC or the Directorate of Legal Affairs. The Zonal Chief Commissioner will send the MTRs containing the compiled Annexures being inserted in respect of his/her charge directly to the Commissioner, Directorate of Legal Affairs, 4th Floor, Rajendra Bhawan, 210 DeenDayalUpadhyayaMarg, New Delhi and also by e-mail at dla-rev@nic.in. The DLA will compile the all India data on the basis of the Annexures received from the Zonal Chief Commissioners. None of the Annexure is required to be sent to Judicial/Review Cell or Legal Cell. </font></em></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Will the field understand these confusing instructions? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In this age of massive computerisation, why should there be a paper report at all? The Department is proud of its ACES and other IT projects. Why can't they develop a programme, so that all the data is fed into a computer from the Range to the Chief Commissioner and all authorised officers can have access to all the data. The Chairman sitting before his computer should be able to know how many returns were filed, how many provisional assessments are pending, the revenue collections and virtually every information. Asking reports from subordinates should be banned and whoever fails to feed data in the system within the stipulated time should be summarily dismissed. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">If I can know from the web site of the Indian Railways, where a particular train is at a particular time, why can't the learned Assistant Commissioner tell me where my refund claim is gathering dust in his office? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Strangely, these instructions to the Department on submitting reports are issued by a public circular, while important matters of vital concern are sometimes issued through departmental letters. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Perhaps the line between instructions and circulars is getting obliterated. </font></p> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=31&filename=notification/excise/2011/excircular944.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBEC Circular No. 944/05/2011-CX., Dated: May 10, 2011 </font></strong></a></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Customs – Exemption Notification 21/2002 - Bevacizumab inserted – AGAIN – Do they have a copy of updated Notification? </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> Government has amended Notification No. 21/2002-Customs, dated the 1st March, 2002. The amendment reads as: </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>In List 3, after item (174), the following shall be inserted, namely:-</em></font></p> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">“(175) Bevacizumab”; </font></em></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The same very amendment was earlier made by Notification No. 31/2011-Customs, dated the 24th March, 2011, which also reads exactly the same as the present amendment. </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>In List 3, after item (174), the following shall be inserted, namely:- </em></font></p> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">“(175) Bevacizumab.” </font></em></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Obviously they forgot about the amendment made just 40 days ago! And apparently they don't keep updated copies of their own notifications. Incidentally both the notifications were signed by the same Under Secretary, but it appears that the two amending notifications were issued from different files and hence, this unwarranted replication! </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We have a CD which contains all the currently valid notifications with the latest updates. The Board can avoid such silly mistakes, if they have a look at it. </font></p> <p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=23&filename=notification/custom/2011/ctariff11_039.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Notification No. 39/2011-Cus, Dated : May 10, 2011 </font></strong></a></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">FM Congratulates ‘Aayakar Parivar'</font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN</strong> a letter to CBDT Chairman, Sudhir Chandra, the Finance Minister Pranab Mukherjee said, </font></p> <blockquote> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">“There has been unprecedented collection of tax revenues in the year 2010-11. Against an initial aggregate target of Rs. 7,45,000 Crore, revised to Rs. 7,82,000 crore, the total collection stand at nearly Rs. 7,90,000 crore. This has greatly strengthened our efforts for fiscal consolidation that is a key imperative for growth of our country's economy and the socio-economic developments of its people. </font></em></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>xxxxxx </em></font></p> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">I would like to convey through this letter, my heartiest congratulations to all members of our ‘Aayakar Parivar' for this magnificent performance. xxxxxx </font></em></p> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">My commendation may be conveyed to all officers and staff under Central Board of Direct Taxes appropriately.” </font></em></p> </blockquote> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Point of Taxation Rules and CENVAT Credit Rules - Logic behind making few provisions in these rules needs clarification from CBEC </font></strong></p> <p><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">WE</font></strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> received the following from a <em><strong>concerned</strong></em> netizen. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Industry is obliged to FINMIN for restoration of provision under Point of Taxation Rules 2011 for payment of Service Tax by recipient of services under reverse charge method only after making payment to the Service Provider vide Notfn No 25/2011-ST dated 31.3.2011. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Operation of the provision introduced earlier under Point of Taxation Rules 2011 vide Notfn No 18/2011-ST dtd 1.3.2011 for discharging service tax under reverse charge method on the basis of “<em><strong>date of receipt of Invoice</strong></em>” would have been great nightmare for the recipient of services. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">However the second <em><strong>PROVISO</strong></em> inserted in newly amended rule 7 of Point of Taxation Rule may become controversial. The said proviso is reproduced below </font></p> <p align="justify"><em><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">“Provided further that in case of services referred in clause (b) where the payment is not received within the period of six months of the date of Invoice, the point of taxation shall be determined as if this rule does not exist.” </font></strong></em></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per this Proviso, if service recipient does not pay to the service provider within six months, he would be under statutory obligation to pay service tax on the Invoices raised by foreign vendor / GTA etc [covered under the notification issued Sec 68(2)] from the date of Invoice and if Invoice is not issued within 14 days of completion of services, the date of completion of such service. Admittedly such payment will be considered as <strong>delayed payment</strong> beyond six months as the liability to pay service tax would start from retrospective effect i.e. from the date of Invoice or date of completion of service. