TIOL-DDT 2210 · 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 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="3">TIOL-DDT 2210 </font><br>
15.10.2013 <br>
Tuesday </strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Can Education Cess be paid by debiting from CENVAT Balance? -
The Law Permits - The Return Does Not! </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>WE</strong> received a query from an assessee seeking clarification whether education cess can be paid by debiting from credit accumulated in excise duty account. Though the query looks naïve, we came to know that this dilemma is faced by most of the assessees post removal (exemption) of education cess on the Customs CVD vide Notification No. <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=23&filename=notification/custom/2012/ctariff12_013.htm" target="_blank">13/2012</a></strong>-Customs dt. 17.03.2012. The assessees who use mostly imported inputs in the manufacture of their final products will not be having sufficient balances of Education Cess and SHE Cess in their CENVAT Credit account because the imported inputs are exempted from payment of education cesses on the CVD portion, at the time of importation, by virtue of exemption notification mentioned above. The assessee who does not have sufficient balance in their education cess (es) account are being forced to discharge their liability towards education cess through cash deposit (in PLA), despite having sufficient / huge balance in their CENVAT (excise duty) credit account. This is putting lot of financial pressure on small assessees who run their industry under tight financial conditions. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">For example an assessee who imports Rs.1000 worth of inputs pays a CVD of Rs. 100 (on an assumed 10% excise duty), with no Education Cess as it is exempted. So he takes CENVAT Credit of Rs. 100/-. If this is his first transaction, he would have a CENVAT Credit of Rs. 100 under excise duty and nil under Education Cess and nil under SHE Cess. Another similar import will give him a credit of Rs. 200 in excise duty and nil under both the Education Cesses. Now suppose he clears final products valued at Rs. 1000 - he has to pay an excise duty of Rs. 100; Education Cess of Rs.2 and SHE Cess of Re. 1. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">He has a credit of Rs. 200 in his CENVAT account; so he can pay Rs. 100 excise duty from the CENVAT credit but from where should he pay the Rs. 3 of Education Cesses - he has no credit of Cesses? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The law (CENVAT Credit Rules) does not restrict/prohibit adjustment (payment) of Education cess from the balance available in CENVAT (excise duty) account, though the converse is not permissible. The relevant provision of Rule 3 (7)(b) of CCR reproduced below, reveals that the only restriction is for utilization of education cess only for payment of education cess only and there is no restriction on the utilization of balance available in CENVAT (excise duty) for payment of education cess . </font></p>
<p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">(b) CENVAT credit in respect of - </font></p>
<blockquote>
<p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">(i) the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 (40 of 1978);</font></p>
<p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">(ii) the National Calamity Contingent duty leviable under section 136 of the Finance Act, 2001 (14 of 2001);</font></p>
<p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif"> (iii) the education cess on excisable goods leviable under section 91 read with section 93 of the Finance (No.2) Act, 2004 (23 of 2004);</font></p>
<p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif"> (iiia) the Secondary and Higher Education Cess on excisable goods leviable under section 136 read with section 138 of the Finance Act, 2007 (22 of 2007) ; </font></p>
<p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">(iv) the additional duty leviable under section 3 of the Customs Tariff Act, equivalent to the duty of excise specified under items (i), (ii) and (iii) above; </font></p>
<p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">(v) the additional duty of excise leviable under section 157 of the Finance Act, 2003 (32 of 2003);</font></p>
<p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif"> (vi) the education cess on taxable services leviable under section 91 read with section 95 of the Finance (No.2) Act, 2004 (23 of 2004); and </font></p>
<p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">(via) the Secondary and Higher Education Cess on taxable services leviable under section 136 read with section 140 of the Finance Act, 2007 (22 of 2007); and </font></p>
<p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">(vii) the additional duty of excise leviable under 24[Section 85 of Finance Act, 2005 (18 of 2005), </font></p>
</blockquote>
<p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">shall be utilised towards payment of duty of excise or as the case may be, of service tax leviable under the said Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 or the National Calamity Contingent duty leviable under section 136 of the Finance Act, 2001 (14 of 2001), or the education cess on excisable goods leviable under section 91 read with section 93 of the said Finance (No.2) Act, 2004 (23 of 2004), or the Secondary and Higher Education Cess on excisable goods leviable under section 136 read with section 138 of the Finance Act, 2007 (22 of 2007) or the additional duty of excise leviable under section 157 of the Finance Act, 2003 (32 of 2003), or the education cess on taxable services leviable under section 91 read with section 95 of the said Finance (No.2) Act, 2004 (23 of 2004), or the Secondary and Higher Education Cess on taxable services leviable under section 136 read with section 140 of the Finance Act, 2007 (22 of 2007), or the additional duty of excise leviable under section 85 of the Finance Act, 2005 (18 of 2005) respectively, on any final products manufactured by the manufacturer or for payment of such duty on inputs themselves, if such inputs are removed as such or after being partially processed or on any output service </font></p>
