TIOL-DDT 1834 · the untouched capture
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<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=14276"><img src="http://www.taxindiaonline.com/RC2/image/ddt/ddt_1794.jpg" alt="DDT in Limca Book of Records" width="175" height="120" hspace="5" border="0" align="right"></a></font></strong></font><font color="#663399" size="3">TIOL-DDT 1834</font><br>
12.04.2012<br>
Thursday</strong></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">ICD Kannur Notified </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>KANNUR</strong> in Kerala has been notified as an Inland Container Depot (ICD) for <em>Unloading of imported goods and the loading of export goods. </em></font></p>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=24&filename=notification/custom/2012/cnt12_032.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Notification No. 32/2012 - Cus., (NT.), Dated: April 11, 2012 </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">CENVAT Credit Wrongly taken - if not utilized, no Interest? </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>WE</strong> received this mail from a Netizen –</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">"The Apex Court in the case of <em>Ind Swift Labs <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=32&filename=legal/sc/2011/2011-TIOL-21-SC-CX.htm" target="_blank"><font size="1">(2011-TIOL-21-SC-CX)</font></a></strong> held that <strong>“interest is payable from the date of taking credit, not utilizing it”</strong> </em>. The Supreme Court ruled that “if the aforesaid provision [rule 14 of the CENVAT Credit Rules, 2004] is read as a whole we find 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 circumstances such credit becomes recoverable along with interest." </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Central government was kind enough to amend Rule 14 of the CENVAT Credit Rules, 2004 by notification 18/2012-CE(N.T), dated 17th March, 2012 so as to substitute the word "OR" with "AND". In the result, from 17th March, 2012, interest is not payable u/s 11AA of the CEA, 1944 on CENVAT credit wrongly taken <strong>unless the same is utilized</strong>.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now, coming to the question of “utilization” of credit wrongly taken, a few questions, (hypothetical as of today) – </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">+ Assume that <em>CENVAT Credit</em> of Rs. 2 lakhs has been taken on 17 th March, 2012 and a show-cause notice is issued in the month of November, 2012 inter alia seeking recovery of the CENVAT allegedly wrongly availed; </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">+ The demand notice is confirmed in March 2013 and penalty is imposed along with order for recovery of interest. The assessee pays up the confirmed amount and also penalty. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">+ While calculating interest, he finds that – </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Situation 1</strong> - The <em>CENVAT Credit</em> of Rs. 2 lakhs wrongly availed has not been utilized at all inasmuch as all through the period beginning from the date of taking credit till reversal of the same the CENVAT balance was always in excess of Rs. 2 lakhs. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Situation 2</strong> - the wrong CENVAT Credit availed has not been utilized fully all through the period from 17th March, 2012 to the date of payment of the confirmed dues meaning to say that only on certain days from the date of taking credit till the date of reversal the CENVAT credit balance fell below Rs. 2 lakhs. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">+ In such a scenario, it is the submission of the assessee that – </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">a) as for the Situation 1 above, no interest is payable since it has not been utilized; </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">b) in respect of Situation 2, interest would be payable only for the period beginning from <strong>when the balance first fell</strong> below Rs. 2 lakhs. This is because the moment the balance fell below Rs. 2 lakhs, it means that the CENVAT Credit that is held to be wrongly taken has been utilized on the said date and this fact would continue irrespective of the fact that the balance subsequently got increased to beyond the Rs. 2 lakhs mark, on account of fresh credits that accrued later. </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This interpretation is also on account of the reason that in terms of section 11AA of the CEA, 1944, which is to be applied mutatis mutandis , interest is to be calculated <strong>from the date on which such CENVAT credit is wrongly taken and utilized up to the date of actual payment of the amount due."</strong> </font></p>
<p><strong><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">Will the Board clarify? </font></strong></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">How can we do business in India if your tax-related decisions are subject to summary reversal by the legislature? - TEI asks PM </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>TAX</strong> Executives Institute (TEI) says it was founded in 1944 to serve the needs of in-house tax professionals. With 7,000 members worldwide, today the organisation has 55 chapters in Asia, Europe and North America, collectively representing 3,000 of the largest companies around the globe. As the preeminent association of business tax professionals worldwide, TEI has a significant interest in promoting fair tax laws and policies at all levels of government. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In a recent letter addressed to Prime Minister Singh, Finance minister Mukherjee, Law Minister Khurshid and Commerce Minister Sharma, the International President of TEI says, </font></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">TEI has long opposed retroactive tax legislation as unfair to otherwise compliant taxpayers and harmful to the ability of businesses to plan and conduct their operations in reliance on the legal rules in effect when business decisions are made. The uncertainty resulting from the retrospective aspects of Finance Bill 2012 could adversely affect the willingness of businesses to commence or continue operations in India. </font></em></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">For a tax system to be fair and perceived as being fair, taxpayers must be able to rely on the law in effect when business transactions take place, expenditures are incurred and other taxable events occur. Therefore, except in extreme circumstances, tax legislation should be prospective. </font></em></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">TEI recognizes that a government is free to change its