TIOL-DDT 2245 · the untouched capture
Rendered as it looked. Links and images are disabled in this view; the file itself is untouched.
<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN" "http://www.w3.org/TR/html4/loose.dtd"> <html> <head> <title>Untitled Document</title> <meta http-equiv="Content-Type" content="text/html; charset=iso-8859-1"> </head> <body> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><font color="#006600"><strong><strong><strong><strong><strong><strong><strong><strong><strong><img width="115" height="125" border="0" align="right" src="image/ddt/10yearsDDT.jpg" alt="" /></strong></strong></strong></strong></strong></strong></strong></strong></strong></font></strong></strong></strong></strong></strong></strong></strong></strong></strong></strong></strong></strong><font color="#006600"><strong><strong><strong><strong><strong><strong><strong><strong><strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=17063"><img width="175" hspace="5" height="120" border="0" align="right" src="http://www.taxindiaonline.com/RC2/image/stories/limca_book2013.jpg" alt="DDT in Limca Book of Records" /></a></strong></strong></strong></strong></strong></strong></strong></strong></strong></font></strong></strong></strong></strong></strong></strong></strong></strong></strong></strong></strong><font color="#663399" size="3">TIOL-DDT 2245 </font><br> 05.12.2013 <br> Thursday </strong></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>There can never be a scheme like VCES, Grab IT: FM </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> <STRONG>YOU</STRONG> can never find a Finance Minister like him anywhere in the world. Yesterday evening he had to attend the crucial Group of Ministers (GOM) Meeting on Telangana, Parliament starts its winter session today and amidst all this busy schedule, the one and only Palaniappan Chidambaram, takes off to Bangalore and the epicentre of the Telangana storm - Hyderabad - to sell his favourite scheme - Service Tax VCES. A GOM Member being present in the capital of the future Telangana State is itself a little adventure - no wonder he asked the Press to leave the place before his interaction with the Trade and a kind Service Tax officer informed the Press that their refreshments and vehicles were waiting for them outside. </font></p> <p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><font color="#006600"><img width="500" height="269" border="0" align="center" src="http://www.taxindiaonline.com/RC2/image/stories/VCES_0111.jpg" alt="" /></font></font><font color="#006600"><strong><strong><strong><strong><strong><strong><strong><strong></strong></strong></strong></strong></strong></strong></strong></strong></font></strong></strong></strong></strong></strong></strong></strong></strong></strong></strong></strong></strong></strong></strong></strong></strong></strong></strong></strong></strong></strong></strong></strong></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">'No interest, No penalty and No questions asked, VCES is a once in a life time offer; therefore take full advantage of it', the FM said. Schemes like this never come quite often. Last time VDS scheme for central excise was announced in 1998 and it took 16 years for the government to come up with another voluntary compliance scheme like VCES. While explaining the need for it, he said there are around 17 lakh registered Service Tax assesses, out of which only around 7 Lakh assesses are filing returns. [<font color="#FF0000">When will somebody tell him that the mythical 10 lakh assessees don't exist?</font>] All these stop filers/non filers should make use of the scheme, come clean and pay service tax. He said till today about 9000 declarations have been received out of which only 107 declarations were rejected, which means about 98.85% of declarations were accepted. Clearing the apprehensions about rejection of declaration, he said the effort is to accept the declaration not to reject it. He said instructions were given to field formations to accept the declarations and collect taxes and not to reject the declarations by giving any wider interpretation to the Section 106 of FA. He further added that all the rejected declarations would be re examined again by a committee to be constituted somewhere in January 2014 and if need be, he himself would examine the rejected declaration so as to give an opportunity to the assessees to avail benefit of the scheme. While cautioning the fence sitters, he said so far 15 arrests have been made under service tax for not depositing the tax collected and said he did not want any more arrests to be made as the department is having information about 360 degrees transaction of service providers through various sources. Calling the Service Tax Voluntary Compliance Encouragement Scheme (VCES) a rare opportunity to make a "fresh start", Finance Minister asked those in trade and industry to seize the offer, even as he made it clear that tax evaders would eventually be "reached". Countdown has begun and the last date is December 31, he added.He questioned, 'when you are honest in most of your transactions in day to day life, then why don't you be honest when it comes to payment of tax?.' </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">After a brief speech for about five minutes, the FM invited questions from the assessees. While replying to a question he <font color="#FF0000">clarified categorically that service tax paid under VCES is available as input credit to service recipient and the amount paid can be passed on to service recipient as credit.The FM mentioned about this in the Mumbai meeting too but no assurance from the Board in this regard. Later it is feared that the same department will argue in Court that the Public Statement (for that matter even the budget speech) of the Finance Minister is not the LAW. Many senior Central Excise officers told us that there is no question of allowing CENVAT Credit. Board should give a clarification immediately.</font> </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A representative of the Tradeasked that if the government comes out with a clarification that no tax be paid for residential constructions done before 1/07/2010, then many builders are ready to file VCES declarations for the period after 1/7/2010. