TIOL-DDT 2346 · 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 align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="3" face="Verdana, Arial, Helvetica, sans-serif"><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><font color="#663399" size="3">TIOL-DDT 2346</font><br> </strong></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>05.05.2014 <br> </strong></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Monday </strong></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Wrong Credit Taken, but not Utilised - No Interest is payable, but Penalty is</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THIS </strong>may look illogical and perverse, but Law is stranger than horror fiction and the level of logic especially in tax laws is slightly lower than what you find in Bollywood movies. Where else can you find a law which says that if Tribunal is not able to decide your case within one year, you have to pay the demand made in the Show Cause Notice faithfully reproduced in the Adjudication Order? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Well,this issue of interest on "credit taken and/or utilised" must be fresh in our memory.The Apex Court in the case of <em>Ind Swift Labs </em> <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=32&filename=legal/sc/2011/2011-TIOL-21-SC-CX.htm" target="_blank"><font size="1">2011-TIOL-21-SC-CX</font></a> </strong> had held that <strong><em>"interest is payable from the date of taking credit,not utilizing it"</em></strong>. You can get more details in our story <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=12113"><strong>Irregular CENVAT Credit - Interest Payable from date of taking credit, not utilizing it: Supreme Court</strong></a>.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It must be admitted that in spite of a favourable order from no less an authority than the Supreme Court of India,the benign Government of India saw reason and logic and amended the Rule 14 of the CENVAT Credit Rules with effect from 17.03.2012 to spare the assessees from payment of interest in cases where wrong credit was taken but not utilised.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Relevant portion of Rule 14 prior to its amendment read as: </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>Where the CENVAT credit has been <font color="#FF0000">taken <strong> or </strong> utilized</font> wrongly or has been erroneously refunded,the same along with interest shall be recovered from the manufacturer………….</em></font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This was amended with effect from 17.03.2012,to read as </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>Where the CENVAT credit has been <font color="#FF0000">taken <strong> and </strong> utilized</font> wrongly or has been erroneously refunded,the same along with interest shall be recovered from the manufacturer……… </em></font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF0000">No </font></strong><font color="#FF0000"> to interest but <strong>yes </strong> to penalty</font>: while the Government amended this Rule 14 in respect of interest,it chose not to amend the Rule 15 relating to Penalty.It failed to substitute ‘ <strong>or' </strong>‘ with ‘ <strong>and' </strong> in similar phraseology appearing in Rule 15 of CCR: </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>15.Confiscation and penalty.- (1) If any person, <font color="#FF0000">takes or utilises</font> CENVAT credit in respect of input or capital goods or input services,wrongly or in contravention of any of the provisions of these rules,then,all such goods shall be liable to confiscation and such person,shall be liable to a penalty not exceeding the duty or service tax on such goods or services,as the case may be,or two thousand rupees,whichever is greater.</em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>(2) In a case,where the CENVAT credit in respect of input or capital goods or input services has been <font color="#FF0000">taken or utilised</font> wrongly by reason of fraud,collusion or any wilful mis-statement or suppression of facts,or contravention of any of the provisions of the Excise Act,or of the rules made thereunder with intent to evade payment of duty,then,the manufacturer shall also be liable to pay penalty in terms of the provisions of section 11AC of the Excise Act.</em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>(3) In a case,where the CENVAT credit in respect of input or capital goods or input services has been <font color="#FF0000">taken or utilised </font>wrongly by reason of fraud,collusion or any wilful mis-statement or suppression of facts,or contravention of any of the provisions of these rules or of the Finance Act or of the rules made thereunder with intent to evade payment of service tax,then,the provider of output service shall also be liable to pay penalty in terms of the provisions of Section 78 of the Finance Act.</em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>(4) Any order under sub-rule (1),sub-rule (2) or sub-rule (3)shall be issued by the Central Excise Officer following the principles of natural justice.</em></font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So,if you take CENVAT credit wrongly and do not utilise it,there is no interest payable,but you can still be liable to a penalty.Now there can be two penalties under Rule 15(1) and 15(2) above,which can amount to twice the credit taken! </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Do you smell a rat? Did the Government forget to amend Rule 15 or was it left alone intentionally? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We understand that the Department in several places are activated on this subject. Already Audit points are raised and Show Cause Notices are being conceived.And with great capacity for quick conceptions,delivery may take place soon.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Department's view is plain and simple.As per Rule 15,if you take credit wrongly,whether you utilise it or not,you are liable for confiscation of the goods and penalty.It is immaterial that Rule 14 does not demand interest if the credit is not utilised.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">When I am not liable to pay interest,why penalty?,you ask logically.Read Rule 15,would be the humble reply of the adjudicator.