TIOL-DDT 2340 · the untouched capture
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font face="Verdana, Arial, Helvetica, sans-serif"><strong><font face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="3"><s><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"><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></font></strong></font></strong></font></strong></font></strong></font></strong></s></font></strong></font></strong></font></strong></font><font color="#663399" size="3">TIOL-DDT 2340 </font><br>
25.04.2014 </strong><br>
<strong>Friday </strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Customs/Central excise Appeals - Why do we need Revision Authorities? </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>YESTERDAY </strong>DDT had carried a story about a High Court order regarding whether an appeal lies to the Tribunal or Revision Authority in matters relating to Service Tax rebate. In any reasonable tax administration the adjudication and appellate mechanism should be clear and well demarcated.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The appellate mechanism for Customs and Central Excise cases is as follows:</font></p>
<table width="90%" border="1" align="center" cellpadding="3" cellspacing="0">
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<td width="0" valign="top"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Order passed by </strong></font></p></td>
<td width="435" colspan="2" valign="top"><p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Appeal lies to </strong></font></p></td>
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<td width="0" valign="top" bgcolor="#009999"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Officers subordinate to Commissioner </font></p></td>
<td width="0" valign="top" bgcolor="#00FFFF"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Commissioner (Appeals) </font></p></td>
<td width="0" valign="top" bgcolor="#00FFFF"> </td>
</tr>
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<td width="0" valign="top" bgcolor="#009999"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Commissioner </font></p></td>
<td width="0" valign="top"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CESTAT </font></p></td>
<td width="0" valign="top"> </td>
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<tr>
<td width="0" valign="top" bgcolor="#009999"><p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Commissioner (Appeals) </strong></font></p></td>
<td width="0" valign="top" bgcolor="#00FFFF"><p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CESTAT </strong></font></p></td>
<td width="0" valign="top" bgcolor="#00FFFF"><p align="justify"><font color="#0000FF" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Revision Authority in certain cases </strong></font></p></td>
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<td width="0" valign="top" bgcolor="#009999"><p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CESTAT </strong></font></p></td>
<td width="0" valign="top"><p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>High Court </strong></font></p></td>
<td width="0" valign="top"><p align="justify"><font color="#0000FF" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Supreme Court in Classification and Valuation matters </strong></font></p></td>
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<td width="0" valign="top" bgcolor="#009999"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">High Court </font></p></td>
<td width="0" valign="top" bgcolor="#00FFFF"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Supreme Court </font></p></td>
<td width="0" valign="top" bgcolor="#00FFFF"> </td>
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</table>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">On several occasions, against orders of the Commissioner (A), appeals are routinely filed before the CESTAT where they ought to be filed with the Revision Authority and the Tribunal after five or six years decides that the appeal lies with the RA (Revision Authority) and not with CESTAT.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Under the scheme operative till 10.10.1982, the appeal against the orders of the Commissioners (then called Collectors), of Customs & Central Excise lay with the Central Board of Excise & Customs. As far as the appeals against the orders passed by the authorities below the rank of the Collectors (now called Commissioner), were concerned, the same were to be filed before the appellate Collectors of Customs & Central Excise.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Erstwhile Section 131 of the Customs Act, 1962 and Section 36 of the Central Excise & Salt Act, 1944, empowered the Central Government to revise the orders passed by the CBEC and appellate Collectors in exercise of their appellate jurisdiction. At the Government level, while Secretary (Revenue) or Special Secretary disposed of the Revision Application against orders passed by the CBEC, and the Addl. Secretary or Joint Secretary disposed of the applications against the orders passed by the appellate Collectors of Customs & Central Excise and executive collector of Customs and Central Excise.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In his 1980 Budget Speech, the then Finance Minister R. Venkataraman said,</font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>I have a major declaim of policy to announce. For the past couple of decades, there has been a persistent public demand for the setting up of an independent Appellate Tribunal for customs and central excise matters, some what similar to the set-up on the Direct Taxes side. This demand has recently been endorsed by the Estimates Committee of Parliament. Government has, in the past, not been in favour of such a system, as it was felt that it would not be appropriate in the case of indirect taxes, and that the present departmental machinery was in fact adopting an objective approach. I think a time has come when we should gracefully accept the common view, which is based on the dictum that justice should not only be done but should also seem to be done. It is in this spirit that provision has been made in the Finance Bill for setting up an Appellate Tribunal to hear appeals in respect of customs, central excise and gold control matters. This Tribunal will be independent of the executive machinery charged with the responsibility of day-to-day administration of revenue laws. I have no doubt that this measure will meet with the whole-hearted approval of Parliament and of trade and industry.