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The FM said law couldn't be changed for the purpose of VCES. It is the duty of the competent authorities to decide liability. FM cannot decide liability across the table. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A representative of Trade asked if the government included the cases where notices issued but adjudication was not done so far also under VCES, many assessees are likely to come forward. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The FM replied that law couldn't be changed and said that there are Supreme Court directions that during VDS government cannot give blanket amnesty scheme. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">To a question whether VCES declaration can be filed for the period for which ST-3 filed without paying service tax (ST-3 filed for 2012-13 but service tax not paid but declared in the return as due), he replied, 'You cannot file declaration for the period for which ST-3 has been filed, but you can file declaration for the period where no ST-3 is filed.' </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The FM's understanding and knowledge over intricate details of service tax law was clearly visible during the interactive session, where even senior officers holding the field quite often fumble. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">While concluding the FM said that if he were a lawyer or Chartered Accountant or a tax consultant he would have advised his client to take full advantage of the scheme, as there can be no better scheme than this. </font></p> <p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>"The root is declarations will be accepted... I'm here to collect money; I'm here to collect tax. As far as possible accept the declaration and collect the tax. We are not interested in punishing you and make life difficult for you. We are here to collect tax, we will collect it fairly- we want you to seize this opportunity and pay the service tax,"</em> he said. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The FM is serious about the Scheme - now it is for the officers to make the Scheme a success. </font></p> <p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Embarrassing moments for Department: </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The meeting also witnessed some embarrassing moments for senior officers of the Department. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">When one of the assessees raised an issue that the Assistant Commissioner has issued order imposing fine and penalty when he filed VCES declaration. The FM was visibly serious and enquired from the Commissioner how this could happen. He directed the Commissioner to give the assessee an appointment today and sort out the issue immediately. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A representative from the film industry said that they were not sure of their liability on an activity which would come under Copy Right Act and stated that they sought for clarification from the Commissioner, which is pending with him. The FM asked the Commissioner concerned to find out the reasons for delay in giving clarification. The Commissioner replied that he made a reference to the Chief Commissioner on the issue two months ago and he is yet receive any reply from him. The FM immediately turned to the Chief Commissioner and the Chief Commissioner had to admit that he was not aware of receiving any such reference from the Commissioner, but he has to verify. The FM asked the Chief Commissioner how far his office was from the Commissioner's office - it is in the same building. The FM asked the Chief Commissioner to give appointment to the assessee today and give the clarification immediately on the issue. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The FM did not allow the assessees to deviate from the agenda-VCES- by not allowing any questions other than those concerning with VCES or issues concerning taxation policies. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">An assessee who attended the meeting and briefed TIOL about the proceedings was simply floored with the FM's understanding and knowledge over intricate details of service tax law. </font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>It is for the Investigating Officer to decide who should be called for investigation - High Court is not inclined to interfere with the summons issued </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>A </strong>summons dated 12/11/2013 was issued by the Dy. Director, DRI, Mumbai to the CFO of the company to appear in person and also give evidence and produce documents. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In response to the said summons, the CFO addressed a letter on 14/11/2013 to the Deputy Director pointing out that petitioner has joined the company in 2006 but the transactions in question pertain to FY 2001-02 for which the petitioner would not be in a position to give any evidence and he is no way connected with these matters; that he is not conversant with any indirect tax matters of the company or its associated companies and that all matters pertaining to the customs are being handled by the Indirect Tax Manager. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The DD wrote back on 18/11/2013 informing that the Indirect Tax Manager is not coming out with the details and is not cooperating with the investigation and hence the summons issued to the CFO cannot be withdrawn. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Another summons came knocking on 20/11/2013 and this too was responded by the CFO with another letter on 25/11/2013 reiterating the contents of his earlier letter and also pointing out that the Indirect Tax Manager had been authorized by a Power of Attorney executed by the company to attend to the customs enquiries. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Fearing the worst, the CFO challenged the summons before the Bombay High Court in a Writ Petition and also placed before the Bench a Medical Certificate indicating that the petitioner is suffering from Cancer and is undergoing radiotherapy treatment and if he has to appear before the Customs officer, he would be made to wait in their office for hours together and which would imperil his health. And so, the summons should be quashed. