TIOL-DDT 2122 · 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 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></strong></font></strong></font></strong></font></strong></font><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"></font></strong></font><font color="#663399" size="3">TIOL-DDT 2122 </font><br>
07.06.2013 <br>
Friday </strong></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Audit by Service Tax Department - HC Orders <font color="#FF0000"><em>Status Quo </em></font></font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">"<strong>IT</strong> is a general practice for Service Tax Department to conduct audit of service tax assessee for the last five years by deputing their own officers of the rank of inspector and Superintendent. Service Tax Department also seeks voluminous details and seeks information in self-specified format/annexures of about 32 pages, which are not prescribed under the law. On several occasions, the courts have held that the Department has to give the reason and opportunity of hearing before conducting an audit under the law even when the Parliament has given them the power to conduct special audit. However, Service Tax Department without assigning any reasons routinely conducts audit even when it is not prescribed under the law and not conducting special audit.", submitted an assessee before the Delhi High Court. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Recently in Delhi High Court in Writ Petition (C) No. 3774 of 2013 <em>[M/s Travelite (India)]</em>, the action of the Department of conducting service tax audit for the last five years by their own officers has been challenged along with the Service Tax Rules empowering the Commissioner of Service Tax, to depute their own officers from Department for conducting audit. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The High Court by order dated 30.05.2013 has issued notice to the Ministry of Finance and the Commissioner Service Tax and also directed that status quo be maintained regarding audit. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In this matter, the assessee before approaching to the High Court had approached the Department for seeking reasons and under which law the Department has sent them the number of forms to be filled up; however, the Department did not respond and insisted for all such documents/information even by issuing summons. The assessee has then approached the High Court. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now the Department will not be able to conduct audit of the said assessee and the matter has been posted for further hearing on 24.09.2013. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The High Court will examine the validity of the provisions of the Service Tax Rules,1994 as well as the action of the Department in conducting audit of service tax assessee by deputing the departmental officers. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">There was a time when the Audit wings of the department were specialised units with senior inspectors. They even used to get a special pay. And many of the assessees happily welcomed these departmental audit officers who were very knowledgeable and could help the assessees in clarifying several doubts. Over the years greed and incompetent arrogance replaced decency and erudition and these officers became a big nuisance and most unwelcome in the premises of the assessees. They became an impediment for the normal work of the assessee's offices and it became prohibitively expensive to entertain these auditors. While Central Excise assessees accept Audit as an unavoidable evil, Service Tax assessees who are relatively new to the vagaries of Audit cannot understand why the Departmental auditors should come to their premises and audit their accounts when no other department does that. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It seems under the cadre review proposals, the CBEC will establish some exclusive Audit Commissionerates and maybe by that time more assessees will approach Courts and get audit stayed. This is what happens when you transform yourself from an advisor to an adversary. </font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">New Exchange Rates </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IT</strong> <strong>was only on the 5th June, 2013 that the Central Government vide notification <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=24&filename=notification/custom/2013/cnt13_058.htm" target="_blank">58/2013-Cus (NT)</a></strong> notified new exchange rates of Swedish Kroner, Swiss Franc & Japanese Yen effective from <strong>06.06.2013</strong> for export and imported goods. Yesterday, i.e on the 6th June, the Central government came out with another notification notifying new exchange rates of all the currencies including the ones that were revised a day ago. And these are effective from today, i.e 7th June, 2013. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So, in effect, the exchange rates of Swedish Kroner, Swiss Franc (not Swiss France) and Japanese Yen were effective only for a day. Probably, that's the greatness of those currencies. </font></p>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=24&filename=notification/custom/2013/cnt13_059.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Notification 59/2013-Cus dt. June 6, 2013 </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Export proceeds realized in rupees - enabling provision </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE </strong>Central Government has amended paragraph 2.35(b) of the FTP, 2009-2014. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Inasmuch as the existing sentence in Para 2.35(b) of Foreign Trade Policy, 2009-2014 will be followed by: </font></p>
