TIOL-DDT 2370 · 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="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 color="#663399">TIOL-DDT 2370 </font></font><br> 09.06.2014 <br> Monday </strong></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Government goes all the way to Supreme Court - to deny exemption to Government!</strong> </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>NOTIFICATION </strong> No. 64/1995-CE dated 16.3.95 allows exemption to goods if supplied as Stores for consumption on board a vessel of the Indian Navy or Coast Guard.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The ever-vigilant Central Excise officers will never let go of an opportunity to deny an exemption granted by the Government with the approval of Parliament - for many of them strongly believe that they have to be more loyal than the Government and Parliament.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In many cases they sought to deny this exemption by hair splitting the definition of "goods", "stores", "consumption" etc,.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Take this case for example:</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In 1996-97, ESSAR Steels supplied plates and sheets to Indian Navy and claimed exemption under the above notification. They produced an end use certificate from the Navy Authorities. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Central Excise Authorities denied the exemption on the grounds that the goods are not stores and they are in fact raw materials not covered by the expression 'Stores'. The Adjudicating Authority further observed that the plates have been used for repairs of warships. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This issue was decided long ago in favour of the assessee by the Tribunal judgements and Board Circulars. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBEC had in Circular No.89/88-CX.6<strong>,</strong> dt.30.12.88 observed: </font></p> <blockquote> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Doubts have been raised by some collectors regarding the interpretation of the expression "stores for consumption on board a vessel". In one Collectorate Audit has taken the view that the expression 'stores' for consumption on board a vessel relates only to 'consumable stores' and not 'non-consumable items', which are used, on board the vessel. On this consideration, the Audit has raised objection in a case of clearance of I.C. Engines supplied without payment of duty to a vessel of the Indian Navy . </font></em></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And the Board clarified: </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>It has all along been the intention of the Government to grant exemption from central excise duty not only to those excisable goods which are used for running or maintenance of the vessels of the Indian Navy but also to those excisable goods which are meant for consumption of the crew members. In view of this the supply of I.C. Engines without payment of duty to a ship of the Indian Navy, under the above notification was in order. </em></font></p> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Apart from the above considerations, it is observed that the term "consumption", in Central Excise merely connotes "use". As for example, the expression "clearance for home consumption", merely means "clearance for use within the country". Thus stores for consumption, on board a vessel would cover stores, both consumable and non-consumable, meant for the use of a ship as well as the crew members. Reliance can also be placed on the definition of 'stores' appearing in section 2(38) of the Customs Act, 1962. </font></em></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In this case, the Tribunal set aside the order of the Adjudicating Authority denying the exemption and allowed the appeal. - <strong><a href="http://www.taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=OTQxODA=" target="_blank"><font size="1">2008-TIOL-2866-CESTAT-AHM</font></a></strong>. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Field officers do not like Tribunal orders and Board Circulars, especially if they allow exemption from duty, even to another wing of the Government. The facts that the other wing is the far more important Defence Ministry and the goods were used in a ship used for protection of all citizens including the all powerful Central excise officers, are not valid reasons for the valiant excise sleuths. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The goods were cleared in 2006 and the Tribunal gave its verdict in 2008. Duty demanded was about Rs.1.75 Crores and Revenue was not prepared to forego that kind of revenue, notwithstanding the Board Circular. So they took the matter to the Supreme Court and also issued some more Show Cause Notices which were mercifully kept in the Call Book. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In the Supreme Court, they took an argument that the end use certificate was not proper. The Supreme Court found no merit in the appeal and dismissed it. - <strong><a href="http://www.taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=OTQxODE=" target="_blank"><font size="1">2014-TIOL-61-SC-CX</font></a></strong>.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The assessee had to pursue a legal battle for eight years all the way up to the Supreme Court for availing an exemption granted by the Government and clearly covered by a Tribunal judgement and Board Circular. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">One welcome change the Finance Minister can think of is to strictly enforce judicial and departmental discipline among his adjudicators. </font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>File Returns even if no duty is payable </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>YET</strong> another issue raised in the recent Hyderabad RAC meeting: </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">An SSI unit is eligible for exemption up to Rs.150 lakhs for one financial year. If he crosses Rs.150 lakhs during a financial year, he takes registration and starts paying duty thereafter. However, his total turnover for that financial year does not exceed Rs. 4 crores. Therefore, for the subsequent year also he is eligible for exemption of first Rs.150 lakh clearances. In such a case, from April next year onwards, he claims exemption and since he is claiming exemption, he should not be required to file any monthly or quarterly return. But since he had taken registration during tile previous year, department is insisting that he should file ‘Nil' return even though he is not paying duty. Industry requests that he should be exempt from filing returns during the period of exemption, and department should not insist on filing of 'Nil' return. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Department answered: </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In terms of the provision of Rule 12 of the Central Excise Rules, 2002, the assessee eligible to avail exemption under a Notification, based on the value of the clearances in a financial year, shall file quarterly returns in the form specified, furnishing details of production and removal of goods and other relevant particulars within ten days from the close of the quarter to which the return relates. Hence, as long as he is registered and claiming exemption under SSI Notification, he has to file the returns quarterly. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Can he get his registration cancelled? </font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">IAS Officer in 7th Pay Commission - Delhi High Court admits writ and issues notice </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> Seventh Pay Commission was constituted by the Government of India on 28.02.2014. One of the Members of the Commission is a retired IAS Officer Vivek Rae. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A group of petitioners who are retired Members of the All India Services, the Central Civil Services and the Armed Forces who have served their country with distinction and risen to positions of high responsibility in Government, has challenged the appointment of Rae. