TIOL-DDT 2034 · 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 2034 </font><br>
30.01.2013 <br>
Wednesday </strong></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">CE - Appeals - Should you appeal immediately or wait for 90 days? - Draconian Circular favours late appellant, but …</font></strong></p>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">AS</font></strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> per Sl Nos 6 and 9 of the table to the now notorious CBEC Circular No. 967/2013 dated 1.1.2013:</font></p>
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<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">6 </font></p></td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CESTAT </font></p></td>
<td valign="top" bgcolor="#F3DEDE"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Appeal filed with a stay application against an Order in Original issued by the Commissioner. </font></p></td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Recovery to be initiated 30 days after the filing of appeal, if no stay is granted or after the disposal of stay petition in accordance with the conditions of stay, if any, whichever is earlier. </font></p></td>
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<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">9 </font></p></td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CESTAT </font></p></td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Appeal filed with a stay application against an Order in Appeal confirming the demand for the first time. </font></p></td>
<td valign="top"><p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Recovery to be initiated 30 days after the filing of appeal, if no stay is granted or after the disposal of stay petition in accordance with the conditions of stay, if any, whichever is earlier. </font></p></td>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now suppose two assessees get their respective orders on 1.1.2013 and one assessee files an appeal before the CESTAT on 15.1.2013 (within 15 days) and the other one files it on 20.3.2013 (just before the expiry of ninety days) and assume both do not get stay orders from CESTAT. (Here you don't need to assume; the appeal will not be listed in CESTAT for hearing the stay petition by that time). </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now, as per the Circular, recovery proceedings in respect of the first assessee can be initiated on or after 15.2.2013. In the case of the second assessee, recovery action can be initiated only after 20.4.2013. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So, is there an advantage in delayed filing of the appeal? Not really! </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DDT understands that yesterday while a High Court granted stay of recovery in a number of cases, it ordered deposit of 50% of the duty in a case where the appeal to CESTAT was filed at the last moment. </font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Draconian Circular - Stay Orders By High Courts </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DDT</strong> understands that yesterday, a High Court granted stay of recovery in more than 30 cases covered by the circular. Large number of cases is before several High Courts and many are pouring in. Is there any point in continuing this litigation? Will CBEC wake up and at least save the huge fees it has to pay its counsels in various High Courts? </font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">GST Alive? </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>WHILE </strong>everyone has almost written off the GST, it seems to have risen like a phoenix. At a meeting of the empowered committee of State Finance Ministers at Bhubaneswar yesterday, the State Governments accepted most of the suggestions of the Committee constituted by the Finance Minister Chidambaram. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Chairman of the empowered committee of State Finance Ministers, Sushil Kumar Modi said, "<em>This meeting puts an end to the long deadlock. We can move forward on GST. The central government has agreed to bring in the necessary changes in the Constitution amendment Bill to reflect the consensus achieved</em>". Just a day before, the Empowered Committee had removed a major hurdle by agreeing to the CST compensation formula suggested by the Centre. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">GST aims at an economic unification of the country with no trade barriers between states and strong persuasive politics can ensure this economic reality soon or will this be drowned in the political cacophony, which we have to live with in the ensuing elections? </font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">FTP - Amendment in Para 3.2.1 of Handbook of Procedures </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DGFT </strong>has amended Para 3.2.1of the Handbook of Procedures Vol. I (RE 2012)/ 2009-14: </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Existing paragraph: </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3.2.1 Application for status recognition shall be filed with jurisdictional RA / Development Commissioner (DC). However, in cases where export performance of EOUs / SEZs is clubbed together with company / firm / Group Company in DTA, the same will be considered by jurisdictional RA (in DGFT) only.” </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Amended paragraph: </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3.2.1 Application for status recognition shall be filed with jurisdictional RA / Development Commissioner (DC). However, in cases where export performance of EOUs / SEZs is clubbed together with company /firm / Group Company in DTA, the same will be considered by jurisdictional RA of DGFT only.<strong> EHTPs and STPs shall file an application of Status Recognition with <font color="#FF0000">concerned </font>jurisdictional RA. </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">With this amendment, EHTPs and STPs can apply to the jurisdictional RAs for grant of Status Certificate.</font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=47&filename=notification/dgft/2012/dgft12pn045.