<p align="justify"><em><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">"…………except to countries as notified by DGFT from time to time. Export of such goods will be permitted against payment in Indian rupees to the notified countries subject to at least 15% value addition." </font></strong></em></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The effect of this Public Notice is that an enabling provision has been made to allow export of goods imported against payment in freely convertible currency where export proceeds will be realized in rupees. This dispensation will be applicable to such countries as would be notified by DGFT from time to time. They also have to achieve 15% value addition. </font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=45&filename=notification/dgft/2013/dgft13not016.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Notification 16/(Re 2013)/2009-2014, Dated: June 6, 2013</font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Gold - it just shines a little more than copper or bronze: FM </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>ADDRESSING the Annual General Meeting of the Indian Banks' Association in Mumbai, the Finance Minister said </strong>- "Banks have a role to play in dampening the enthusiasm for gold. I would urge all banks to please advise their branches that they should not encourage their customers to invest in or buy gold." The Reserve Bank, the Finance Minister said, has already "advised banks they should not sell gold coins...I hope a day will come when we regard gold as any other metal, it just shines a little more than copper or brass." </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A day after the government raised import duty on gold to 8 percent, the Finance Minister said the surging imports are unsustainable and advised the banks to tell customers not to invest in the precious metal. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Expressing concern over rising Current Account Deficit, Chidambaram said, "the gold imports have been a major contributor of the CAD. With the sharp drop in gold prices, millions were happy. I am afraid I was not among the millions. I told the (RBI) Governor that the drop in gold prices internationally is a bad news for India. Our fears came true." </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">"In April we imported 142 tonnes of gold, in May we imported 162 tonnes of gold. Last year's monthly average was 70 tonnes of gold, this year in the first two months, the average is 152 tonnes of gold", he said, questioning "how do we sustain? How can we finance these gold imports." </font></p>
<p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">Does anyone have a solution to stop this gluttony?</font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">For those who do not make it to VCES, 2013 the doors of Settlement Commission are always open </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">WE received an interesting mail on the VCES from a netizen - </font></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">"Section 111 of the FA, 2013 says that where the CCE has reasons to believe that the declaration made by the declarant under the Scheme was "substantially" false, he may in writing serve notice on the declarant in respect of such declaration requiring him to show-cause why he should not pay the tax dues not paid or short-paid. What is meant by "substantially false" would be an issue that would need the Courts (or for that matter Settlement Commission) to answer in the days to come. Moving further, sub-section (2) states that such action cannot be taken after the expiry of one year from the date of declaration . Sub-section (3) specifies that the SCN issued u/s.s (1) shall be deemed to have been issued under section 73/73A. </font></em></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>A few questions arise here - </em></font></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">+ since the VCES scheme allows a declarant to disclose his tax dues for the period beginning 1 st October, 2007 to 31st December, 2012 and assuming that the declarant has filed the declaration on 31 st December, 2013 will the SCN issued (for making a substantially false declaration) by December, 2014 cover the entire period of the declaration? This cannot possibly be so for the reason that the notice<strong> deemed</strong> to have been issued u/s 73 can cover the period of five years and not more. So also, since the facts have already been revealed by the declarant while filing the declaration, can suppression be alleged? </font></em></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Be that as it may, once the SCN is issued cannot the declarant knock the doors of the Settlement Commission for settlement of his dues? </font></em></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In the years to come, I am certain that the "tax disputes" under VCES would continue to simmer in the Tribunal, the Settlement Commission and the Courts long after the VCES scheme has ended its life span." </font></em></p>
<p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">These doubts may seem irrelevant to some experts, but the fact is that the assessees are afraid of the Government for they believe, you are damned if you do and you are damned if you don't. When the Government says, ‘it is deemed', the assessee understands it as, ‘I am doomed'. DDT has been repeatedly emphasizing the need for a comprehensive clarification on VCES and the sooner the Board comes out with it, the better. </font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">No early hearing as more than 20K appeals are pending before the CESTAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>TATA </strong>Consultancy Service Ltd. had filed applications for early hearing of their appeals on the ground that the application for rebate claim amounting to Rs.8,42,65,547/- is pending before the department. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Bench rejected their plea by observing - </font></p>
<blockquote>
<p align="justify"><em><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">"2. More than 20,000 appeals are pending before this Bench for hearing, therefore, we do not find any justification for hearing the appeal out-of-turn as the same would affect a number of other appellants who have been waiting since 2003/2004 for hearing of their appeals…." </font></em></p>
</blockquote>
<p align="justify"><em><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">When are they going to clear those 20,000 cases? One of the purposes of establishing Tribunals was speedy disposal of cases. Why can't the Government establish more benches? </font></em></p>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">See
<a href="http://www.taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=ODg1MzI=" target="_blank"><font size="1">2013-TIOL-856-CESTAT-MUM
</font></a></font></strong></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">IT Department (DG, Systems) publishes Handbook of Frequently Asked Questions </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">"<strong>WE</strong> are
changing the Income Tax world with technology. Many people see technology
as the problem; but we would like to see it as the solution, as the enabler.