<p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">Provided that the credit of the education cess on excisable goods and the education cess on taxable services can be utilized, either for payment of the education cess on excisable goods or for the payment of the education cess on taxable services: </font></p>
<p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">Provided further that the credit of the Secondary and Higher Education Cess on excisable goods and the Secondary and Higher Education Cess on taxable services can be utilized, either for payment of the Secondary and Higher Education Cess on excisable goods or for the payment of the Secondary and Higher Education Cess on taxable services. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">There is no restriction in law other than what has been mentioned above, and it can be inferred from the above provisions of CCR that there is no specific prohibition/bar in the law, for utilization of credit available in the CENVAT (excise duty) account for payment of both the education cess (es ) on the final products cleared by an assessee, which is the subject matter of query discussed in the beginning. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">However, the predicament that would be faced by the assesses is how to show such adjustment (payment) of Education Cess (es) from the balance available in the CENVAT ( excise duty ) account in the ER1 filed by them online and whether the system recognizes such debiting from CENVAT (excise duty) account as due discharge of liability towards Education cess. We also find that there is no column for such adjustment in the ER1. It's a clear case where the law permits but the returns do not. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We hope the Government understands the problems faced by small assesses on this count and gives a clarification to guide both field formations and the assessees.. </font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Appeal to Tribunal - Is Fee Justified? </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>FOR</strong> making an appeal to the CESTAT, you have to pay a fee of Rs. 10,000 if the amount of duty, interest and penalty is more than Rs. fifty lakhs. If you want to make a further appeal to the High Court, the fee is hardly Rs. 500. Why should you pay Rs. 10000 to appeal to CESTAT and just Rs. 500 to appeal to High Court? Is it not the Government's responsibility to provide a justice delivery mechanism? Should an appellant pay for the cost of litigation? After all he is not the only one who is going to enjoy the fruits of a successful appeal - it is precedence for all future appellants. Is the Government making a profit out of the appeal fees? Does the Government spend all the money it collects from the Tribunal for providing better facilities in the Tribunal? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Why can't the Tribunals have own buildings, rooms for lawyers and litigants, better facilities for the Members and staff, more computers, more rooms, more staff, better toilets, good libraries with electronic equipment, better court rooms and … - after all the Government is collecting high fees! </font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Delhi HC strikes Down Hike in Court Fees - There can be peace only if there is justice </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN</strong> a mammoth 531-page judgment, the Delhi High Court recently struck down the Court Fees (Delhi Amendment) Act, 2012 through which the Delhi government had sought to increase court fees payable in Delhi. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Judgement started with a quote from Mahatma Gandhi - <strong>There can be peace only if there is justice</strong>. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The early legislative measures in India on court fees were the Madras Regulation III of 1782, the Bengal Regulation Act XXXVIII of 1795 and the Bombay Regulation VIII of 1802. Subsequently all provincial regulations were amalgamated into a single legislation, the Court Fees Act XXVI of 1860. This Act was also followed by subsequent legislation covering all of British India, including Act XXVI of 1867. All court fees statutes were eventually repealed by the ‘Court Fees Act, 1870 (Act VII of 1870)'. The 1870 Act has been amended from time to time since then, but has not been repealed. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Delhi High Court observed, </font></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is well established that administration of justice is a ‘service', which the State is constitutionally mandated to ensure to its citizens. It is a fundamental duty of the state. The levy of exorbitant court fees imposes financial burden on litigants and operates as a barrier for them approaching the judicial system for redressal of their grievances. This is an established impediment to the exercise of the fundamental rights of access to justice. It adversely impacts the constitutional obligation for providing and ensuring a system for securing a just social order and promoting justice. Enhancement of court fee, payment whereof is a pre-condition for approaching the courts, without any evaluation of the realities, ignoring the principles laid down by the Supreme Court; overlooking the studies and reports of legal, social and economic experts is indubitably an anathema to social order and justice. The inevitable conclusion is that therefore, it is violative of the directive principles enshrined in Articles 38 and 39A of the Constitution of India. </font></em></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is trite that administration of justice is a sovereign function and the responsibility for providing an adequate system of justice rests squarely on the State. It has been held that it is acceptable for the State to recover some amount as court fee. However, the court fee regime is necessarily to be based on some empirical data and consideration of essential inputs and an appropriate expert evaluation. A mere differential between the amount recovered through court fee and the total expenditure incurred on the judiciary is by itself insufficient to permit the State to impose a particular court fee regime or enhance the existing regime to such levels so as to make good the differential or to make a profit before the system of levying ‘court fee‘ came into vogue and it continued after the levy also . </font></em></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The High Court quoted Lord