TIOL-DDT 2311 · the untouched capture
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<!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><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 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></strong></strong></strong></strong></strong></strong></strong></strong></strong></strong></strong></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font><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 2311</font><br> 11.03.2014<br> Tuesday</strong></font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Service Tax - Arrest - NO BAIL - HC</font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THIS</strong> should be great news for the Service Tax Department. These days there are several reports about several arrests under Service Tax. Some big businessman is arrested and the Service Tax offices give wide publicity. Even before the Press reports about the arrest, the alleged offender is released on bail and that fact is usually not mentioned.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">On 17.12.2013, we had carried an article <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=19306"><strong>Service Tax - Arrest for offences prior to 10.05.2013 is illegal</strong> </a>in which the author had observed,</font></p> <blockquote> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The power to arrest under the provisions of Finance Act, 1994 (Service Tax) was introduced by Finance Act, 2013 w.e.f. 10.05.2013 by inserting Section 91. This section inter alia empowers an officer not below the rank of a Superintendent to arrest a person if he defaulted in payment of service tax collected equal to 50 lakhs or more (a cognizable offence) and authorised by the jurisdictional Commissioner for such arrest. Section 90 was also enacted along with Section 91 to enable classification of offences into cognizable and non cognizable offences. Relevant provisions of Section 89 of the Act relating to Offences and Penalty were also substituted to align with newly inserted provisions under Section(s) 90 & 91.</font></em></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The author argued that the amendments had no retrospective effect and that<em> it is effective only for an act or omission committed after 10.05.2013, the date on which Finance Act, 2013 was enacted. An Officer empowered can only arrest a person for non-payment of Service Tax if he fails to remit the amount collected and exceeds the prescribed limit (as stated in section 89(1) (ii)) if such amount pertains to the period after 10.05.2013.</em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This was exactly the argument taken by an arrested person, before the Bombay High Court.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The applicant is said to have collected Rs. 2.59 Cores of Service Tax during the period 2010-2011 to 2013-2014 but had not deposited the said amount except Rs. 15 Lakhs; that he had in fact never filed any service tax returns and as such knowingly utilized the Government monies for his personal use.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The applicant submitted that <em>there cannot be any retrospective effect to the penal provisions and as such considering the arrest of the applicant on 22.1.2014 and considering that the amount of tax collected and required to be deposited with the Government must exceed Rs. 50 Lakhs and there must be failure to pay the amount so collected to the credit of the Central Government beyond a period of six months from the date on which such payment becomes due, the applicant was not liable for the arrest inasmuch as the amount collected between 10.5.2013 to 21.7.2013 is only Rs. 5,00,887/-. In other words, it is submitted on behalf of the applicant that the maximum amount evaded, if any, under Section 89(1)(d) is less than Rs. 50 lakhs for the relevant period and as such the provisions of Section 89(1)(d)(ii) are not applicable</em>.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The High Court was not impressed and observed,</font></p> <blockquote> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In the considered opinion of this Court, it being continuing offence the entire outstanding amount to be deposited with the Central Government in the present matter is required to be taken into consideration inasmuch as on 10.5.2013 what was the arrears then accrued is required to be taken into account while calculating the amount of Rs. 50 Lakhs as contemplated by Section 89(1)(d)(ii) of Finance Act, 1994.</font></em></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">During the arguments it was suggested on behalf of the applicant that he would deposit all the outstanding Service Tax to the Central Government but in a time bound programme. But the schedule was not appealing to the Revenue and it insisted that the entire dues of Service Taxes, already collected by the applicant, shall be deposited with the Department.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So, the High Court held that it is a continuing offence and as on 10.5.2013 there were huge outstandings definitely beyond the amount of Rs. 50 Lakhs and more so said amount was outstanding even at the time of arrest of the applicant; it is not a case in which the applicant can be released on bail more so when the investigation is still going on.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Consequently the application for bail is dismissed.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now what will happen? As long as he doesn't pay up the dues, he may not get bail - he may not be able to pay up unless he gets bail - A Catch 22 situation? Wouldn't it have been prudent for the Department to allow him to go on bail and pay up the dues in instalments rather than treat him as a State Guest in a jail? But prudence and Tax Collection hardly ever go together.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This order of the Bombay High Court was made available only yesterday and we bring it to you today.