TIOL-DDT 2453 · 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 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>TIOL-DDT 2453</font><br> 10.10.2014<br> Friday</strong></font></p> <p align="center"><font face="Georgia, Times New Roman, Times, serif"><strong><em><font color="#006600" size="3">Deduction under section 10A/10AA on transfer of Technical Manpower in case of software industry - CBDT Clarifies </font></em></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CBDT</strong> clarifies that: </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The transfer or re-deployment of technical manpower from existing units(s) to a new unit located in SEZ, in the first year of commencement of business, shall not be construed as splitting up or reconstruction of an existing business, provided the number of technical manpower so transferred as at the end of the financial year does not exceed 50 per cent of the total technical manpower actually engaged in development of software or IT enabled products in the new unit. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In the alternative, if the assesses (enterprise) is able to demonstrate that the net addition of the new technical manpower in all units of the assessee (enterprise) is at least equal to the number that represents 50% of the total technical manpower of the new SEZ unit during such previous year, deduction under section 10A/10AA would not be denied provided the other prescribed conditions are also satisfied. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is further clarified that this clarification will not apply to the assessments which have already been completed and no appeal shall be filed by the Department in cases where the issue is decided by an appellate authority in consonance with this Circular. </font></p> <p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/notDesc.php?MpoQSrPnM=MTcxOTQ=" target="_blank">CBDT Circular No. 14/2014, Dated: October 8, 2014 </a></font></strong></p> <p align="center"><em><font face="Georgia, Times New Roman, Times, serif"><strong><font color="#006600" size="3">Even if Service Tax Audit cannot be done, there is no hurdle for Central Excise Audit - CBEC </font></strong></font></em></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>NETIZENS</strong> will remember the Delhi High Court judgement dated 04 08 2014 in the <em>Travelite </em>case<em><strong> <a href="http://www.taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=OTUzNzc=" target="_blank"><font size="1">(2014-TIOL-1304-HC-DEL-ST)</font></a></strong></em> striking down Rule 5A(2) of the Service Tax Rules as ultra vires. [Rule 5A(2) requires the assessees to make available records to the 'Audit Party' deputed by the Commissioner or CAG]. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">From 15 October some 45 Audit Commissionerates will start functioning. <strong>DDT</strong> had expressed a doubt as to what all these Audit Commissionerates will do, when according to the Delhi High Court, they do not have the power to audit at all. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The wise Board has come up with a brilliant clarification. The CBEC says that the Delhi High Court order quashed the Service Tax rule but it did not deal with the issue of audit in Central Excise at all. And so the Board states that: </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif" style="background-color:#FFFF00" span="span">in Central Excise there is adequate statutory backing for audit by the Central Excise Officers. The statutory provisions relevant for audit is clause (x) of Section 37(2) and rule 22 of the Central Excise Rules, 2002. For ease of reference, Section 37(2 )( x) is reproduced below:- </font></p> <blockquote> <p align="justify"><strong><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif" style="background-color:#FFFF00" span="span">Section 37: Power of the Central Government to make rules - </font></em></strong></p> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif" style="background-color:#CCCCCC" span="span">"37(2)(x): impose on persons engaged in the production or manufacture, storage or sale (whether on their own account or as brokers or commission agents) of salt, and, so far as such imposition is essential for the proper levy and collection of the duties imposed by this Act, of any other excisable goods, the <strong>duty of furnishing information, keeping records and making returns, and prescribe the nature of such information and the form of such records and returns, the particulars to be contained therein, and the manner in which they shall be verified</strong>;"</font></em></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif" style="background-color:#FFFF00" span="span">3. Rule 22 of the Central Excise Rules, 2002 provides that the Commissioner may empower an Officer or depute an audit party for carrying out scrutiny or verification of records of the assessee . The rule also obliges an assessee to make available records for such scrutiny. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif" style="background-color:#FFFF00" span="span">4. The statutory backing for rule 22 thus flows from clause (x) of section 37(2) and the general rule making powers under section 37(1) of the Central Excise Act, 1944. Clause (x) of section 37(2) empowers the Central Government to make rules for verification of records and returns to check the correctness of levy and collection of duty which in the present regime of self-assessment would mean verification of correctness of self-assessment and payment of duty by the assessee . It may be noted that the expression “verification” used in the section is of wide import and would include within its scope, audit by the Departmental officers, as the procedure prescribed for audit is essentially a procedure for verification mandated in the statute. </font></p> <p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">Does this mean that Central Excise assessees can be audited but not Service Tax assessees? </font></p> <p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">Maybe the Board is not aware that an identical provision to Section 37(2)(x) is there in Service Tax also. Section 94(2)(k) provides for this: </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif" style="background-color:#CCCCCC" span="span"><em>imposition, on persons liable to pay service tax, for the proper levy and collection of the tax, of <strong>duty of furnishing information, keeping records and the manner in which such records shall be verified . </strong></em></font></p> </blockquote> <p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">If the Board is right with regard to