TIOL-DDT 2066 · 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 size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><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=17063"><img src="http://www.taxindiaonline.com/RC2/image/stories/limca_book2013.jpg" alt="DDT in Limca Book of Records" width="175" height="120" hspace="5" border="0" align="right"></a></font></strong></font></strong></font></strong></font></strong></font><font color="#663399" size="3">TIOL-DDT 2066</font><br>
15.03.2013<br>
Friday</strong></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">CBEC
Draconian Circular: Recovery
of Demands when Stay plea is pending - No automatic vacation of Stay
after 180 days: HC </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>ALMOST</strong> every High Court is striking at the root of the Board's draconian New Year Circular on recovery of demands. CBEC might not have realised a single rupee from the Circular, but the Board has generated tremendous amounts of wealth - for the lawyers, including the Government Counsels. Even, lawyers who have never appeared in a High Court, are filing writ petitions and getting Stay and hefty fees - just for the asking. Lawyers should be ever grateful to the benign Board for this New Year windfall. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Recently, the Punjab and Haryana High Court came down heavily against the circular. It not only held the very basis of the Circular as <strong>untenable, misconceived, wholly illegal and arbitrary, </strong>but also set aside the condition of recovery, if no stay is granted within 30 days, as illegal, arbitrary, unjustified and read down the condition that a stay granted gets automatically vacated after 180 days. After 180 days, the Court wants the Department to move an application before the Tribunal for vacation of Stay. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Some gems of judicial wisdom from the exhaustive judgement replete with erudition supported by huge precedence: </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. <strong>The assessee in no way can insure that the Commissioner (Appeals) shall decide his application for dispensation of the duty demanded and penalty levied within a period of 30 days.</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. The Revenue cannot take a right which has been conferred by statute only for the reason that the application for waiver of pre-deposit could not be disposed of within 30 days. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. It would be a farce, if without considering the application for pre-deposit, the recovery proceedings are initiated for no fault of the assessee. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. <strong>The statutory right of appeal or of consideration of an application for pre- deposit cannot be frustrated administratively. </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">5.<strong> Till such time, the application for waiver of pre-deposit is decided in an appeal filed in terms of the Statute, the Revenue shall not proceed to recover the same provided that the assessee does not delay the hearing of the appeal directly or indirectly. </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">6. <strong>Where the assessee has no control over the functioning of the Tribunal, then the provision of vacation of stay cannot be sustained. </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">7. Condition of automatic vacation of stay on the expiry of 180 days, has to be read down to mean that after 180 days the Revenue has a right to bring to the notice of the Tribunal the conduct of the assessee in delay or avoiding the decision of appeal, so as to warrant an order of vacation of stay. </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is Simple; if the Tribunal created by the State cannot decide my Stay application, the State cannot punish me - only the Board does not understand this or they do but refuses to admit that. On 1st April 2013, they can inform the FM that Revenue targets could not be reached because of the mischief caused by the High Courts! </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The P&H High Court judgement is a classic analysis of the provisions of appeal, stay and recovery and every revenue officer should read it. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We bring you this classic judgement today. Please see <strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=17264" target="_blank">Breaking News</a></strong></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Rs
50 lakhs Cost imposed on appellant for wasting precious time of HC
and SC; orders CBI and IT enquiry; guidelines issued on writ
petitions: SC </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>A </strong>Company called Pearls Green Forests Limited (PGF) is said to have collected thousands of Crores from the public in a Scheme of sale and development of agricultural land. A SEBI investigation started in 1997, which was strongly contested and finally reached the Supreme Court in 2004. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Supreme Court was not at all impressed and while dismissing the appeal, not only imposed a cost of Rs. 50 Lakhs but also ordered inquiry by CBI and Income Tax Department. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Supreme Court observed, </font></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">"Frivolous challenges always result in prolongation of the litigation, which enables such unscrupulous elements who always thrive on other peoples money to take advantage of the pendency of such litigation preferred by them and thereby gain, on the one side, unlawful advantage on the monitory aspect and to the disadvantage of innocent victims, and ultimately, gain unlawful enrichment of such ill-gotten money by defrauding others. In effect, such attempts made by invoking the extraordinary jurisdiction of the writ Courts of many such challenges, mostly result in rejection of such challenges. However, at the same time, while taking advantage of the long time gap involved in the pending proceedings, such unscrupulous litigants even while suffering the rejection of their stand at the end as to the vires of the provisions, always try to wriggle out of their liabilities by stating that the time lag had created a situation wherein those persons who were lured to part with huge sums of money are either not available to get back their money or such unscrupulous petitioners themselves are not in a position to refund whatever money collected from those customers or investors."