TIOL-DDT 1629 · 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 1629</font> <br> 14.06.2011 <br> Tuesday </strong></font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Orders against CESTAT - Appeal to HC or SC? </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>AS</strong> per Section 35G of the Central Excise Act, an appeal lies to the High Court from every order passed by the CESTAT, except an order, among other things, relating to classification (rate of duty) or valuation. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per Section 35L, an appeal shall lie to the Supreme Court from an order passed by CESTAT among other things, relating to classification (rate of duty) or valuation.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Similar provisions are applicable for Customs and Service Tax. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This means that even if valuation or Classification is one of the issues among many other issues, the appeal from an order of the CESTAT lies to the Supreme Court and the High Court is barred from appellate jurisdiction. It is another matter that the Writ jurisdiction of the High Court cannot be taken away by any law. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Why this bifurcation of jurisdiction in appeals</strong>? The Karnataka High Court, recently tried to answer this question in a case, we are carrying today. <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=33&filename=legal/hc/2011/2011-TIOL-366-HC-KAR-CX.htm" target="_blank"><font size="1">[2011-TIOL-366-HC-KAR-CX]</font></a></strong>. The High Court explained, </font></p> <blockquote> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">“ The intention behind this bifurcation of jurisdiction between the Apex Court and the High Court seems to be that more often than not, any decision on these aspects not only affects the interest of the manufacturers who are parties thereto, but also to the manufacturers of those products throughout the country. In a country governed by Parliamentary legislation because of the territorial bifurcation in forming states and because of the divergent opinion, which is possible, the excise duty payable would vary from place to place. In order to bring uniformity in the levy of excise duty throughout the country and consequently to see that the country's finance is not affected, the Parliament has vested the jurisdiction to decide the disputes with the Apex Court. Therefore, we see a duty policy underlining this bifurcation of the jurisdiction between the Apex Court and the High Courts. All other matters other than what is set out above which relates to the individual manufacturers and all disputes based on assessment orders which have attained finality, such as the benefits to which they are entitled to refunds, duty drawbacks, rebates, etc., which relate to a particular manufacturer falls within the jurisdiction of the High Courts ”. </font></em></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But then, most of the issues before any particular High Court are applicable to hundreds of assesses all over India, even though they may not relate to classification or valuation. Even the Karnataka High Court has delivered a landmark judgement on CENVAT Credit on outward transport in the ABB case (copy of the order is not yet made available) and the Delhi High Court is to deliver a judgement on renting of immovable property service. These issues certainly have all India ramifications. For that matter, even decisions of the Tribunal Benches have all India effect and but for that rare exception, Tribunal Benches respectfully follow the decisions of other Benches. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Perhaps there should be some other reason. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a look at History. Way back in 1982, when the Tribunal (called CEGAT then) was established, classification and valuation were hot issues and of course having all India effect. As per Section 35D(2), as it then existed, appeals to the Tribunal from orders of the Commissioners, relating to, among other things, classification or valuation, had to be heard by a Special Bench of the Tribunal consisting of three members and the Special Bench had all India jurisdiction. Appeals from these Special Benches, which were dealing with classification/valuation matters, were to lie to the Supreme Court. This was a substantive right of the appellant irrespective of whether a question of Law or a question of fact was involved. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Over the years, Classification and valuation lost their importance in litigation and the Special Benches of the tribunal were abolished in 1995 and now all Benches of the CESTAT can hear matters relating to Classification and Valuation. When the Special Benches were abolished, there was no reason to continue direct appeals to the Supreme Court on classification/valuation matters. But somebody forgot to make the changes and we are stuck with this system and all matters relating to classification/valuation are still going straight to Supreme Court from the Tribunal. In fact, the Karnataka High Court, based on its order that we are carrying today, has dismissed several appeals by Revenue for want of jurisdiction as the issue involves classification/valuation. Several other orders are in the pipeline. And the Revenue will take them all to the Supreme Court seeking condonation of delay. Lawyers will have a good time ahead! </font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Direct Appeal to SC - Does Chandra Kumar make any difference? </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN</strong> a landmark case,<em> L. Chandra Kumar v. Union of India </em>- <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=50&filename=legal/sc/2002/2002-TIOL-159-SC-CB.htm" target="_blank"><font size="1">2002-TIOL-159-SC-CB</font></a></strong>, a Constitutional Bench of the Supreme Court held, </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>++ We hold that all decisions of Tribunals whether created pursuant to Article 323A or Article 323 B of the Constitution, will be subject to the High Court's Writ jurisdiction under Article 226/ Article 227 of the Constitution, before a Division Bench of the High Court within whose territorial jurisdiction the particular Tribunal falls. </strong></font></p> <p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ We may add here that under the existing system, direct appeals have been provided from the decisions of all Tribunals to the Supreme Court under Article 