</em></font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Finance (No. 2) Act, 1980 introduced a new system by establishing appellate Tribunal. The appellate jurisdiction of CBEC and Revisionary jurisdiction of the Central Government were abolished w.e.f. 11.10.1982, except a few residual transitional provisions and the Customs, Excise and Gold Appellate Tribunal (now CESTAT) was set up w.e.f. 11.10.1982.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Finance Act, 1984, revived the Revisionary powers of the Central Government in specified type of cases. On the Customs side, Section 129 DD read with proviso to Section 129(A) of the Act, empowered Central Government to revise the appellate orders passed by the Commissioner of Customs (Appeals).</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">On Central Excise side, Section 35EE read with first proviso to sub-section (ii) of Section 35B of the Central Excise Act, 1944 gave review and revisionary powers to Central Government to revise the orders passed by the Commissioner of Central Excise (Appeals).</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Revision Application Unit of the Department of Revenue, Ministry of Finance, Government of India is dealing mainly with Revision Applications filed before Central Government in specified Customs and Central Excise matters under section 35 EE of Central Excise Act 1944 and section 129 DD of Customs Act 1962.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Revision Authority has jurisdiction to decide appeals in the following cases:</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Customs </strong>: Section 129 DD read with proviso to Section 129 A (1) of Customs Act, 1962 empowered the Central Government to revise or review the appellate orders passed by Commissioner of Customs (Appeals) if such order related to:-</font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">a. Any goods imported or exported as baggage;</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">b. Any goods loaded in a conveyance for importation into India, but which are not unloaded at their place of destination in India, or so much of the quantity of such goods as has not been unloaded at any such destination if goods unloaded at such destination are short of the quantity required to be unloaded at the destination;</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">c. Payment of drawback as provided in Chapter X and the rules made there under.</font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Central Excise </strong>: Section 35 EE read with proviso to Section 35 B (1) of Central Excise Act, 1944 empowered the Central Government to revise or review the appellate orders passed by Commissioner of Central Excise (Appeals) if such order related to :-</font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">a. A case of loss of goods, where the loss occurs in transit from a factory to a warehouse or to another factory, or from one warehouse to another or during the course of processing of the goods in a warehouse or in storage, whether in a factory or in a warehouse;</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">b. A rebate of duty of excise on goods exported to any country or territory outside India or on excisable materials used in the manufactured of goods which are exported to any country or territory outside India;</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">c. Goods exported outside India (except to Nepal or Bhutan) without payment of duty.</font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Law does not specify any appellate authority against orders passed by the Revision Authority. So as far as the Government is considered its orders are final and so the only option is writ in the High Court.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Do we need such a complicated and archaic appellate procedure? The Revision Authority and the Commissioner (A) are of the same rank. In a rank conscious administrative setup, is it fair for an officer to sit in judgement over an order passed by his same rank colleague who may sometimes be even his senior?</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We should abolish this office as soon as possible and merge it with the Tribunal. There should be only one appellate authority against orders passed by a Commissioner (A) - and ideally that should be the Tribunal.</font></p>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Please also see <a href="http://www.taxindiaonline.com/RC2/NewsDesc.php?MpoQSrPnM=NjM1Ng">Remedy through Revision Application to Govt of India</a></font></strong></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>No Time Limit for Commissioner to File Revision Application</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>SURPRISINGLY </strong>there is no time limit within which the Commissioner is required to file the Revision Application against an order of the Commissioner(A), while the assessee is required to file it within three months.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Revision application is filed under Section 35EE(1) by the assessee and under Section 35EE(1A) by the Commissioner.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per Section 35EE(2), application under Sub Section (1) shall be filed within three months - AND THERE IS NO TIME LIMIT FOR THE APPLICATION UNDER SUB-SECTION (1A) - THAT IS APPLICATION BY COMMISSIONER.</font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Customs - Appeal - CESTAT by Majority Orders 50% deposit- Difference of opinion itself should have been sufficient reason to give substantial relief in pre-deposit - High Court</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN</strong> <em>Unifax vs Commissioner </em> - <a href="http://www.taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=OTI3OTk="><strong><font size="1">2014-TIOL-470-CESTAT-DEL</font></strong></a>, there was a difference of opinion between the two Members of the Division Bench at the Stay stage itself.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Holding that the prima facie view is that the demand in question is barred by limitation, the Member (J) ordered unconditional stay in the matter and allowed all the stay petitions.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Member (Technical) differed with the above view and came to the conclusion that the appellant did not have any Prima facie case for total waiver of pre-deposit. He directed the appellant to make a pre-deposit of 50% of total demand.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So, the matter was referred to a Third Member with the question <em>whether the applicants to be granted unconditional stay in all four appeals as arrived at by learned Member (J) or they were required to be asked pre-deposit of 50% out of customs duty of Rs.82,71,874/- as held by Member (Technical).