TIOL-DDT 199 · the untouched capture
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<html> <head> <title>Untitled Document</title> <meta http-equiv="Content-Type" content="text/html; charset=iso-8859-1"> </head> <body bgcolor="#FFFFFF"> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#663399" size="3">TIOL-DDT 199</font><br> 12 09 2005<br> Monday</b></font></p> <p align="center"><font color="#006633" size="2" face="Verdana, Arial, Helvetica, sans-serif"> <b>Classification of sprayer engine – Board invites suggestions</b></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> Board proposes to issue a circular clarifying that sprayer engine is to be classified under Chapter Heading 84.07 of the First Schedule to the Central Excise Tariff Act, 1985. There is no change at the 4 digit level even in the 8 digit Tariff. Board is aware of two interesting cases while coming to this conclusion.<br> <br> 1. The Assistant Commissioner, Division-I, Surat-I Commissionerate, passed an order classifying product under chapter heading 84.07 of CETA 1985 and appeal against the said order was rejected by Commissioner (Appeal). CEGAT dismissed the appeal filed by the assessee against the said order-in-appeal of Commissioner (Appeal) on account of non-compliance with the stay order.<br> <br> 2. CEGAT, Chennai Bench in the case of Commissioner of Central Excise, Chennai-III Vs. M/s. Greaves Limited [2002-(148)-ELT-0059-(T)] on classification of sprayer engines classified the product under 84.24. The appeal filed by the department against the said order of the Tribunal was summarily dismissed by the Hon’ble Supreme Court without going into the merits of the case. <b>Mere rejection by Hon’ble Supreme Court would mean that the Apex Court refused to exercise its jurisdiction and therefore could not by itself be considered as the decision of the Apex Court on merit on the correctness of the decision sought to be appealed against.</b> The short order passed by the Hon’ble Supreme Court in the matter of CCE Chennai –III vs. Greaves Ltd. cannot be treated as a declaration of law by the Hon’ble Supreme Court. <br> <br> So how does the Board go about nullifying the Supreme Court order? Not by retrospective legislation as you must be thinking. They have now come up with a new device. Just a circular! Any way if the field or the assessees have any problem with the Board decision, they can send their views to <a href="dscx4cbec@yahoo.com">dscx4cbec@yahoo.com</a> by 23rd September 2005. <br> <br> <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=wnew/excircular.htm">Section 37B Order – draft circular</a></font></p> <p align="center"><font color="#006633" size="2" face="Verdana, Arial, Helvetica, sans-serif"> <b>Summary dismissal by Supreme Court – what is the effect?</b></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> While issuing the draft circular mentioned above, Board states, <b>Mere rejection by Hon’ble Supreme Court would mean that the Apex Court refused to exercise its jurisdiction and therefore could not by itself be considered as the decision of the Apex Court on merit on the correctness of the decision sought to be appealed against. The short order passed by the Hon’ble Supreme Court in the matter of CCE Chennai –III vs. Greaves Ltd. cannot be treated as a declaration of law by the Hon’ble Supreme Court. </b><br> <br> Board does not mind if their Commissioners and other officers do not pass speaking orders, but Board is not prepared to spare the Apex Court if it does not pass speaking orders. So Board does not consider the <b>short</b> order of the Supreme Court as declaration of law. But who gave the Board the power to declare that Supreme Court’s order is not law? Does it not border on contempt? Generally the all-knowing bureaucrat has only contempt for the judiciary, but most of them are wise enough to refrain from expressing the contempt publicly.<br> <br> In the famous KUNHAYAMMED case - </font><font size="1" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=50&filename=legal/sc/2002/2002-TIOL-50-SC-LIMITATION.htm">2002-TIOL-50-SC-LIMITATION</a></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">, the Supreme Court had laid down the law that once an appeal is dismissed with or without reasons, merger results and law is declared - It is no longer permissible to move the High Court by review and no court, tribunal or authority can express any opinion contrary to the view taken by Supreme Court. <br> <br> So dismissal of an appeal by a short summary order is good enough law and the Board certainly cannot subvert the Supreme Court order by a circular.