tax policies, but fairness demands that the change should be prospective where the changes will have a significant negative financial effect on taxpayers. </font></em></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Reversing the outcome of decided cases on a retroactive basis exacerbates the uncertainty faced by businesses operating in India. How can taxpayers do business in India if their tax-related business decisions are subject to summary reversal by the legislature? Indeed, why would a taxpayer challenge an adverse decision of the taxing authorities in the first instance - and at considerable expense - if it cannot be assured that a successful judicial decision will stand? And what taxpayer would invest without hesitation in a country where the legality of tax assessments is not subject to independent judicial review? </font></em></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In sum, the retrospective effect of proposed ‘Finance Bill 2012' generally, and its reversal of Indian judicial precedent in particular, would have a significant detrimental effect on foreign direct investment and business operations in India, upending the necessary predicate of a stable and predictable fiscal environment for business. </font></em></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">Officers to Declare assets of Spouse - AP High Court </font></strong></font></p>
<p align="center"><font color="#006600"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Two Senior IPS officers fight each other - High Court orders Contempt against one and enquiry against both</font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN</strong> a landmark judgement delivered yesterday, the Andhra Pradesh High Court ordered contempt proceedings against the State DG of Police and held that officers were obliged to declare the assets of their spouses. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In this strange case, the petitioner Umesh Kumar is a very senior IPS officer of the 1977 batch. The main respondent is his batch-mate and the present DGP of Andhra Pradesh, Dinesh Reddy. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">They have levelled serious allegations of impropriety and corruption against each other. Each claims that baseless allegations are being levelled against him by the other only to further his own career prospects. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>The Charge by the petitioner</strong>: Respondent was conducting himself in a manner unbecoming of a member of the service; he was indulging in selective leaks to the press, and was sponsoring public interest litigation against the petitioner; the petitioner's reputation has been sullied by the action of the respondent; purchase and sale of large tracts of land by the respondent's wife; and the respondent's failure to declare these transactions in his annual property returns. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>The Respondent retaliates:</strong> while holding the post of Additional Director General (P&L), the petitioner was entrusted with the purchase of various material required for the police department worth hundreds of crores. He had indulged in a huge scam. After he joined ACB, the petitioner had destroyed all files pertaining to certain cases; timber scandal when he was DIG Warangal; Telgi Stamps scam in which he was involved; DGP office purchases scam; Illegal promotions of DSPs when he was in the DGP's office; Medal scam; and sale of bullet proof jackets to extremists. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>High Court observes:</strong> If the allegations and counter allegations levelled by the petitioner and the respondent against each other have any basis it would show that, in their fight to occupy the top post of the Director-General of Police in the State of A.P, <strong>both the media and the portals of this court have been used (misused) to eliminate the other from the race, without any regard to the consequences which such allegations may have on the image and credibility of not only the police force but also the institution of the judiciary.</strong> That the judicial process was sought to be subverted, in this mindless and selfish pursuit of personal glory, is a matter of serious concern, and may well <strong>necessitate a strict threshold scrutiny of the Writ Petitions</strong> being instituted before this Court. </font></p>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">High Court on Corruption: </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Avarice and insatiable greed is slowly but surely eroding the governance structure in this country. Corruption, unless severely dealt with, will destroy the very fabric of our society. Corruption by public servants has now reached endemic proportions and monstrous dimensions. Its tentacles have started grappling even institutions created for the protection of the republic. Unless those tentacles are intercepted and impeded from gripping the normal and orderly functioning of public offices, through strong legislative, executive as well as judicial exercises, corrupt public servants may well paralyse the functioning of such institutions. Proliferation of corrupt public servants could garner momentum to cripple the social order if such men are allowed to continue to manage and operate public institutions. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Wife's Assets - Should Husband Declare?</strong> The High Court questioned, “When members of the State Civil Services; Members of Rajya Sabha and Lok Sabha; Union Ministers; the Chief Minister and Ministers of the State of Andhra Pradesh; and Judges of the High Court of Andhra Pradesh; are required to disclose the assets of their spouse, is it permissible to construe Rule 16 of the All India Services (Conduct) Rules as enabling members of All India Services alone not to declare details of the assets of their spouse?"</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">When the spouse is extended, and avails, the benefit of LTC and Medical Reimbursement which a member of the All India Services is entitled to, can he/she avoid the obligation of having to disclose his/her assets on the ground that the assets were acquired from an independent source of income? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This requirement of spousal declaration must be read as obligatory as the spouse is being extended benefits from the public exchequer which he/she would not, otherwise, have been extended, but for being the spouse of the member of the service. </font></p>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The High Court directed : </font></strong></p>
<div align="justify">
<blockquote>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. The Government to enquire into the property transactions of the DGP's wife.