</font></em></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Supreme Court stipulated certain guidelines for the writ courts while dealing with challenges to the Statutes: </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. Examine whether there is a prima facie strong ground made out in order to examine the vires of the provisions raised in the writ petition. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. The Court can also note whether such challenge is made at the earliest point of time when the statute came to be introduced or any provision was brought into the statute book or any long time gap exist as between the date of the enactment and the date when the challenge is made. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. It should also be noted as to whether the grounds of challenge based on the facts pleaded and the implication of provision really has any nexus apart from the grounds of challenge made. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. With reference to those relevant provisions, the Court should be conscious of the position as to the extent of public interest involved when the provision operates the field as against the prevention of such operation. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">5. The Court should also examine the extent of financial implications by virtue of the operation of the provision vis-a-vis the State and alleged extent of sufferance by the person who seeks to challenge based on the alleged invalidity of the provision with particular reference to the vires made. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">6. Even if the writ Court is of the view that the challenge raised requires to be considered, then again it will have to be examined, while entertaining the challenge raised for consideration, whether it calls for prevention of the operation of the provision in the larger interest of the public. </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Supreme Court had only attempted to set out some of the basic considerations to be borne in mind by the writ Court and the same is not exhaustive. In other words, the Writ Court should examine such other grounds on the above lines for consideration while considering a challenge on the ground of vires to a Statute or provision of law made before it for the purpose of entertaining the same as well as for granting any interim relief during the pendency of such writ petitions. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">For the above stated reasons it is also imperative that when such writ petitions are entertained, the same should be disposed of as expeditiously as possible and on a time bound basis, so that the legal position is settled one way or the other. </font></p>
<p><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Please see </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/2013/2013-TIOL-18-SC-MISC.htm" target="_blank">2013-TIOL-18-SC-MISC </a></font></strong></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">Ramesh Nair to be Member CESTAT again? <br>
</font></strong></font><font color="#006600"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CESTAT Members discharged during probation entitled to practice</font></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>FORMER</strong> Members of CESTAT are not allowed to practice before the CESTAT. Does this bar apply to a Member who is not confirmed, but discharged during probation? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">If an advocate practicing in CESTAT is appointed as a Member at the age of 45 and if he is not confirmed within two years but discharged - at the age of 47, is he permanently barred from practicing in the CESTAT for the sin of being a Member under probation for two years? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Ramesh Nair was appointed as a Member (Judicial) in CESTAT (<strong>Please see <a href="http://www.taxindiaonline.com/RC2/NewsDesc.php?MpoQSrPnM=MTU5MjU=" target="_blank">DDT 1947 - 21.09.2012</a></strong>) vide Office Memo F.No.A-12026/ 1/20 11-Ad.IC (CESTAT) dated 13.09.2012. The OM was modified on 19.9.2012 to the extent that instead of a term of 5 years from the date of entry upon the office, the offer was made for appointment until the age of superannuation, i.e. 62 years. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">He sought a clarification "whether a member is entitled to practice and appear in CESTAT after he is discharged from service for any reason given by either side during the period of probation." He was informed that the words "on ceasing to hold office", is applicable to all types of cessation-whether it is retirement or resignation or discharge during probation or by any other way. He filed an application in the CAT challenging this communication and sought a direction to the Ministry to appoint him as Member in CESTAT without being subjected to embargo of Section 129 (6) of Customs Act, 1962 and Central Excise Act, 1944 in the event of his ceasing to hold office as Member before the expiry of period of probation. While the issue was pending in the CAT, the Government withdrew the offer of appointment. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We understand that the CAT recently held that a member of the Tribunal discharged from service during probation period may not be debarred from practicing before it and the provision of Section 129 (6) of Customs Act, 1962 would be applicable only to such Members who cease to hold office only after their confirmation. The phrase "on ceasing to hold office as Member" used in Section 129 (6) would not include discharge of probation and only a Member who is confirmed to hold office in such capacity can be said to have ceased to hold the same. Since a probationer does not acquire any lien on the post of Member before its confirmation, there is no question of his ceasing to hold the same. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is understood that the CAT has allowed the application with consequential benefits and this may find Ramesh Nair back in CESTAT. </font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">FTP - List of Goods in SCOMET </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>GOVERNMENT</strong> has made amendments in the list of specified goods, services and technologies, i.e. Special Chemicals, Organisms, Materials, Equipment and Technologies (SCOMET) that was notified vide Notification No.38 (RE-2010) /2009-2014 dated 31st March, 2011. Annexure to this notification will replace the existing ‘Appendix 3' to Schedule- 2 of ITC (HS) Classification of Export and Import Items, 2009-14. </font></p>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=45&filename=notification/dgft/2012/dgft12not037.