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Interestingly, even some experts hold the view that even though interest is not leviable, penalty can be imposed.One of them argues,"as both penalty and interest were harsh, interest was deleted,but the assessee should be penalised for taking wrong credit and that is why penalty is imposed." </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It will be in the <em>interest </em> of all <em>concerned</em>,if the Board can clarify this issue before it reaches the Supreme Court. Maybe the Government should amend Rule 15 in the ensuing budget.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>The Twist in the Tale</strong>: The JSTRU in his Budget Letter in D.O.F.No.334/ 3/2012-TRU,dated 16.03.2012,clarified as,<font color="#FF0000">"</font><font color="#FF0000"><em>Rule 14 is being amended to substitute the word "or" with "and" so that interest is not payable on credit wrongly taken unless the same is utilized. However, penalty provisions for such cases have not been amended</em>." </font></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>FICCI not liable to pay Service Tax under Club or Association - CESTAT </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>WE</strong> covered this issue in <strong>DDT 343 - 18 04 2006 </strong> - <a href="http://www.taxindiaonline.com/RC2/NewsDesc.php?MpoQSrPnM=MzU5Mg=="><strong>FICCI,CII,ASSOCHAM and several trade associations liable to Service Tax as club or association? </strong></a>and in <strong>DDT 456 25 09 2006 - </strong><a href="http://www.taxindiaonline.com/RC2/NewsDesc.php?MpoQSrPnM=NDI5OA=="><strong>Bar Council of India is a club liable to pay Service Tax? : No Charity! says,Board.</strong></a></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per the definition of <em>"club or association"</em>,</font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(iii) any person or body of persons engaged in any activity having objectives which are in the <strong>nature of public service and are of a charitable </strong>,religious or political nature; </font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">is not included in the definition.</font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Eight years ago,we questioned why FICCI will not fall under the above exclusion and now the CESTAT has emphatically ruled that <em>appellants FICCI are engaged in activities having objectives which amount to public service and are of a charitable nature </em> and so are outside the purview of Service Tax of club or association.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In fact the Tribunal found <em>the adjudication order of the Commissioner is stricken with the vice of gross judicial indiscipline.The Commissioner must be considered as having misconducted himself in refusing to follow the clear and direct judgment of the Supreme Court,which is conclusive on the principle,that FICCI is a charitable organization having objectives and pursuing activities of general public utility,this being its dominant purpose.</em></font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We bring you this order today.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Please see <strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=20343" target="_blank">Breaking News</a></strong></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Customs - New Exchange Rates from 2nd May </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CBEC</strong> has notified new exchange rates for Imported Goods and for Export Goods with effect from 2nd May 2014.The US Dollar is 60.85 rupees for imports and 59.85 rupees for exports.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Exchange rates were last notified on 17 April 2014.</font></p> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=24&filename=notification/custom/2014/cnt14_038.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Notification No.38/2014-Cus (N.T.),Dated: May 01 2014 </strong></font></a></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>How to make Good Show Cause Notice? </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>NACEN </strong>has started an e-Learning module for the officers and the first lesson is <strong><em>"How to make a Good Show Cause Notice"</em></strong><em>.</em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We don't know whether it refers to preparation or repair of a Show Cause Notice.When you say <em>"How to make a Good Show Cause Notice"</em>,it may mean How to make a Good Show Cause Notice - out of a bad one.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Was it really necessary to use this adjective <em>"good"</em> and does it mean that you can also make a "bad" show cause notice? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A Departmental advice says,<strong> the Show Cause notice,in fact,should be luminous and not voluminous</strong>.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The DG,NACEN has informed the DG Inspection about the e-module of NACEN.</font></p> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/pdfdocs/wnew/RFD.pdf" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DG NACEN F.No.II/(15)47/2013/NACEN/1638 to 1697,Dated: February 21,2014 </strong></font></a></p> <p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong> </strong></font><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Overreach of Revenue - Bank account attachment day before Tribunal hearing </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>SOMETIMES</STRONG> our Revenue officers behave more like highway robbers than modern day revenue collectors.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The law that a stay granted by the Tribunal will be automatically vacated after one year,even if the assessee is not at all responsible for the Tribunal's delay in disposing of the appeal,is causing havoc.Even though the Supreme Court has ruled that Tribunal has the power to extend stay beyond one year,of late some High Courts have held that the Tribunal has no such power.