136 of the Constitution. In view of our above-mentioned observations, this situation will also stand modified. </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>++ In the view that we have taken, <font color="#FF6633">no appeal from the decisions of a Tribunal will directly lie before the Supreme Court</font> under Article 136 of the Constitution; but instead, the aggrieved party will be entitled to move the High Court under Article 226/ 227 of the Constitution and from the decision of the Division Bench of the High Court, the aggrieved party could move this court under Article 136 of the Constitution. </strong></font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Supreme Court was very emphatic that no appeal shall lie to the Supreme Court from an order of a Tribunal. But the issue did not rest there. Several High Courts held that Chandra Kumar is not applicable to CESTAT and one High Court held that Chandra Kumar decision did not take away the statutory right of appeal provided for in the Central Excise Act. And even the Supreme Court continues to admit appeals directly from the orders of the Tribunal. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In <em>Samruddhi Industries </em>- <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=32&filename=legal/hc/2009/2009-TIOL-600-HC-MUM-CX.htm" target="_blank"><font size="1">2009-TIOL-600-HC-MUM-CX</font></a></strong>, the Bombay High Court held that CESTAT was not constituted under Article 323B and so Chandra Kumar is not applicable. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In <em>Delhi Gymkhana Club </em>- <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=43&filename=legal/hc/2009/2009-TIOL-460-HC-DEL-ST.htm" target="_blank"><font size="1">2009-TIOL-460-HC-DEL-ST</font></a></strong>, the High Court held that appeal lies to Supreme Court. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In <em>Shalimar Rubber Industries </em>- <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=33&filename=legal/hc/2003/2003-TIOL-222-HC-DEL-CX.htm" target="_blank"><font size="1">2003-TIOL-222-HC-DEL-CX</font></a></strong>, the High Court held that the ratio of Chandra Kumar is not to take away right of appeal provided under Section 35L and so the appeal had to be to the Supreme Court. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>The Basic Doubt – Is CESTAT a Tribunal constituted under Article 323B</strong>? We need not have much discussion on this as the Supreme Court had in the Chandra Kuma r case itself clarified this issue. In para 26 of the order, the Supreme Court observed, </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">“in <em>R.K.Jain V. Union of India </em><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=50&filename=legal/sc/2002/2002-TIOL-405-SC-CB.htm" target="_blank"><font size="1">[2002-TIOL-405-SC-CB</font></a><font size="1"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=50&filename=legal/sc/2002/2002-TIOL-405-SC-CB.htm">]</a></font></strong>…. A Division Bench of this Court consisting of three of us (Ahmedi, CJI, Punchhi and Ramaswamy, JJ) had occasion to deal with complaints concerning the functioning of the <strong>Customs, Excise and Gold (control) Appellate Tribunal, which was set up by exercising the power conferred by Article 323</strong>B”. </font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So it has been confirmed by the Supreme Court itself that CEGAT/CESTAT is set up by exercising the powers under Article 323B. In fact in the R.K.Jain case, the Hon'ble Court had suggested that the possibility of an appeal from the Tribunal to the High Courts be pursued and one of the reasons for the Chandra Kumar judgment was that this suggestion of the Apex Court was not followed up. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So, in spite of Section 35L, as per the Supreme Court judgement in Chandra Kumar , there should be no direct appeal from Tribunal to Supreme Court. </font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Establish National Tax Tribunal </font></strong></p> <p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">THE</font></strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> National Tax Tribunal Act, which is gathering dust in some Ministry, should be recovered and put into effect, so that some confusion can be avoided. It is not easy for every assessee to go to the High Court, let alone the Supreme Court and then wait for years to get a decision. Since Central Excise, Customs and Service Tax are taxes to be levied uniformly all over the country and since, almost every decision of the Tribunal, has all India ramifications, it is better that there is only one Appellate Authority and let it be the Supreme Court, if we cannot bring in the National Tax Tribunal. But Delhi is too far for many. Maybe we should have an exclusive circuit bench of the Supreme Court for tax matters, which should travel to all State Capitals to hear appeals. </font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But this is all a dream. We will have to go through the maze of litigation from Inspector to Supreme Court and in the whole process, there is only one community of winners – the lawyers – on both sides! Perhaps the laws are made for the lawyers! </font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">DEPB Extended for three months - Trade not very happy</font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>YESTERDAY</strong>, the Revenue Secretary announced that the DEPB Scheme which is to come to an end on June 30, is extended till September. While complimenting the Revenue Secretary for extension of the DEPB Scheme, the Federation of Indian export Organisations (FIEO) said that the Notification for the same may be issued immediately so that the uncertainty regarding extension is over. FIEO suggested that DEPB Scheme should continue till GST is introduced as it will not be possible to fix the drawback rates for all the products for which DEPB rates exist in the short span of three months. The federation wanted that in the long run, Government should definitely bring all products under All Industry Duty Drawback Scheme and should also involve industry bodies in fixation of the rates for accuracy of the data and transparency in fixation. The Revenue “loss” in DEPB is said to be about Rs. 8500 Crores. </font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Era of banking Secrecy is over? </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>INAUGURATING</strong> the high level two day International Seminar on “Adapting Tax Systems and International Tax Rules to the