</font></p> <p><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=OTI1Mzg=" target="_blank">2014-TIOL-307-HC-MUM-ST</a></font></font></strong></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Customs - Inspection Services - WCO Concerned</font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>RECENTLY </strong>there was a meeting of the World Customs Organization (WCO), International Monetary Fund (IMF), World Bank, World Trade Organization (WTO) and others to discuss the topic of pre-shipment inspection (PSI) and destination inspection (DI) companies.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It was observed that:</font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. International trade is an essential driver to promote development and economic competitiveness that alleviates poverty; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. Customs administrations perform a wide range of important fiscal, economic and social functions, including the facilitation of legitimate trade, collection of revenue and protection of society from illicit trade; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. A number of Governments have entered into inspection services contracts with PSI and DI companies to undertake core Customs functions, including the determination of Customs duties and taxes payable on imported goods, risk management and examination of goods moved across international borders;</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. An increasing number of countries have successfully taken ownership of these core functions with no adverse effect on revenue following termination of contracts;</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">5. In some instances, these contracts have been costly to governments and detrimental to the realization of Customs knowledge and skills in such areas as Customs valuation and classification and their objectives were not achieved;</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">6. The WCO has developed a comprehensive set of instruments and tools to support national Customs administrations with their reform and modernization programmes; and </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">7. Although some of these activities are currently regulated by the Agreement on Pre-shipment Inspection of the World Trade Organization, Article 10.5 of the Agreement on Trade Facilitation that was agreed in December 2013 provides that Members shall not require the use of pre-shipment inspections in relation to tariff classification and Customs valuation and encourages Members not to introduce or apply new requirements regarding their use.</font></p> </blockquote> <p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It was recommended that:</font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Governments should provide political will, support and resources to Customs administrations to assume responsibility for the core Customs functions of determining Customs duties and taxes payable, risk management and examination of goods.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Customs administrations should take ownership of the Customs functions covered by pre-shipment and destination inspection contracts; commit to reform and modernization to assume responsibility for functions covered by these contracts by developing comprehensive strategies and implementation plans; Commit to good governance and to combat corruption by effectively implementing integrity promotion programmes; enhance communication and partnerships with stakeholders, including neighbouring Customs administrations, to better articulate Customs efforts on modernization and trade facilitation.</font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">What is the stand of the Indian Customs?</font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">It's Election Time - Don't Carry cash more than Rs. 50,000/-</font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IT </strong>seems the Income Tax Department is gearing up to handle all that black money to be circulated during elections. A senior Income Tax Officer is said to have stated that <em>as per the Election Commission guidelines, any person carrying more than Rs. 50,000 cash or bullion for his personal or business use till the Model Code of Conduct is in force is required to carry ID proof, address proof, documentary evidence of its source and its end use so that it can be produced before the authorities if required. </em></font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Income Tax Department is all set to collect a handsome booty. </font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Justice</font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>ON</strong> 31.05.2001, Upamanyu, aged about 18, riding on a scooter hit a speeding RTC bus and died. He was the only son of his parents who were dependent on him. In 2003, the Motor Accident Claims Tribunal awarded a compensation of Rs. 3,17,200/- to the parents. The RTC was aggrieved and took the matter in appeal to the High Court. The High Court by an order in 2006 reduced the compensation to Rs. 1,58,600/-. The aggrieved parents took the matter in appeal to the Supreme Court.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Supreme Court yesterday set aside the order of the High Court and upheld the order of the Tribunal. That is they will get the amount of Rs. 3,17,200/- thirteen years after their son was killed in the accident and God knows how much money they had to spend in litigation to get the Order from the Supreme Court and even now it is doubtful whether they will get their money.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Imagine a couple fighting legal battles for thirteen years after their only son died in an accident - this is how they understand democracy, law and justice. </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif" style="background-color:#FFFF00" span="span">WE, THE PEOPLE OF INDIA, having solemnly resolved to constitute India into a SOVEREIGN SOCIALIST SECULAR DEMOCRATIC REPUBLIC and to secure to all its citizens: </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif" span="span" style="background-color:#FF0000">JUSTICE, </font><font size="2" face="Verdana, Arial, Helvetica, sans-serif" style="background-color:#FFFF00" span="span"> social, economic and political;</font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Our assessees harassed by taxmen are far better off.