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In a recent case,the Revenue struck a day before the Tribunal was to hear the extension of Stay application by attaching the bank account of the assessee and recovering part of the demand.The Tribunal granted extension of Stay but Revenue refused to refund the amount recovered from the bank.The hapless assessee approached the High Court.The High Court observed that this is tantamount to overreaching the process of law which cannot be approved by the Court.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Are the Revenue officers expected to collect revenue in this manner? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">If the Congress loses the 2014 elections,our Revenue officers can take credit for being largely responsible for damaging the reputation of the Government by this kind of high-handed behaviour.If the BJP comes to power,they should be grateful to these officers,but ensure that they are nowhere near collection of revenue in the new Government.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We will bring you the High Court order tomorrow.</font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Customs and Security Staff exchange blows in Mumbai </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IT</strong> is reported that Customs officers and staff of a private security agency came to blows in Mumbai Air Cargo Complex as an Additional Commissioner's car was stopped by the security guard.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">EGO more than security is the issue in such situations. Customs officers feel bad when security staff stop them in their own fiefdom - the Customs areas.And the Security Staff get a lot of kicks when they stop high-profile Customs officers.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Kiran Bedi once stopped PV Narasimha Rao because he did not have a pass - everybody knew who PV Narasimha Rao was - but he didn't slap her! </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"> – Tuesday's cases</font></strong></font></strong></font></p> <p align="justify"><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">Service Tax</strong> </font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Recovery of demand day before Tribunal was to hear extension of stay application - Overreaching process of law which cannot be approved: HC</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> adjudicating authority confirmed a Service Tax demand of over Rs.83 lakhs with equal penalty and attendant interest.The Tribunal on 20.09.2012 granted stay subject to pre-deposit of 15% of the tax demanded.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">After expiry of six months a notice dt.3.10.2013 was served upon petitioner from the office of Commissioner that the interim protection was for a period of six months and appeal is still pending but the stay granted by the CESTAT automatically stands vacated and called upon the petitioner to deposit the balance towards service tax along with interest and penalty in terms of order of the adjudicating authority under intimation to his office failing which necessary action shall be initiated for recovery of outstanding dues.</font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Whether for period prior to 10.05.2008,penalty under section 76 & 78 of FA,1994 can be imposed simultaneously - Matter referred to Larger Bench of CESTAT </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> short issue involved in the matter is whether penalty under section 76 & 78 of the Finance Act,1994 for the period prior to 10.05.2008 can be imposed simultaneously on the assessee or not.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Whereas the appellants relied on the Karnataka HC decision in <em>United Communication Udupi </em>favourable to them,the Revenue representatives countered the same by citing the Kerala & Delhi High Court decisions in the cases of <em>Krishna Poduval </em>& <em>Bajaj Travels </em> respectively.</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 definition of 'case' over which Settlement Commission has exclusive jurisdiction excludes proceedings for reassessment - NO: HC </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> assessee company is engaged in real estate business.Its premises were searched different dates.It filed its return declaring taxable income.The assessee had earlier been issued separate notice under Section 153-A of the Act.In response to the notice,the assessee stated that its returns filed for 2000-2006 be treated as reiterated under Section 153A.The assessee approached the Settlement Commission to settle pending assessments for AY 2000-2001 to 2006-2007 and declared additional income. Initially, after hearing parties,the Commission admitted the application for hearing and disposal.The Commission passed its order under Section 245D(4),finally determining the assessee's liability,for 2004-05 to 2006-07.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The issues before the Bench are - Whether the definition of <em>"case"</em> over which the Settlement Commission has exclusive jurisdiction excludes proceedings for reassessment,under Section 245A(i) and Whether reopening of proceedings is permissible in respect of proceedings completed by the Settlement Commission.And the answers favour the assessee.</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>Conversion of retail packs of paints into bigger/bulk packs does not amount to manufacture as no evidence has been adduced to indicate that the appellant has undertaken any reprocessing - Appeal allowed: CESTAT </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> appellant is a job worker of M/s Asian Paints (I) Ltd. On the direction of M/s Asian Paints,the appellant has,in the months of January and February,2002,received retail packs of paints for conversion into bigger packs.The applicant did the repacking from small packs to bigger packs and cleared the same without payment of any duty. Incidentally, no CENVAT credit was availed on any materials/inputs while conducting the said repacking activity.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Revenue was of the view that the reprocessing activity amounts to <em>"manufacture" </em>of final products and hence demanded CE duty on these clearances.As the lower authorities confirmed the duty demand and imposed penalty/interest the appellant is before the CESTAT.</font></p> <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"><strong>vijaywrite@taxindiaonline.com </strong></a></font></p> </body> </html>