</font></p> <p align="center"><font color="#006633" size="2" face="Verdana, Arial, Helvetica, sans-serif"> <b>Counter insurgency allowance – exemption from Income Tax</b></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> As per Section 10 of the Income Tax Act, certain incomes are not included in computing the total income. As per Rule 2BBA, certain allowances and their limits are prescribed for exclusion from the Tax. One such allowance is the counter insurgency allowance granted to armed forces personnel for operating away from their permanent locations for a period of more than 30 days. Now the restriction of 30 days is deleted.<br> <br> <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=35&filename=notification/cbdt/2005/it05not197.htm">Notification No. 197/2005, Dated: September 8, 2005 </a></font></p> <p align="center"><font color="#006633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>FBT – In Court</b></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> The Fringe Benefit Tax, the new goose that the Finance Minister discovered is in trouble, maybe largely because the FM’s boys put so much pressure on it to lay too many golden eggs. The recent Board clarification must have put too much load on the egg laying capacity of the poor goose. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now the FBT is challenged at least in two High Courts. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Strangely in the Congress Ruled state of Andhra Pradesh, a state owned PSU, Andhra Pradesh Industrial Infrastructure Corporation (APIIC), has filed a writ in the AP High Court. The APIIC is not challenging the FBT but wants it to be included in the exempted category.<br> <br> A CA firm represented by its partner, a former President of the ICAI, has challenged the FBT in the Madras High Court on the following grounds:-</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. It violates the following provisions of the constitution.<br> <br> i. Article 14 - Equality before law<br> ii. Article 19 - Right to Freedom – profession<br> iii. Article 265 - No tax without authority of law<br> <br> 2. It amounts to double taxation as no deduction of expenditure is allowed.<br> 3. It discriminates between different categories of employers.<br> 4. The cost of administration would be heavy.<br> 5. It is against the basic concept of income-tax law<br> 6. It is without any rationale.<br> <br> Other Court battles are sure to follow soon.</font></p> <p align="center"><font color="#006633" size="2" face="Verdana, Arial, Helvetica, sans-serif"> <b>And the defence of the Government</b></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> Dr Parthasarathi Shome, Advisor to the Union Finance Minister, clarified that FBT was not a tax on expenditure and that it was basically a tax on the income of employees that was being collected at the hands of an employer. He said,<br> <br> "There is no issue of constitutional validity of FBT. It is essentially a tax on income of employees that is collected from the employer, " <br> <br> Dr Shome said that FBT was like VAT, where the tax was collected from the manufacturer even though the incidence of taxation is on the consumer. <br> <br> Dr Shome urged India Inc to stop debating the issues of presumption and the philosophical matters behind FBT and instead identify the inconsistencies in the recent circular of the tax department. <br> <br> "Within the concept of presumption, if there are any clear inconsistencies then they could be considered, analysed and removed. It will be useful to list them in a technical manner," he said. <br> <br> Regarding further clarifications by another circular, he said,<br> <br> "There is no plan for another circular. We have addressed all the issues that came to us in the circular that was issued. On the other hand, it is not in our culture to refuse reconsideration of any particular issue that is strongly felt by the taxpayer," <br> <br> Saying that FBT is more equitable, he said,<br> <br> "If the tax rate was simply kept higher, then only those that have taxable profits would pay the FBT. In this particular case, it is much more equitable. There is an important issue of equity and the incidence is much more evenly spread”<br> <br> Dr Shome underlined two sides of the story of FBT - misunderstanding of the structure of the tax and the other is fear of higher compliance of tax that may drain corporate profits. <br> <br> "Any new tax with a new return arithmetically will increase compliance time. But I really do not believe that compliance costs would be vehemently increased on account of FBT”<br> <br> <b><font color="#FF6666">Until tomorrow with the <font color="#FF0000" size="5">200th</font> edition of DDT<br> <br> Have a nice day. <br> <br> Mail your comments to</font></b> <a href="vijaywrite@taxindiaonline.com">vijaywrite@taxindiaonline.com </a></font></p> </body> </html>