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DGFT Public Notice No. 45 (RE-2012)/ 2009-14, Dated: January 29 2013 </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">CRR Cut by 25 Basis Points </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>RESERVE</strong> Bank of India has cut the cash reserve ratio (CRR) of scheduled banks by 25 basis points from 4.25 per cent to 4.0 per cent of their Net Demand and Time Liabilities (NDTL) effective the fortnight beginning February 9, 2013. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The reduction in the CRR, will inject around Rs. 180 billion of primary liquidity into the banking system. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The policy repo rate under the liquidity adjustment facility is reduced from 8.0 per cent 7.75 per cent. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Consequently, the reverse repo rate under the Liquidity Adjustment Facility (LAF), determined with a spread of 100 basis points below the repo rate, will be 6.75 per cent instead of 7.0 per cent, and the marginal standing facility (MSF) rate, determined with a spread of 100 bps above the repo rate, now at 9.0 per cent will be adjusted to 8.75 per cent. </font></p>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Why the Change? </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">RBI Governor, Subba Rao has explained the rationale behind the policy action: </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>First, both headline wholesale price inflation and its core component, non-food manufactured products inflation, have softened through the third quarter. This provided some relief from the persistence that dominated the first half of the year. Several indicators such as the weaker pricing power of corporates, excess capacity in some sectors, the possibility of international commodity prices stabilising as well as inflation momentum measures suggest that inflationary pressures have peaked. However, further moderation in inflation going into the next fiscal year is likely to be muted as the correction of under-pricing of administered items is still incomplete and food inflation remains elevated. Accordingly, the setting of monetary policy has to remain sensitive to these conflicting pressures and attendant risks. </em></font></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Second, growth has decelerated significantly below trend through the last fiscal year and through this year so far, and overall economic activity remains subdued. On the demand side, investment activity has been way below desired levels and consumption demand too has started to decelerate. External demand has also weakened due to languid global growth. On the supply side, constraints in the availability of key raw materials and intermediates are becoming binding. While the series of policy measures announced by the Government has boosted market sentiment, the investment outlook is still lacklustre, especially in terms of demand for new projects. </font></em></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The third consideration that informed our decision is that liquidity conditions have remained tight. Although the Reserve Bank lowered the cash reserve ratio, CRR, successively in September and October 2012, and carried out open market operations (OMO) injecting systemic liquidity of Rs. 470 billion during December and January to augment liquidity, the average net LAF borrowings at Rs. <a></a>910 billion in January have been above the Reserve Bank's comfort level. This tightness could potentially hurt credit flow to productive sectors of the economy. The structural deficit in the system provided a strong case for injecting permanent primary liquidity into the system. </font></em></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Banking - KYC - Transfer of Bank Accounts </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>SHIFTING</strong> <strong>of bank accounts to another centre - Proof of address</strong>: Banks were advised by RBI, that KYC (Know Your Customer) once done by one branch of the bank should be valid for transfer of the account within the bank as long as full KYC had been done for the concerned account. The customer should be allowed to transfer his account from one branch to another branch without restrictions. In order to comply with KYC requirements of correct address of the person, fresh address proof has to be obtained from him/her upon such transfer by the transferee branch. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">However, a large number of customers with transferable jobs or those who migrate for jobs are unable to produce a utility bill or other documents in their name as address proof immediately after relocating. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In view of this, RBI has instructed that: </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(a) Banks may transfer existing accounts at the transferor branch to the transferee branch without insisting on fresh proof of address and on the basis of a self-declaration from the account holder about his/her current address, subject to submitting proof of address within a period of six months. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(b) Banks may also accept rent agreement duly registered with State Government or similar registration authority indicating the address of the customer, in addition to other documents listed as proof of address in Annex I of Master Circular on KYC/AML/CFT dated July 2, 2012. </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Banks should intimate their customers that in the event of change in address due to relocation or any other reason, they should intimate the new address to the bank within two weeks of such a change. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">While opening new accounts and while periodically updating KYC data as required, an undertaking to this effect should be obtained. In all these cases, customers will have to produce proof of address as mentioned at (a) and (b) above. </font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=347&filename=notification/rbi/2013/rbi013noti004.