TIOL-DDT 2332 · the untouched capture
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<p><font face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2"><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"></font></strong></font></strong></font></strong></font></strong></font></strong></font><font color="#663399" size="3"><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=20079"><img src="http://www.taxindiaonline.com/RC2/image/stories/limca_book2014_1.jpg" alt="DDT in Limca Book of Records - Third Time in a row" width="250" height="123" hspace="5" border="0" align="right"></a>TIOL-DDT 2332</font><font size="2"><br>
</font></strong><font size="2"><strong>11.04.2014</strong><br>
<strong>Friday</strong></font></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Corruption in postings and transfers in Mumbai Customs - Writ Petition in HC</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>TRANSFERS</strong> and postings in the Revenue Departments is a multi Crore industry. Once the Board refused to part with some information on transfers taking shelter under section 8(1)(d) of the RTI according to which <em>information including <strong>commercial confidence</strong>, <strong>trade secrets </strong> or intellectual property, the disclosure of which would harm the competitive position of a third party, unless the competent authority is satisfied that larger public interest warrants the disclosure of such information</em>, need not be furnished. Maybe this is a tacit admission that transfer is a commercial activity. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">THIS commercial activity starts right at the top and it is said that the amounts run into Crores. Now when a senior officer buys a post, he has to reap rich returns for his investment. He can sell posts in his jurisdiction. Now a days it is not even done discreetly - people talk openly about how much they paid for a post. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now, a complaint on corruption in transfer and posting of employees in the Office of the Commissioner of Customs, Mumbai, has reached the Delhi High Court.The petitioner is aggrieved against his transfer from Airpool to Rummaging and Intelligence (R and I). He had complained to the Finance Secretary who in turn had asked a Joint Secretary to investigate.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The High Court has directed the Joint secretary to place a copy of the report on record upon conclusion of the inquiry. The High Court expected that the inquiry will be completed expeditiously, though not later than three months. A copy of the report of the inquiry will also be furnished to the petitioner. </font></p>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Please see
<a href="http://www.taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=OTMwMDM=" target="_blank"><font size="1">2014-TIOL-470-HC-DEL-MISC
</font></a></font></strong></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Central Excise Law - Retrospective Bungling - Reprehensible - but assessee will invariably get punished for all mistakes of babus </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IT </strong>is only our Government, which has the luxury of committing mistakes in haste and correcting them at leisure retrospectively. With effect from 01.06.2006,<em> "Parts, components and assemblies of automobiles" </em>were included under the Third Schedule to the Central Excise Act, so as to attract the <em>"deemed manufacturing"</em> principle and they were simultaneously notified under Section 4A also, to attract MRP based levy of excise duty. Subsequently, the Government wanted to bring some more commodities also under the Third Schedule and also notify them under Section 4A. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The entry<em> "Parts, components and assemblies of vehicles (including chassis fitted with engines) falling under Chapter 87 excluding vehicles falling under headings 8712, 8713, 8715 and 8716" </em>was substituted for the earlier entry of "Parts, components and assemblies of automobiles" under Section 4A with effect from 27.02.2010. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Again with effect from 29.04.2010, the following item was also notified under Section 4A. </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>"Parts, components and assemblies of goods falling under tariff item 8426 41 00, headings 8427, 8429 and sub-heading 8430 10" </em></font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Notifying these items under Section 4A is a bureaucratic exercise of amending the existing notification <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=30&filename=notification/excise/2008/exnt08_49.htm" target="_blank">49/2008 CE NT</a></strong>.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The intention was to simultaneously place these items under Third Schedule to the Central Excise Act also, so as to subject them to the "deemed manufacturing" concept. But, somehow this was not done. The result - these items would attract MRP based levy, when "manufactured". Activities like packing, repacking, labelling, etc. would not be construed as "manufacture" for these goods. In 2011 Budget, this anomaly was sought to be rectified by retrospectively amending Third Schedule to the Central Excise Act and placing these items under the said schedule, from 27.02.2010 and 29.04.2010, respectively. But, the legislative wisdom erred and instead of placing these items under the Third Schedule to the Central Excise Act, they placed them under the non existing Third Schedule to the Central Excise Tariff Act, in Finance Act, 2011. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This mistake was rectified in Budget 2012 and these items were correctly placed under the third schedule to the Central Excise Act, with retrospective effect from 27.02.2010 and 29.04.2010 respectively. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">All is well. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">When <em>"Parts, components and assemblies of automobiles" </em>were under the third schedule and MRP levy, a doubt arose as to whether parts of items like hydraulic excavators, etc, would also be covered by these amendments. This was clarified in the negative vide CBEC'sInstructions in <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=31&filename=notification/excise/2008/letter0801.htm"><strong>F.No. 167/38/2008 Dt. 16.12.2008</strong></a>. Further, the intention to subject these items under deemed manufacture only from 2010 is also evident from the CBEC's instructions <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=31&filename=notification/excise/2011/revenue_order.htm"><strong>F.No.341/33/2011 Dt. 12.09.2011</strong></a>. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Despite the above, the Mumbai bench of the Hon'ble Tribunal, in the case of <em>CCE VS JCB Limited</em> - <strong><font size="1"><a href="http://www.taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=OTE0MDQ=" target="_blank">2014-TIOL-09 CESTAT-MUM</a></font></strong> had held that parts of <em>"Loader, backhoe loader, etc"</em> would be covered from 2006 itself as parts of automobiles. Of course, the Tribunal has held that the extended period of limitation cannot be invoked in this case.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now to the crux of the story. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>TIOL </strong> is in possession of an Order passed by a Commissioner of Central Excise, confirming the demands on a major manufacturer / importer of parts of dumpers, excavators, bulldozers, etc. by treating them as parts of automobiles and confirming the demand even prior to 2010. But that is not the surprise. The Commissioner has confirmed the demand by invoking the extended period of demand, imposed equal amount of penalty and also imposed personal penalties on the executives of the company. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This is the environment in which one has to do business in India. Government can get away with whatever mistakes they do and they can rectify them retrospectively. But the poor citizens should predict everything, ignore any Circulars of the highest policy making body and still pay the tax. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DDT had extensively covered this 'retrospective' drama. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Please see: </font></p>
<blockquote>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">1. On the Third Schedule: <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=6694"><strong>DDT 790 - 25.01.2008 </strong></a></font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">2. Third Schedule requires rescheduling - <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=10858"><strong>DDT 1360 - 17.05.2010 </strong></a></font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">3. Retrospective Bungling by CBEC - Even Parliament Not Spared - <a href="http://www.taxindiaonline.com/RC2/NewsDesc.php?MpoQSrPnM=MTI0NTE="><strong>DDT 1599 - 02.05.2011 </strong></a></font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">4. Retrospective Bungling - Discussions on Non Existing Statute - Height of Ignorance at highest Seat - <a href="http://www.taxindiaonline.com/RC2/NewsDesc.php?MpoQSrPnM=MTMzMzU="><strong>DDT 1705 - 03.10.2011 </strong></a></font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In fact, based on DDT reports, a Netizen had shot off letters to the President, Prime Minister, Sonia Gandhi, Rahul Gandhi etc,.on this bungling. </font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Service Tax - VCES - No provision to extend date for payment of first 50 per cent - HC </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN </strong>this case before the Delhi High Court, it is contended that the petitioner in the declaration filed before the Service Tax Authorities sought to declare the amount of Rs.3.87crores. In terms of its understanding, it claimed credit for the sum of Rs.81,35,729/- deposited by it earlier, i.e., prior to March, 2013. It also sought to seek credit for the sum of Rs.1,18,00,000/- paid between 18th March, 2013 and 10th July, 2013, in compliance of section 107(3). The Service Tax Authorities however refused to accept the declaration, taking the position that the credit claimed in respect of the earlier sum paid up to 18.3.2013 was based upon a wrong understanding of the provisions relating to the scheme. The tax authorities also held, consequently, that in the absence of 50% deposit under section 107(3) the application could not be entertained and proceeded with. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is contended by the petitioner that the omission to provide an express provision for extension of time for deposit of the initial 50% cannot be construed to its prejudice given the objectives of the encouragement scheme. It was contended that pre-deposit or for that matter timely pre-deposit is not central for the purpose of the scheme as is evident from section 107(4) which in fact extends the time for deposit of balance 50%, enabling instalments to be paid first by 30.06.2014 and thereafter by 31st December, 2014. It was therefore contended that the mistake of including Rs.81,35,729/- as part of the declaration should be permitted to be rectified and that the declaration should be so read or construed as having been amended to exclude a reference to that amount. </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"><em>The object of the "Service Tax Voluntary Compliance Encouragement Scheme, 2013" appears to the net escaped tax liability by service providers who are otherwise either in default or have not been assessed. It was to afford them a window of opportunity to voluntarily disclose their liability. In a sense it is similar to a permanent mechanism as the Settlement Commission or a voluntary disclosure scheme which the Central Government put in place in different tax regimes. Self contained nature of the scheme is evident from the definitions as well as the regime it dictates for a declarant who has offered to fully disclose the tax dues which are payable according to him and also make the necessary deposit as a pre-deposit for extension of the benefit which is immunity from the penalty, interest and other proceedings given under section 108. It would be worth noticing that the scheme itself was brought into force w.e.f. May, 2013. Assesees and service providers liable to service tax therefore had adequate time to weigh the choices and make necessary declaration under sections 106 and 107. The fact that the declaration regime required payment of 50% of the tax dues under section 107, and at the same time allowed flexibility for payment of the balance of 50% in this Court's opinion would not be fatal to the working of the scheme. In fact the right of the assessee to claim the benefit of the scheme is dependent upon its depositing the initial 50%. The assesee's income from rendering of services was not brought to tax for some reason or the other, due to omission, either wilful