New Global Environment: A Shared Challenge for India and the OECD”, the Finance Minister Pranab Mukherjee said, </font></p> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">“The statement of G 20 leaders in London issued in April 2009, gave a call to take action against non-cooperative jurisdictions, including tax havens. It stated that we stood ready to deploy sanctions to protect our public finances and financial systems. It further added that the era of banking secrecy was over. However, the spirit of this statement has not been respected. We cannot say with certainty that the bank secrecy is over in all cases. While the countries have accepted to end bank secrecy in general, some countries have agreed to do so only from prospective date and are not willing to exchange past banking information. This puts a question mark on the efficacy of present legal provisions for exchange of banking information. There is an urgent need to revisit existing legal framework developed by OECD in this regards.” </font></em></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Though they shout hoarse to bring back black money parked in tax havens, many of the politicians are actually scared that some stupid country will reveal the secret funds parked there. </font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Banking Secrecy - A Twist in Tale? </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>MORE</strong> than twenty years ago, Jeffery Archer published a collection of his short stories, called, “A Twist in the Tale”, in which one of the stories was about a strict honest Finance Minister of Nigeria who was out to end corruption in his county. He goes on a mission to Switzerland to unearth bank accounts of his countrymen in Swiss banks. He goes to a Bank and meets the Chairman and asks for the details. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">He cajoles, threatens, induces and uses all the tricks in the trade to persuade the Chairman to part with the details, but the Chairman is very firm. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">He threatens that his Embassy in Geneva will be closed and he will throw out the Swiss ambassador from his country; he would hold a press conference and announce that the Bank is under investigation – but the Chairman did not respond! </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Finally the Minister got up from his seat, took out a pistol and said, “I need those names and by now you must have realised that I will stop at nothing. If you don't give them immediately, I am going to blow your brains out. Do you understand?” </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Chairman was sweating but he gave no names. He was prepared to die rather than part with the names. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">“Excellent,” said the Minister as he removed the pistol from the Chairman's head and picked up his briefcase and opened it to the banker to show neatly packed rows of hundred dollar bills which the Chairman quickly estimated to be about 5 million dollars. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">“Sir,” said the Minister, “How do I go about opening an account with your bank?” </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Do you think these politicians will allow the money to be brought back? </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"> – Wednesday's cases</font></strong></font></strong></font></p> <p><strong><font color="#663399" 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">Central Excise</font></strong></p> <p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">The reasoning for reversal of CENVAT credit is not relevant. The re-credit has to be taken by filing refund claim only - CESTAT</font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>AS </strong>per the ‘oral' directions given by the Central Excise officers who ‘visited' the assessee, the appellants reversed the <em>CENVAT credit </em>Under Protest. After one year when no show-cause notice was issued and nothing was heard from the department in writing about the alleged offence committed, the appellants took back the amount of <em>CENVAT credit </em>reversed by them in the <em>CENVAT</em> account and intimated the department. This ‘one-tight-slap' was too much to bear. The jurisdictional authorities immediately issued a show-cause-cum-demand notice on the ground that the appellants should have actually filed a refund claim and should not have taken the credit back suo motu . </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 when assessee transfers brand, trademark and other interests in a health periodical, held as intangible assets, profits arising out of such transactions are to be treated as capital gains or business income - capital gains, says HC</font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>ASSESSEE</strong> is a private limited company engaged in the business of Healthcare, print media & electronic media communications – it entered into a 'Specified Assets Transfer Agreement' with one ‘CMPIPL' for the sale of all its rights, titles and interest in specified assets of its Healthcare Journals & Communications business for a consideration of Rs. 3.80 crores. The issue before the HC is - Whether when assessee transfers brands, trademark and interests in a health periodical, held as intangible assets, the profit arising out of such transaction is to be treated as capital gains or business income. </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">Merely because there is a huge difference in duty between show cause notice and admitted amount, case of petitioner cannot be thrown out: HC</font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> Settlement Commission has prima facie failed to consider the investigation report on its merits. The Settlement Commission has failed to consider the investigation report submitted by the Commissioner which the Settlement Commission is bound to consider in terms of Section 127C(7) for passing appropriate order under Section 127C(9). Though at one stage the Settlement Commission has stated that the Revenue has conceded there were some errors in the calculation, in paragraph 24 of the order passed by the Settlement Commission it has been stated that the evidence furnished by the department is based on the official records and the bills issued by the applicant and as such the demand of the department is prima facie corroborated. </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> <div 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> </div> </body> </html>