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">They are challenging the appointment of Vivek Rae as unfair, unjust and arbitrary and offending the rule against bias and interest. Their plea is that since Rae is a retired IAS officer, he is directly interested and affected by the recommendations of the Commission since these would also relate to the pension and retirement benefits of Mr. Rae himself. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is submitted that a key recommendation to be made by the VII Pay Commission relates to the demand for parity in pay scales within the AIS. Under the existing system, members of the lAS enjoy an 'edge' in pay, entitling them to higher emoluments than other Central Government employees, including members of other Services. This 'edge' has been retained by previous Pay Commissions despite repeated representations made inter alia , by the other Services. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A common 'feature of all the previous Pay Commissions that have considered and rejected the demand for parity in pay within the AIS has been that the composition of each of them has included a member of the lAS. The bias in favour of retention of the status quo in relation to the demand for parity is apparent on 'a plain reading of previous reports of the Pay Commissions, which justify retention of the 'edge' essentially on the basis of a perceived 'superiority' of the lAS over the other Services. The Petitioners submit that this specious reasoning has a rational nexus and connection with the consistent presence of a member of the lAS on the Commission. That the Commission includes a Member of the lAS therefore raises a reasonable likelihood of bias on the part of the Commission in considering the issue of parity of pay intra the Services as well as qua other Central Government employees. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Delhi High Court has issued notice to the Union of India and posted the case for 4.9.2014. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Petitioners include AK Agnihotri, retired Chief Commissioner of Customs and MC Joshi, retired Chairman of CBDT. </font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Credibility, Continuity and Clarity from Budget </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN</strong> a pre-consultation meeting with the Finance Minister, CII pressed for an amendment of the Income tax act which would promulgate the reversal of retrospective amendment and make all taxation prospective. A simple, transparent and non-adversarial tax regime bereft of complexities and ambiguities would go a long way to strengthen business sentiment and restore faith of the foreign investor in the India growth story, according to CII. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CII suggested: </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A fresh thinking on the direct tax code is required, which would make it simple and exemption free. A low tax framework for direct taxes should be evolved, going forward, without looking at DTC as the base. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">To boost investment in manufacturing sector, the threshold limit of investment allowance should be reduced to Rs. 50 crores which would encourage mid-sized companies to participate as well. The quantum of deduction should be enhanced to 25% of investment. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Creating a framework for settling tax disputes without going into litigation. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A pro-growth budget which makes a bold statement on reforms would go a long way to effect a turnaround in sentiment and mark a return to growth. The economy is at an inflexion point and is awaiting remedial action. CII is looking for Credibility, Continuity and Clarity from the Budget.' </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 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"><strong><font color="#663399">Service Tax </font></strong></font></p> <p align="justify"><font color="#FF6633"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Demand of service tax on British Airway set aside - not liable to pay service tax under reverse charge on services of online database access and retrieval services provided by overseas computerized reservation system companies - CESTAT by majority.</font></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THERE</strong> is a demand of service tax on British Airways under Section 66A in respect of services received from outside India from computerized reservation system companies (CRS). Due to difference of opinion between the Member (J) and the Member (T), the matter was referred to the Third Member. Please see <strong><a href="http://www.taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=ODkzMjc=" target="_blank"><font size="1">2013-TIOL-1161-CESTAT-DEL</font></a></strong> </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">M/s British Airways, India has to be treated as a separate person. If that be so, in view of the admitted position that the contract between CRS/GDS companies is not with M/s British Airways, India and is only that M/s British Airways, UK, the present appellant cannot be held to be recipient of the services so as to make him liable to pay service tax, on reverse charge basis, in terms of the provisions of Section 66A. </font></p> <p><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 Sec 80IA benefits cannot be denied merely because business is in nature of works contract - YES: HC</font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> assessee, an engineering company, is a civil contractor for the government. For the AY 2005-06, the return of income was filed which was taken under scrutiny assessment u/s 143(1) and the same was framed u/s 143(3). One of the disallowances was a part of deduction u/s 80IA(4). On appeal, CIT(A) had partly allowed such appeal. Both the sides challenged the same before the Tribunal and the Tribunal had already adjudicated upon the issue in a recent past. By way of these petitions, the challenge was made to the notice issued u/s 148 read with section 147. On the basis of retrospective amendment, the explanation given under sub-section (13) of section 80IA was substituted by the Finance (No.2) Act, 2009. Assessee objected to reassessment proceedings contending that this was nothing but a change of opinion. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The issue before the Bench is - Whether deduction u/s 80IA would apply in relation to a business referred to in the nature of works contract. And the answer goes in favour of the assessee. </font></p> <p><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Central Excise </strong></font></p> <p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Classification of Toys/Games/Puzzles - Funskool India dispute resolved by Third Member of CESTAT. </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> difference of opinion order was reported earlier vide <strong><a href="http://www.taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=OTIxMjQ=" target="_blank"><font size="1">2014-TIOL-253-CESTAT-MAD</font></a></strong>, wherein the issue of classification of certain items manufactured by Funskool was referred to Third Member due to difference of opinion between the two Members. The majority order has been delivered by the Tribunal recently. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The issue under dispute is regarding classification of the following items: </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1 Chip N Dale <br> </font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2 Duck Tale Disney</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><br> 3 Fox and Geese <br> </font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4 Rally </font></p> <p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><img src="http://www.taxindiaonline.com/RC2/image/stories/sharp_guy.jpg" alt="Legal Corner Icon" width="479" height="390" hspace="5" border="0" align="center"></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399">See our Columns Tomorrow for the judgements</font></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">Have a nice day.</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.co</strong></a></font></p> </body> </html>