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">RBI/2012-13/399 - DBOD.AML.BC. No. 78 /14.01.001/2012-13, Dated: January 29 2013 </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">BIG FOUR to appear before UK PAC </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>BIG</strong> FOUR tax partners will appear before the British Public Accounts Committee in its investigations into tax avoidance. Witnesses from PwC, Deloitte, KPMG and Ernst & Young will appear on 31 January before the Committee. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Last year, the committee had condemned multinational companies for using transfer pricing arrangements to drastically reduce their UK tax, and also found fault with the HM Revenue & Customs for not taking sufficiently aggressive action to assess and collect the appropriate amount of corporation tax from these multinationals. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Committee told the HM Revenue & Customs, “the taxman must ensure big businesses do not get away with dramatically reducing their UK corporation tax payments through the use of complex tax avoidance arrangements”. </font></p>
<p align="center"><strong><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"> – Thursday's cases</font></strong></font></strong></font></strong></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">Service Tax</font></strong></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Manpower Recruitment and Supply Services - when farmers and transporters have entered into agreements directly with sugar factory, by no stretch of imagination appellant could be considered as a person responsible for supply of manpower to sugar factory, temporarily or otherwise - Strong prima facie case in favour - Pre-deposit of ST of Rs.2.21crores waived and Stay granted: CESTAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> appellant is a Trust (Sanstha) consisting of farmers and transporters. The farmers undertake harvesting of sugar cane and the truck owners undertake transportation of these from the farmers' fields to the factory of M/s Dudhganga Vedganga Sahakari Sakar Karkhana Limited, Bidri, Kolhapur. The bills for the service rendered to the sugar factory are routed through the Sanstha and the payment is received from the sugar factory to the Sanstha for further distribution to the farmers and the transporters.The department took a view that the activity undertaken by the appellant falls under the category of ‘Manpower Recruitment and Supply Services' and accordingly a Service Tax demand of Rs.2,21,20,788/- for the services rendered during the period 2005 to 2008 was made on the appellant. </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 relinquishment of vested rights in an immovable property can be considered as 'transfer' within meaning of Section 2(47) even if sale deed was not executed - NO: HC </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> assessee is a registered society and had registration u/s 12A(a) since 1977. Objects of the assessee, inter alia, were to promote sports of motorcar and motorcycle and conduct motor races, competitions, etc. During the scrutiny proceedings, for A.Y 2009-10, the A.O. sent a proposal to the DIT(E) recommending cancellation of registration granted to assessee u/s 12A(a). In the opinion of DIT(E), the motor sports were for the purpose of promotion of business of sponsors. The sponsorship proceeds were commercial receipts in the hands of the assessee. The DIT(E) was of the opinion that assessee was hit by proviso to Section 2(15) inserted from 1.4.2009. Therefore, according to him, the objects and activities of the assessee could no more be considered charitable in nature. In this view of the matter, he cancelled registration granted to the assessee u/s 12A(a). </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="#FF6600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Interest under Section 11AB of CEA, 1944 is payable on duty paid under Section 11A(2B) under supplementary invoice on price differential on account of retrospective price escalation received by assessees - since interest is "sum due to Government", which is recoverable u/s 11 of CEA, 1944 it has no limitation period - SCN issued u/s 11A has to be treated as communication for recovery of interest u/s 11 - Revenue appeals allowed and assessee appeals dismissed: CESTAT</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN</strong> all these cases, the assessees had supplied excisable goods to their customers against contracts with Price Escalation Clause. At the time of clearance, the duty had been paid on the provisional price, though the same was subject to variation in terms of the Price Escalation Clause. In none of these cases, the assessees had opted for provisional assessment in terms of the provisions of Rule 7 of the Central Excise Rules, 2002 and the duty had been paid at the time of clearance on the provisional price. Subsequently, there was upward revision of price from back date and the assessees received the escalation amount from their customers against the supplementary invoices raised by them and all that time, the assessees paid the duty on the price differential. However, while paying duty, they did not pay interest on the same as per provisions of Section 11AB of the CEA, 1944. The department was of the view that since the price had been revised upward from the back date and on account of such upward revision of the price, the appellant had received the differential amount, while paying duty on such price differential, they should also have paid the interest on the duty under the provisions of Section 11 AB. </font></p>
<p><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">See our Columns Tomorrow for the judgements </font></strong></p>
<p><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Tomorrow with more <strong>DDT</strong></font></p>
<p><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a Nice Day </font></p>
<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></p>
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