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The High Court observed - </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">+ As per the settled legal position, in exercise of the writ jurisdiction under Article 226 of the Constitution, this Court is not inclined to interfere with the investigation. It is for the Investigating Officer to decide who should be called for investigation. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">+ In case the Dy. Director is of the view that the petitioner's presence is necessary for making enquiries then it is open to the DD to summon the petitioner. However, having regard to the petitioner's health, it is hoped that the petitioner would not be made to unduly wait after he makes himself available for investigation by the Dy. Director. </font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The WP was disposed of. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>See <a href="http://www.taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=OTA5ODM="><font size="1">2013-TIOL-980-HC-MUM-CUS </font></a> </strong></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>India is as corrupt as it was last year </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>TRANSPARENCY </STRONG>International's Corruption Perceptions Index 2013 offers a warning that the abuse of power, secret dealings and bribery continue to ravage societies around the world. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">More than two thirds of the 177 countries in the 2013 index score below 50, on a scale from 0 (perceived to be highly corrupt) to 100 (perceived to be very clean). </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In the Corruption Perceptions Index 2013, Denmark and New Zealand tie for first place with scores of 91. Afghanistan, North Korea and Somalia this year make up the worst performers, scoring just 8 points each. </font></p> <p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">India got a score of 36, same as last year! India ranked 94 th - again, same as last year! And that certainly is good news! </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 size="5" color="#FF6633">tiol</font><font color="#006600"> - Friday's cases</font></strong></font></strong></font></p> <p align="justify"><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" color="#663399"><strong><img width="100" hspace="5" height="84" border="0" align="left" alt="Legal Corner Icon" src="http://www.taxindiaonline.com/RC2/image/stories/ddt_hammer.jpg" /></strong></font></strong></font><font color="#663399">Central Excise </font></strong></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>It is absurd and irrational to suggest that such a huge sum is paid to the consulting engineers for developing only prototypes and these services are not “in relation to” the manufacture of commercial vehicles - Appeal allowed: CESTAT </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> appellants are engaged in the manufacture of motor vehicles and motor vehicle parts under Chapter 87 of the CETA, 1985. They are having an Engineering Research Centre (ERC) situated in their premises where R&D activities are being undertaken. The ERC has also been recognized as a Technical Institute by the Department of Scientific and Industrial Research, New Delhi vide letter dated 29/04/2008. The appellants are availing CENVAT credit on input services utilized and consumed in the R&D activities in ERC. In respect of Prototypes manufactured in ERC the appellants are claiming exemption from payment of duty under Notification no. 167/71-CE dated 11.09.1971. </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"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Whether when a cement manufacturer is also engaged in mining operation to source its key raw material, mining activity tends to lose its independent identity so as to be ineligible for Sec 80HH benefits - YES: AP High Court </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> assessee, a company, had been carrying on business of manufacturing cement, and such manufacturing unit was situated in a backward area in the State of Andhra Pradesh. The assessee had also a mine having deposit of large quantity of lime. Hence, the assessee also carried on mining operation of the lime and the same was used as a raw material in manufacturing cement. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The issue before the Bench is - Whether when a cement manufacturer is also engaged in mining operation to source its key raw material, the mining activity tends to lose its independent identity so as to be ineligible for Sec 80HH benefits. And the question is answered against the assessee. </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">Applicants are financing the vehicles manufactured by them by way of loan -interest on the loan is not liable to service tax as per the provisions of the Finance Act, 1994 - prima facie strong case in favour - pre-deposit of Rs.205crores waived: CESTAT </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CRORES </STRONG>is the order of the day and that too hundreds of them! </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A total Service Tax demand of Rs.379.80 Crores is confirmed against the applicant along with interest and penalties. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The demand <em>inter alia </em> comprises of the following - </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">+ Rs.170crores - repair and maintenance of vehicles manufactured by the applicants during the warranty period. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">+ Rs.205crores - providing banking and financial services. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">+ Rs.1.72crores - providing service of authorized service station. </font></p> </blockquote> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>See our Columns tomorrow for the judgements </strong></font></p> <p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until tomorrow with more <strong>DDT </strong></font></p> <p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Have a nice day. </strong></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"> <a href="mailto:vijaywrite@taxindiaonline.com">vijaywrite@taxindiaonline.com</a></font></p> </body> </html>