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DGFT Notification No. 37 (RE-2012) /2009-2014, Dated: March 14, 2013 </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Tax Free Bonds - Clarification</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>BUDGET</strong> 2013-14 authorizes Union Government to raise Rs. 50,000 crores (Tax Free Bonds). These bonds carry a lower rate of interest, currently in the range of 6.75 to 7.5 per cent which is tax free under Section 10(15) (iv)(h) of the Income Tax Act, 1961. Such bonds were also provided for in Budget 2012-13, but the response had been poor due to restrictions under Section 372A(3) of the Companies Act, 1956. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Section 372A (3) of the Act inter alia provides that "No loan to any body corporate shall be made at a rate of interest lower than the prevailing bank rate, being standard rate made public under section 49 of the Reserve Bank of India Act. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now, Ministry of Corporate Affairs clarifies that <em>in cases where the effective yield (Effective rate of return) on tax free bonds is greater than the yield on prevailing bank rate, there is no violation of Section 372A(3) of Companies Act, 1956</em>. </font></p>
<p><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=wnew/mca_circular_06_2013.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">MOC F. No. 5/03/2013-CL-V, Dated: March 14 2013 </font></strong></a></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DDT Cartoon </strong></font></p>
<p align="center"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><img src="http://www.taxindiaonline.com/RC2/image/stories/ddt_2066.jpg" alt="Legal Corner Icon" width="400" height="451" hspace="5" border="0" align="center"></strong></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"> - Monday'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">CENVAT - duty paying documents lost in transit - Powers of adjudication are given to quasi judicial authorities to sub-serve justice and not to deny them -rejection of request is case of pure and simple harassment to assessee</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> appellant received a consignment of duty-paid inputs from <em>M/s. Rashtriya Ispat Nigam Ltd., Pune</em>. During the course of transportation, all the documents including the duty paying documents were lost in transit by the driver of the truck and the driver lodged a complaint with the Sonai Police Station, Ahmednagar .The appellant vide letter dated 19/12/2007 along with copies of FIR, affidavit and Xerox copies of the invoices, informed these facts to the department and requested for permission to take credit which was never given. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The wait became unbearable and so the appellant took CENVAT credit of the duty involved of Rs.57,792/-. This probably made the Assistant Commissioner wake up from slumber and spring into action. He rejected the assessee's request and denied the credit and, thereafter, issued a SCN dated 20/10/2009 demanding reversal of CENVAT credit along with interest thereon and also for imposition of equivalent amount of penalty under Rule 15 read with Section 11AC. </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 commission earned by assessee is in nature of salary as per Sec 192, assessee is required to pay advance tax as per Sec 208 when employer fails to deduct tax at source - NO: ITAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>ASSESSEE</strong>, an individual, derives income from salary, house property and other sources. It was carrying on the activity of diagnostic services through his proprietary concern Vijaya Diagnostic Services till the end of FY 2004-05. It had entered into an agreement with Vijaya Diognostic Centre Pvt. Ltd. As per which the business of the proprietary concern was taken over by the company. It had filed its ROI declaring total income of Rs.81,42,230/-. Subsequently a search operation was conducted, during which it was found that huge amounts were debited as ‘commission paid' and at the end of the years some amount was shown as outstanding. When the AO sought clarification, it was explained that the commission was paid to the assessee calculated at the rate of 2% of the total sales made by the company. It was also contended that the amount was not accrued during the year as the royalty payable to the assessee could be ascertained only when the company's accounts were audited. When the AO found that no commission income was admitted by the assessee, he added the same as undisclosed income of the assessee for the assessment year. On appeal, CIT(A) had sustained the addition and observed that the company was all along treating the amount to be paid or payable to the appellant as commission only. In fact, the administrative head of the company had also confirmed that the amount paid to the appellant was commission @2% on the total receipts. </font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Service Tax </font></strong></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Appellant
was providing services as DSA on commission basis to ICICI Bank - since
they were misguided by their Consultant that Bank is liable to pay ST,
they failed to pay service tax and file ST-3 returns although they obtained
registration - this is fit case for condoning lapse and not imposing any
penalty - Appeal allowed to said extent: CESTAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> appellant was providing services as Direct Sales Agents (DSA) on commission basis since October, 2004 to General Insurance Companies and ICICI Bank.They had obtained Service Tax registration under the category of "BAS" in September, 2005 but did not pay Service Tax or file returns. A case was booked and it was revealed that the appellant had earned commission of Rs.8,52,839/- during the period from October, 2004 to March, 2008 on which they have not discharged their service tax liability of Rs.98,459/-. The above fact was admitted by Shri Mayur Vikrambhai Daftary, proprietor of the assessee in his statement dated 11/02/2008. </font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">See our Columns Monday for the judgements</font></strong></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Monday with more<strong> DDT</strong></font></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a Nice Weekend </font></p>
<p 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"> <strong><a href="mailto:vijaywrite@taxindiaonline.com">vijaywrite@taxindiaonline.com</a></strong></font></p>
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