or inadvertent; such assesses were given more than enough time to consider whether they would make a disclosure under the Scheme. Once such disclosure was made, the applicant or declarant was entitled to be considered only upon deposit of 50% by 31.12.2013. The consideration prayed for by the petitioner that such initial deposit cannot be considered as mandatory cannot be granted, given the fact that the scheme is a package and does not permit any such division. The only relief available is by way of power to remove difficulties conferred upon the Central Government. We also notice that the authorities have not been given any discretion in the matter of grant of extension of time to make initial pre-deposit of 50% of the declared tax amount. In fact, the consequences are spelt out for failure to pay the tax dues under section 110. In these circumstances the claim in the petition for a direction to extend the period or alternatively for deleting the sum of Rs.81 lakhs from the declaration already filed cannot be granted. </em></font></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=OTMwMDQ=" target="_blank"> 2014-TIOL-471-HC-DEL-ST</a></font></font></strong></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DDT Cartoon </strong></font></p>
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<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"> -Tuesday's cases</font></strong></font></strong></font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><img src="http://www.taxindiaonline.com/RC2/image/stories/ddt_hammer.jpg" alt="Legal Corner Icon" width="100" height="84" hspace="5" border="0" align="left">Central Excise </font></strong></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Payment of duty on own volition - Notification having character of exemption cannot be forced upon an assessee if it does not suit him - Liberal and strict construction of an exemption provision is to be invoked at different stages of interpreting it - Reference answered in favour of assessee: HC </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> following question of law was referred to the High Court - </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>"Whether the option is available to the Assessee either to avail the exemption or to pay duty on the final product by taking modvat credit on inputs in terms of Rule 57A of the Central Excise Rules, 1944." </em></font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">For the uninitiated, this issue was the hottest thing going in the Central Excise department in the year 1993 and continued for a few more years. Vide notification 1/93-CE, SSI units were granted full exemption from payment of duty upto an aggregate value of Rs.30 Lakhs clearances. Many SSI units chose to forego this ‘exemption' and pay duty on the clearances by opting to avail MODVAT credit. The jurisdictional authorities called this as "payment of duty on own volition" and sought to deny the MODVAT credit availed by citing C.B.E.C's Circular No. 2/91-CX 3, dated 4-1-1991 from F.No.93/13/90-CX 3. The corollary to this allegation was that the ‘duty so paid on own volition' was to be treated as "deposit" in view of the Supreme Court decision in <em>Jain Spinners Ltd. </em> <em><font size="1"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=32&filename=legal/sc/2002/2002-TIOL-58-SC-CX-LB.htm" target="_blank"><strong>(2002-TIOL-58-SC-CX)</strong></a></font></em> and demand notices were issued to the consignee for denial of credit taken by him as he could have availed credit only of ‘duty' & not of ‘deposit'. </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 income from letting out property is to be treated as business income merely because property is commercial in nature and rental is exorbitantly high - NO: ITAT </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE </strong>AO noted that the assessee had disclosed income from house property of Rs. 104,887,980/- and claimed deduction u/s. 24(1) of 30%. The AO held that the rental income was treated as business income and deduction claim of Rs. 31466394/- u/s. 24(1) was not allowable. The CIT(A) deleted the addition of Rs. 3,14,66,394/- by treating income from business of letting out of property as rental income and allowed deduction u/s. 24(a). </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The CIT(A) gave part relief of Rs. 1,07,238/- u/s. 57(iii) under the head income from other sources. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The issue before the Bench is - Whether income from letting out of property can be treated as business income and not as income from house property just because rental income was too high and the property was commercial in nature. NO is the Tribunal's answer. </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Service Tax </strong></font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Appellant are paying tax regularly as provider of Banking & Financial Services - during audit certain discrepancy was found in tax payment and immediately the appellant paid same along with interest - no intention to evade tax - penalties set aside : CESTAT </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> appellant is a co-operative bank and are registered as provider of Banking and Financial Services and paying appropriate tax and also filing statutory returns. During audit it was found that there was some short payment of service tax. The same was paid immediately along with interest. Subsequently, show-cause notice was issued demanding service tax of Rs.17,52,635/- along with interest and proposing imposition of penalty. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">There is no intention on the part of the appellants to evade payment of tax and appellants were under the <em>bona fide </em> belief that the appellants were paying appropriate tax. </font></p>
<p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Monday is a Holiday - Dr Ambedkar's Birthday </strong></font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>See our Columns Tuesday for the judgements </strong></font></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Tuesday with more <strong>DDT</strong></font></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a nice extended weekend. </font></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Mail your comments to</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> <a href="mailto:vijaywrite@taxindiaonline.com"><strong>vijaywrite@taxindiaonline.com </strong></a></font></p>
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