With the focus on <font color="#000000">technology-driven tax</font> administration,
the Department is now able to improve the delivery of its public services,
offer multiple channels of communication, individually tailored services,
stronger local accountability and greater efficiency. our officers often
have many doubts and questions - which require immediate solutions and answers.
There is a need to assist the field formations in addressing these, to enable
them to take full benefit of the computerization efforts of the Department.
It is in this context that the Directorate General of Systems has brought
out this booklet titled "Systems Handbook of Frequently Asked Questions
(FAQs)", as a single reference guide to the common problems faced by
our field officers", says the Foreword to the Handbook published recently
by the Directorate of Systems, Income Tax Department. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This answers several questions like: </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. How to resolve cases of One PAN allotted to two persons? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. How to issue Refund to Legal Heir? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. Whether the TDS claimed in the return of income can be increased u/s 154? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. How can AO re-issue the refund which was not paid to assessee? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">5. Can AO view the return filed through e-filing?</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">6. Which return will be processed if Original & Revised returns are filed on the same date? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">7. What are the modes of giving refund in IT returns filed online? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">8. I am a not very tech savvy. Whether any guidelines have been issued for the users to enable them to have a safe and faster computing experience on the computers. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">9. My computer/desktop is very slow. How to remedy this? </font></p>
</blockquote>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/pdfdocs/wnew/DG_Systems_Handbook_FAQs.pdf"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Directorate of Systems, Income Tax Department - Systems Handbook of Frequently Asked Questions (FAQs) </font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">DDT Cartoon</font></strong></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><img src="http://www.taxindiaonline.com/RC2/image/stories/Hammer_Tongs.JPG" alt="Legal Corner Icon" width="424" height="479" hspace="5" border="0" align="center"><br>
</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><font 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"><strong><font color="#663399">Service Tax</font></strong></font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Appellant and M/s BWIL agreed to integrate and jointly carry out day-to-day functions in both companies in various areas and to share jointly the activity cost for rendering executory services - no evidence that appellant gave consultancy to M/s BWIL in various fields of management - no cause for demand under ‘Management Consultancy Services' - appeal allowed: CESTAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE </strong>appellant M/s Glaxo Smithkline Pharmaceuticals Ltd. entered into an agreement dated 19.1.1999 with M/s Burroughs Welcome India Ltd. Both the companies had decided to merge with each other and prior to such merger, they decided to integrate and jointly carry out several day-to-day functions. The department was of the view that the appellant was rendering ‘Management Consultancy Services' to M/s Burroughs Welcome India Ltd. and accordingly issued a show-cause notice demanding Service Tax of Rs.1,29,19,615/- for the period 1.1.2002 to 31.12.2002. </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 settlement amount paid to Microsoft for violation of copyright can be termed as penalty - NO: ITAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> AO pointed out that though the assessee had paid Rs.34,95,441/- to the faculty members being professionals for their services but the TDS had not been deducted u/s 194J. The CIT(A) held that what was paid to the faculty members was salary and the TDS was not liable to be deducted u/s 194J.The assessee had paid Rs.5 lakhs as assessee's share of the legal settlement due to Microsoft for violation of copyright Act. The AO has disallowed the same. The CIT(A) treated the payment as business expenditure. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The issues before the Bench are - Whether salaries paid to part time teachers can be professional fees for the purpose of invoking the provision of section 194J when a perusal of Form NO.16 clearly shows that what was paid by the assessee was only salary and Whether settlement amount paid to Microsoft for violation of copyright can be termed as penalty. And the verdict goes in favour of assessee. </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">In case additional customs duty is adjusted from DEPB no benefit of CENVAT or duty drawback is eligible - in view of clear provisions of EXIM policy CENVAT has been rightly denied - Appeals dismissed: CESTAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> issue in the present case is whether the appellant is eligible to take credit in respect of the CVD paid by debiting in the DEPB as per the provisions of Exemption Notification NO. 45/2002-Cus. This issue is specifically dealt with by the Larger Bench of the Tribunal in the case of<em> Essar Steel Ltd</em> . The Tribunal held that mere debit in DEPB pass book is not sufficient for eligibility of <em>Modvat credit</em> availed on the strength of Bills of Entry wherein importers availed benefit of Notification NO. 34/97-Cus which exempts duties of customs when duty leviable on goods debited to DEPB. </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><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a Nice Weekend. </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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