Central Excise, they can continue to audit in Service Tax also. </font></p> <p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">The Board Circular is silent on whether Service Tax audit will be continued or Delhi High Court order would be followed. </font></p> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/notDesc.php?MpoQSrPnM=MTcxOTM=" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBEC Circular No. 986/10/2014-CX., Dated: October 9, 2014 </font></strong></a></p> <p align="center"><em><font size="3" face="Georgia, Times New Roman, Times, serif"><strong><font color="#006600">Can CESTAT extend Stay beyond 365 days - YES, holds Larger Bench </font></strong></font></em></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>AS </strong>reported in<a href="http://www.taxindiaonline.com/RC2/NewsDesc.php?MpoQSrPnM=MjA5ODc=" target="_blank"> <strong>DDT 2397 16.07.2014</strong></a>, the issue referred to the Larger Bench of the CESTAT was </font></p> <blockquote> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Whether the third proviso to Section 35C(2A) of the Central Excise Act, 1944 disables CESTAT of the power to grant extension of stay beyond 365 days from the initial grant of an order of stay, notwithstanding that the delay in disposal of an appeal is occasioned not on account of any conduct of the appellant? </font></em></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per Section 35C, the CESTAT is expected to decide an appeal within three years. If a Stay is granted, the appeal has to disposed of within 180 days. The controversial third proviso under dispute inserted in Section 35C(2A) with effect from 10.05.2013 reads as: </font></p> <blockquote> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Provided also that where such appeal is not disposed of within the period specified in the first proviso, the Appellate Tribunal may, on an application made in this behalf by a party and on being satisfied that the delay in disposing of the appeal is not attributable to such party, extend the period of stay to such further period, as it thinks fit, not exceeding one hundred and eight-five days, and in case the appeal is not so disposed of within the total period of three hundred and sixty-five days from the date of order referred to in the first proviso, the stay order shall, on the expiry of the said period, stand vacated." </font></em></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per the Statute, the Tribunal can grant Stay for a maximum period of 365 days. Tribunal takes about 5 to 10 years to decide a case. In such a situation should the Stay granted be vacated after 365 days for no fault of the appellant? Government, at least Board thinks so. The Courts are vertically divided on the issue, in spite of the decision of the Supreme Court in the case of <em>Kumar Cotton Mills Pvt. Limited </em>- <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=26&filename=legal/sc/2005/2005-TIOL-42-SC-CESTAT.htm" target="_blank"><strong><em><font size="1">2005-TIOL-42-SC-CESTAT</font></em></strong></a>. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Any way without referring to the multitude of case law,<strong> DDT</strong> is happy to report that the Larger Bench of the CESTAT headed by the President has held that: </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>Even in a case where the period of 365 days has passed from the date of initial grant of stay but the appeal could not be disposed of for reasons not attributable to the appellant/ assessee (in whose favour the stay was granted); and where the Tribunal is satisfied that the appellant/ assessee was ready and willing for disposal of the appeal and/ or had not indulged in any protractive strategies, extension of stay could be granted (beyond the period of 365 days) by passing a speaking order disclosing the satisfaction of the Tribunal as to absence of any delay/ protractive stratagems by the appellant/ assessee resulting in non disposal of the appeal or that the appeal could not be disposed of on account of pendency of several appeals or other reasons attributable to the structure and context of the Tribunal or other appropriate reasons. </em></font></p> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">An assessee/ appellant in whose favour an order of stay earlier granted stood vacated on expiry of 180 days or 365 days as the case may be, may present an application seeking extension of stay by pleading the necessary facts as would authorise the exercise of discretion by this Tribunal for grant of such extension. </font></em></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This means that: </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. The appellant has to apply for extension of Stay beyond 180 days and 365 days. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. The Tribunal has to be convinced that the appeal could not be disposed of for reasons not attributable to the appellant/ assessee. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. The Tribunal has to pass a speaking order. </font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">All the Stay orders will now have to be got extended by separate applications followed by hearings and orders. All this avoidable work happens just because the Department has no respect for the Tribunal or its inherent power to grant extension of Stay. Even when the Tribunal orders that recovery is stayed during the pendency of the appeal, the Department resorts to recovery proceedings after 180 days and 365 days and the assessee is forced to knock at the doors of the Tribunal and is often dragged to the High Court by the Department. This huge unproductive work costs the Department and the assessees a bomb. Revenue officers are perhaps the biggest enemy to revenue collection. They ensure that precious time is spent in litigation and not production. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Fortunately, the scene has changed after 5.8.2014 and now there is a mandatory pre-deposit and there is no Stay - but for the old cases, the process of filing Stay applications will have to be gone through. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Can't the Board simply accept the fact that a Stay is a Stay till the appeal is disposed of? Then CESTAT can do better things than hearing Stay applications. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The larger Bench Order is technically binding on all other Benches of the CESTAT and now the assessees can be sure of getting extension of Stay. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We bring you this important order today.