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">On the above background, following are some of apprehensions in the field. </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Said sub-rule (7) of POT Rules is silent as to whether such delayed payment of service tax beyond six months period from the date of Invoice or from the date of completion of service will attract <strong>interest</strong> till the actual date of payment of such tax by recipient of services?</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Any payment of Interest on delayed payment of service tax <strong>if payable</strong> by service receiver because of this PROVISO , it will be additional transaction cost to Industry without any CENVAT benefit. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Interest is a penal provision and unintentionally this penalty appears to be cast on the recipient of services for no fault of his. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Six months time limit for payment to foreign vendor appears to have been borrowed from RBI guidelines for import of goods and services. However what could be logic in going back to date of Invoice / date of completion of Service for Point of Taxation purpose when RBI will take its course for delayed payment beyond six months. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ What is logic for fixing this six months time limit under this sub-rule (7) for making payment to <strong>domestic service provider i.e. GTA</strong> covered under 68(2) when there are no RBI limits for making payments to domestic service providers? In that case what is the logic also in incorporating three months time limit under rule 4(7) of Cenvat Credit Rules for making payment of value of services? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ There appears to be discrimination between Export of Services and Import of Services under the said rule as far the period of payment / receipt of value of services is concerned. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ What is logic in making discrimination between selective service providers specified under clause (c) by providing them option to pay service tax on receipt of payment basis?. There could be many small service providers under other categories who also now got burdened of payment of service tax from his pocket on Invoicing basis irrespective whether he receives /realizes money from recipient in time. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ There is one more provision made under Cenvat Credit rule 4(7) prescribing three months time limit for payment to service provider. Logic behind this provision is also not understood for the following reasons. </font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Service tax is now payable by service provider on the basis of date of Invoice / completion of service if Invoice is not issued within 14 days or receipt of payment which ever is earlier. Accordingly a corresponding provision is also made in Cenvat Credit Rule 4(7) permitting credit availment of input services on or after the date of receipt of Invoice by recipient of the services for the obvious reasons.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Therefore when on one side Government will get Service Tax in the exchequer on due date from Service provider, there will be no corresponding impact on exchequer when CENVAT credit of service tax is availed by recipient as per rule 4(7) after receipt of such Invoice. However, what is the logic in providing THREE MONTHS time limit in the said rule 4(7) for making payment to service provider and if payment is not made within three months, then CENVAT is required to be reversed. Therefore when one side exchequer has already received Service tax from service provider will it not be a case of “Unjust Enrichment” on the part of Government when CENVAT credit of such tax already paid to exchequer is again recovered from recipient on the ground that he has not paid the value of services to the service provider? Although provision of restoration of such credit is made in the CCR once the payment of value of services is made to service provider, but till such time Government will be unjustly enriched to the extent benefit of interest on such Cenvat recovered under rule 4(7) beyond three months period. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Non payment of value of services and service tax thereon as indicated in Bill to the service provider will be a matter of commercial dispute between two parties but why Government wants to become party to this dispute by bringing this provision is not understood when they have already received the tax in exchequer. </font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Will CBEC like to clarify on these aspects which appears to be difficult to operate. </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"> – Friday'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">When duty cannot be demanded under section 11A, question of demanding interest under section 11AA also does not arise: CESTAT </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> provisional assessments have to be finalized and the final duty amount has to be determined under the provisions of Rule 9B of Central Excise Rules, 1944 and duty cannot be demanded under section 11A, as has been held in the judgments cited (supra). When duty cannot be demanded under section 11A, the question of demanding interest under section 11AA also does not arise…. </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, merely because non-resident assessee writes to RBI seeking nod for closing down branch office in India, Revenue is justified in presuming that assessee had discontinued trading and thus disallowed depreciation on premises - NO, says 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, merely because non-resident assessee writes to RBI seeking permission to close down its branch office in India, AO is justified in making the presumption that the assessee had discontinued its trading activity in India, and thus disallowed the depreciation claimed and whether no depreciation can be claimed if there is a lull period in any business. And verdict goes in favour of assessee. </font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>FTP </strong></font></p> <p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Import of marble blocks – Petitioner's turnover was well above required one Crore - showing turnover as 24 Crores instead of 22 Crores does not alter eligibility criterion: HC</font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> counsel for the Union of India also does not dispute the position that the petitioner would not have gained any additional benefit by showing inflated figures from Rs. 22 crores (approx.) to Rs. 24 crores (approx.) in the CA Certificate and that their entitlement would not have been in any manner affected on that count. Even according to the DGFT, by increasing the figures of the domestic sales turnover, there would have been no change in the entitlement of the petitioner and no malafide intention could be ascribed to them and that the misdeclaration on the part of the petitioner may be on account of negligence or carelessness. The respondents are directed to grant the licence for import of marble blocks for the year 2010-11 to the petitioner forthwith. </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 Day. </font></p> <p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Mail your comments to</font><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif"></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>