</em></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Third Member agreed with the Member (T) and ordered pre-deposit of 50% of the duty demanded.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The assessee is in appeal before the High Court.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The High Court ordered:</font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>It is evident from the materials on record that there appears to be a conflict within the department itself as to the proper classification of goods i.e. whether they are to be cleared under tariff heading 8443 32 70 or 8443 32 60. This coupled with the fact that one Member of the CESTAT was of the opinion that the extended period of limitation was not properly invoked, is in the opinion of this Court sufficient for the Tribunal to have made an order granting substantial relief. Having regard to these facts this Court is of the opinion that the impugned order to the extent it requires deposit of 50% of the amount should be modified. Instead the petitioner should be permitted to deposit 20% of the amount as a pre-condition subject to which its appeal may be heard.</em></font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">When one Member says no pre-deposit is required and another thinks otherwise, shouldn't the assessee get the benefit of doubt and total waiver as at least one Member of the Tribunal believes that there is no prima facie case against him?</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=OTMyNzU=" target="_blank"><font size="1" face="Verdana, Arial, Helvetica, sans-serif">2014-TIOL-569-HC-DEL-CUS</font></a></font></strong></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><br>
<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"> - Monday's cases</font></strong></font></strong></font></p>
<p align="justify"><strong><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"></strong>Customs</font></strong></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>FTP- Import of Digital Multifunction printing and photocopying machines prior to 6.6.2012 - whether licence required for importation - Matter referred to Third Member: CESTAT</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE </strong>short issue involved in the present appeals of the Revenue against the order passed by Commissioner (Appeals) is as to whether the Digital Multifunction Printing and copying Machines (Old and used), imported prior to 05.06.2012 are hit by Para 2.17 of the Foreign Trade Policy, which placed the same under the restricted category with effect from 05.06.2012. It is seen that prior to the said date, only photocopier were listed under the said Para 2.17 of the Foreign Trade Policy for the purposes of requirement of licence.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The matter goes to a Third Member with the following difference of opinion.</font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>Whether the Digital Multifunction printing and photocopying machines imported prior to 6.6.2012 do not require a license for importation of the same as held by Member (Judicial) or the same require a license for importation as held by Member (Technical)?</em></font></p>
</blockquote>
<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 any disallowance u/s 40A(2) is warranted even assessee proves higher payment of salary to one of its key employees running critical business operations - NO: High Court</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> assessee, a limited company, is mainly engaged in the business of contract and working for National Highway Authority of India on contract basis and the assessee gets work order after submission of tenders. It was claimed by the assessee that it was maintaining regular and proper books of accounts supported by material and relevant records and accounts were also audited by a CA. During assessment, AO desired the assessee to explain the nature and source of payment debited on account of job work charges to the extent of Rs.2,51,80,655/- and particularly of three sub-contractors to whom substantial payments had been made.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The issues before the Bench are - Whether any disallowance u/s 40A(2) is warranted even the assessee proves the higher payment of salary to one of its key employees running critical business operations; Whether such disallowance can be made even if it is pointed out that the individual assessee has paid higher taxes on such income in its individual return of income; Whether payments made to sub contractors by way of account payee cheques, can be disallowed merely on the basis that the amount is excessive and Whether amount disallowed after considering all the material facts and circumstances by the Tribunal, can be altered by the High Court without any cogent basis. And the verdict goes against the Revenue.</font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Central Excise</strong></font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Appellant supplying standby transformer to client when the one initially sold is received for repairs - after repairs, the standby transformer is received back in factory and appellant takes credit of duty paid thereon while initially clearing the same - Revenue objecting to taking such credit : CESTAT</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> applicant manufactures transformers and clears the same on payment of duty. Sometimes, the transformers which were supplied to the customer are returned for repairs. In that situation, the applicant is providing a standby transformer for the period of repair of the transformer sold to the customer. The transformer which was sent as a standby for a short period is cleared on payment of duty and after the repair, the repaired transformer is cleared; the standby transformer is returned to the factory and on which the applicants are taking credit of the duty initially paid on the same.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Revenue is not at all happy with this standby business and is of the view that the applicant is not entitled to take credit on the said standby transformer which is returned as same is not an input and the credit cannot be taken on the strength of the applicant's own invoice which is not a proper document under the CENVAT Rules.</font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>See our Columns Monday for the judgements</strong></font></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Monday with more <strong>DDT</strong></font></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Have a nice weekend.</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"><strong>vijaywrite@taxindiaonline.com</strong></a></font></p>
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