</font></p> <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=OTY2OTM=" target="_blank">2014-TIOL-1965-CESTAT-LB</a></font></font></strong></p> <p align="center"><font face="Georgia, Times New Roman, Times, serif"><strong><em><font color="#006600" size="3">Service Tax Return for period April - September 14 </font></em></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">SERVICE Tax Return (ST-3) for the period April 14 - September 14 is now available for e-filing by the assesses in both offline and online version. The last date of filing the ST-3 return for the said period is 25th October, 2014. However, to avoid congestion and inconvenience in the last minute, all assesses who wish to file their ST-3 for the said period are advised to start e-filing the returns immediately and not to wait till the last date. The assesses can file return either online or use the offline utility by downloading the latest version from 'DOWNLOADS' Section of ACES website <strong>(<a href="https://www.aces.gov.in/">https://www.aces.gov.in/</a></strong>). </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The quarterly return for the First Stage Dealer/ Second Stage Dealer/ Registered Importer for the period July-September, 2014 is required to be filed on or before 15th October 2014. Importers who are registered with Central Excise for issuing cenvatable invoices can e-file their quarterly returns now using the offline or online versions available in ACES. The offline version can be downloaded from <a href="http://acesdownload.nic.in/"><strong>http://acesdownload.nic.in/</strong> </a>or from 'DOWNLOADS' Section of ACES website. </font></p> <p><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Source: <a href="https://www.aces.gov.in/" target="_blank">ACES Website</a></font></strong></p> <p align="center"><font size="3"><em><font face="Georgia, Times New Roman, Times, serif"><strong><strong><font color="#006600">Jurispruden</font><font color="#FF6633" size="4">tiol</font> <font color="#006600">- Monday's cases</font></strong></strong></font></em></font></p> <p><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"><font color="#663399"><strong>Central Excise </strong></font></font></p> <p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Refund of unutilized credit is only permissible in case of export of goods and not for any other reason - Refund in cases of closure of factory is not provided under statute - Appeal dismissed: CESTAT</font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> appellants were manufacturing Aluminium Alloys and Zinc Alloys at their Khopoli factory. They sold their assets i.e. land and building etc. vide Sale Deed dated 28.12.2010 and also sold the stock of unutilized raw material and finished goods. The Central Excise registration was surrendered to the department on 03.01.2011. At that time there was a credit balance of Rs.35,49,815/- in the CENVAT account. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This amount, the appellant claimed as refund u/r 5 of the CCR, 2004. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The adjudicating authority rejected the refund by holding that Rule 5 does not provide any legal basis to grant cash refund of unutilized credit on account of closure of factory except in cases where the same is attributable to inputs which have gone into final products which are exported. </font></p> <p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Income Tax </font></strong></p> <p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Whether mere fact that broker through whom assessee had purchased shares was banned by SEBI much after transactions of assessee had taken place, there is any merit in AO's opinion to treat same as not genuine - NO: ITAT </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> assessee company is in the business of manufacture and sale of drilling, mining, construction tools and accessories. It declared total income of Rs.2,18,460 and claimed exemption of long term capital gain to the extent of Rs.24,87,000. Assessee had purchased 20,000 shares of AIC for a consideration of Rs.1,00,400 through a broker <em>M/s. V.K. Singhania & Co., Kolkata</em>. The share certificates in physical form were submitted to the said AIC for transfer and received back. These shares subsequently, dematerialized through the depository service of HDFC Bank. This was subsequently sold through M/s. Ahilya Commercials P. Ltd., Kolkata for a sum of Rs.25,87,400/-. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The issue before the Bench is - Whether mere fact that the broker through whom the assessee had purchased shares was banned by the SEBI much after the transactions of the assessee had taken place, there is any merit in the AO's opinion to treat the same as not genuine. And the answer goes against the Revenue. </font></p> <p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Settlement/Customs/MODVAT/CENVAT </font></strong></p> <p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">MODVAT/CENVAT credit taken on basis of certificate issued by DRI valid: HC </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>SETTLEMENT</strong> Commission directed that in respect of the Countervailing duty paid by the assessee, the Directorate of Revenue Intelligence (DRI) would issue a certificate of proof of payment made by the assessee, so as to enable the assessee to claim the benefit of MODVAT credit in accordance with law. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Department contended that the certificate issued by the Directorate of Revenue Intelligence (DRI) cannot be taken into consideration, inasmuch as the certificate is required to be issued by the Superintendent of Central Excise under Rule 57E(4) of the Central Excise Rules. The High Court found the submission of the department as patently erroneous. The Settlement Commission in its order has given a categorical finding that as the consequence of their order, the assessees are entitled to a certificate of payment of Countervailing duty from the Jurisdictional Commissioner or the DRI who are duty bound to issue such certificate. Consequently, the certificates issued by the DRI in consequence of the order of the Settlement Commission is perfectly legal. </font></p> <p><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">See our Columns Monday for the judgements </font></strong></p> <p><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Monday with more <strong>DDT</strong></font></p> <p><strong><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a nice weekend. </font></strong></p> <p><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@tiol.in"><strong>vijaywrite@tiol.in </strong></a></font></p> </body> </html>