</font>
</p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. The Government to enquire into the allegations against each other.
</font>
</p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. The Registrar General of the High Court to initiate <em>suo-motu</em> criminal contempt proceedings against the DGP. </font></p>
</blockquote>
</div>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The enquiry officer shall be an IAS/IPS officer senior to both the petitioner and respondent IPS officers. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now, which officer would like to enquire against the State DGP and a very senior IPS officer? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Anyway, the State Government does not have much of a choice. According to a Government watcher, there are only two IPS officers senior to these two. One of them will retire this month end and the other has disqualified himself by filing a case against the appointment of Reddy as DGP. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">There are three IAS officers senior to them. Two of them will retire by June – and that leaves only one officer qualified to do the job. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We bring you the AP High Court's Order<font size="1"><em><strong> (<a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=51&filename=legal/hc/2012/2012-TIOL-258-HC-AP-MISC.htm" target="_blank">2012-TIOL-258-HC-AP-MISC</a>)</strong></em></font> delivered yesterday. </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><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">Customs </font></strong></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Import of Vessels - Duty to be paid and Bill of Entry to be filed? - Seized ships directed to be released: HC</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>SINCE </strong>the seized vessels were imported prior to 2000, prima facie, it appears that the customs duty on the said vessels were not payable. If the duty was not payable on the date of import and customs authorities have permitted user of the vessels all these years as imported goods, the customs authorities are not justified in abruptly seizing the vessels in question. The customs authorities shall forthwith release the seized vessels and shall not arrest or take any coercive steps in respect of all other vessels belonging to the petitioners till the adjudication order is passed in respect of the said seized vessels. </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 Revenue seizes cash in a search from assessee's premises, which turns out to be more than tax liability, entitlement of assessee to interest on refund of excess sum cannot be denied - YES, rules Bombay HC</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>SEARCH</strong> u/s 132 was conducted at business and residential premises of the deceased. On 4.9.1992, during said operation, cash of Rs.1,68,298/- was found and out of it, an amount of Rs.1,60,000/- was seized. On 24.12.1992, order u/s 132(5) determining provisionally total tax liability at Rs.3,34,492/- was passed and seized cash was appropriated till orders u/s 143(3) on regular assessment were passed. On 16.03.1995 order of regular assessment came to be passed and total income was assessed at Rs. 2,69,200/. Net tax demanded was Rs.34,572/. The petitioner paid that tax in cash in May 1995. The petitioner claimed that an amount of Rs. 1,60,000/- seized from him was neither appropriated nor treated as advance tax. </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">Pipes used for water supply projects wherein bulk of water has been supplied for human and animal consumption - even when it was used in industry, it was used for gardening and flushing of toilets - substantive benefit under exemption notification cannot be denied: CESTAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE </strong>notification does not stipulate that pipes should be supplied to projects which supplies water exclusively for human or animal consumption. Therefore, so long as these pipes are used for water supply projects wherein bulk of the water has been supplied for human or animal consumption, applying the ratio of the judgments cited supra and relied on by the learned counsel for the appellant, the benefit of notification no. 06/2006-CE has to be granted and cannot be denied. </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="left"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Tomorrow with more <strong>DDT</strong></font></p>
<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>
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