</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"> – Wednesday'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">Customs</font></strong></p> <p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Settlement - A course of settlement under Act is available only where petitioners on their own want to make clean breast of their affairs and not where petitioner wants to resist notices by challenging several statements relied upon by revenue - process contemplated by petitioner would require adjudication i.e. resolving a lis - In such case the petitioner would be well advised to seek remedy under the Act in adjudication process -: HC</font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> counsel submitted that there has been a failure of justice in view of the fact that after the hearing before the Settlement Commission on 28 September 2012 they were able to obtain documents/inspection reports in respect of six earlier consignments carried out by the Customs department which would indicate that goods imported were only cutlery as declared in the bills of entry. Consequently, by letters dated 19 October 2012, 22 October 2012 and 31 October 2012 the petitioners requested the Commission to grant an additional hearing so as to provide further clarification in the matter.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">They, therefore, seek that the impugned order be set aside and the Commission be directed to consider further documents which are now in their possession before deciding upon the petitioners' application for settlement.</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 return of fund received by assessee from Central Govt towards equity but no shares allotted and interest was paid on same, can be construed as business expenditure - YES: Delhi HC</font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>ASSESSEE</strong> a public limited company is a joint venture enterprise of the Central Government, the State of Andhra Pradesh and the State Transport Service Operator and Infrastructure Leasing and Financial Services Ltd. It was set up in the financial year 1993-94 to undertake comprehensive mobility studies and consultancy to the State Government and local bodies, aimed at restructuring and reforming public transport delivery system. It received an advance for equity to the extent of Rs. 7 Crores from the Central Government and started its business in the year 1994. The amounts given by the Central Government were deployed in investments. There was no dispute that the corresponding income was taxed in the earlier AYs. The Central Government insisted for return of its contribution of the share application during the FY 2006-07 (AY 2007-08) and as a result the assessee repaid the amount together with the interest earned from the investments.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The issues before the Bench are - Whether the return of the fund received by the assessee from the Central Govt towards equity but no shares were allotted and interest was paid on same, can be construed as business expenditure and Whether the nomenclature of the amount paid as compensation, return or interest can affect its allowability. 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">Activity of site formation and clearance, excavation of top soil and overburden has to be treated as an activity ancillary to mining and since overall contract is for mining and as such it is an indivisible contract, entire contract has to be treated as mining contract - Demand for period 16/6/05 to 31/5/07 set aside: CESTAT</font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> appellant are engaged in business of mining and related works. They are registered with Service Tax Department since 06/4/09 for payment of service tax. The appellant also provide services to M/s Rajasthan State Mines and Minerals Ltd., a Government of Rajasthan Enterprise [RSMML] in relation to mining of lignite. In this regard the appellant entered into an agreement with RSMML on 16/1/03. In terms of the agreement, the appellant's job was clearing the site for mining, excavation of top soil and it's dumping at a specified place, removal of the overburden and raising of saleable lignite from Matasukh Mines located at Rajasthan. The payment for the services provided by the appellant, in terms of Section VII of the agreement, was on the basis of per M.T. of saleable lignite mined by them.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Inquiry in respect of their activity was initiated by the Department sometime in the year 2007 and the appellant under their letter dated 09/3/07 informed the Department about their activity, pleading that the services provided by them were not taxable services. In their letter to the Department, they emphasized that they receive payment from RSMML in terms of their agreement for the quantity of lignite mined and not for other activities like removal of over burden or excavation of top soil.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Subsequently, the Department taking a view that the activity of the appellant was taxable as 'cargo handling' service till 15/06/05 and thereafter from 16/06/05 to 31/05/07 their activity was taxable as 'site formation and clearance, excavation and earth moving service' and w.e.f. 01/6/07 their activity was taxable as 'mining service' issued a show cause notice dated 29/9/08 to them for demand of service tax amounting to Rs. 1,63,14,265/- alongwith interest and penalty.</font></p> <p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">See our Columns Tomorrow for the judgements</font></strong></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">Have a nice day.</font></p> <p><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Mail your comments to</font><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif"></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> <a href="mailto:vijaywrite@taxindiaonline.com"><strong>vijaywrite@taxindiaonline.com</strong></a></font></p> </body> </html>