Macaulay, </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>It is undoubtedly a great evil that frivolous and vexatious actions should be instituted. But it is an evil for which the Government has only itself and its agents to blame, and for which it has the power of providing a most sufficient remedy. </em></font></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Why did dishonest plaintiffs apply to the courts before the institution fee was imposed? Evidently because they thought that they had a chance of success. Does the institution of fee diminish that chance? Not in the smallest degree. It neither makes pleadings clearer, nor the law plain…. </font></em></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Well, that explains it all. </font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Queries raised by Bench not answered by Counsel at time of hearing - replying to query after order is passed by filing modification application cannot be entertained: CESTAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> Bench had directed the appellant to make a pre-deposit of Rs.25,82,211/- within a period of six weeks and report compliance. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Instead of complying with the order, the appellant filed a modification application submitting that when the case was heard on 05/08/2013, the Bench had raised certain queries to which the Counsel could not give any satisfactory reply. Inasmuch as since the Counsel wanted to give the reply now, therefore, the modification application has been filed. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Bench observed - </font></p>
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<p align="justify"><em><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">"</font><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">3. We find no merit in the modification application filed by the appellant. The Counsel should have answered the query raised by the Bench at the time of hearing of the stay petition. Replying to the query after the order is passed cannot be entertained and accordingly the modification application is dismissed. However, in the interest of justice, two weeks' time is granted to the appellant to make the pre-deposit and report compliance…"</font></em></p>
</blockquote>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Please See <font size="1"><a href="http://www.taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=OTAyOTE=" target="_blank">2013-TIOL-1521-CESTAT-MUM</a></font></font></strong></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><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><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</strong></font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Notfn. 97/2004-Cus - Appellant importing machinery under EPCG scheme but installing same in mines of M/s. KJS Ahluwalia and renting out same to them for consideration -actual user condition violated: CESTAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> appellant imported one new One New Nordberg Track Mounted (Cone Type) Crushing Plant and One New ExtecS5 Ft Double Screen respectively through Mumbai port claiming benefit of Notification No. <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=23&filename=notification/custom/2004/ctariff04_097.htm" target="_blank">97/2004-Cus</a></strong> dated 17/09/2004 under an EPCG licence. Investigation conducted by the DRI revealed that the machines imported by the appellant under the EPCG scheme were actually installed and being used in the mines of M/s. KJS Ahluwalia at Nuagaon Iron Ores Mines, Guali, Keonjhar. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Alleging that there has been a violation of the conditions of Notification No. <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=23&filename=notification/custom/2004/ctariff04_097.htm" target="_blank"><strong>97/2004-Cus</strong></a> and EPCG, the said machines valued at Rs.5,89,29,208/- were seized u/s 110 of the Customs Act. </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 merger & acquisition can be mode of acquiring assets and whether such acquisition amounts to 'transfer' as per law - verdict favours assessee: Delhi HC </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> issues before the Bench are - Whether assets acquired by the merged entity pursuant to scheme of amalgamation u/s 394 of the Companies Act falls within the meaning of term ‘transfer' of the Income Tax Act; Whether merger and acquisition can be one of the modes of acquisition of an asset; Whether imported cars originally purchased between 1st March, 1975 and 31st March, 2001, but transferred to the merged entity after the cutoff date of the merger i.e. 1st April, 2001 is entitled to depreciation and Whether bar/prohibition in clause (a) to proviso to Section 32(1) would apply on such imported cars acquired pursuant to a scheme of merger. And the verdict goes against the Revenue. </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">Service tax has to be paid on gross amount charged for supply of SIM cards: CESTAT </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>WHAT</strong> emerges from the decisions of the Kerala and A.P. High Courts is that SIM cards/ Recharge Coupons are not “goods” but service and service tax alone can be levied on the supply of such cards/coupons. While considering the case of Vodafone India Ltd. by the Bombay High Court, these decisions of the Kerala and A.P. High Court was not brought to the notice of the Court and therefore, the said decision has to be considered as “<em>per incuriam</em>”. In view of the above factual and legal position, it is held that the benefit of Notification No.12/2003-ST will not be available to the appellant and service tax has to be paid on the gross amount charged for the supply of SIM cards. Therefore, the demand of Service Tax confirmed by the adjudicating authority is sustainable in law. </font></p>
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<td><div align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Tomorrow is Bakrid </strong></font></div></td>
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<p><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">See our Columns Thursday for the judgements </font></strong></p>
<p><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Thursday 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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