TIOL-DDT 2489 · 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 bgcolor="#FFFFFF"> <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 2489</font><br> 04.12.2014<br> </strong><strong>Thursday</strong></font></p> <p align="center"><font face="Georgia, Times New Roman, Times, serif"><em><strong><font color="#006600" size="3">Rule 8(3A) of CER, 2002 fades into oblivion</font></strong></em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>YESTERDAY</strong> we reported the Gujarat High Court decision in <em>Indsur Global Ltd. </em><a href="http://www.taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=OTc3Nzg=" target="_blank"><strong><font size="1">2014-TIOL-2115-HC-AHM-CX</font> </strong></a> holding that the portion "without utilizing the CENVAT credit" of sub-rule (3A) of rule 8 of the Central Excise Rules, 2002, [as it existed prior to its substitution from 11.07.2014] shall be rendered invalid.</font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The reasoning given by the High Court is as culled below: </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">+ It can be appreciated that where a manufacturer falls behind the payment schedule on account of financial constraints such as, slowing down of business, competition in the market reducing the profit margins, promised payments from the purchasers not coming forth or temporary labour disputes, would find it extremely difficult thereafter to raise further funds for payment of duty in addition to the duty which he has already paid. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> + If such facility is withdrawn his ability to continue the business under such adverse financial climate would further diminish. This would be a cyclical vicious pattern where in every month he would fall behind by the due date unable to raise cash flow for payment of duty for the clearance which he desires to make and is therefore further saddled with the burden of paying such duty in cash without availing CENVAT credit. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> + This rule thus imposes a wholly unreasonable restriction which is not commensurate with the wrong sought to be remedied. This extreme hardship is not the only element of unreasonableness of this provision. It essentially prevents an assessee from availing CENVAT credit of the duty already paid and thereby suspends, if not withdraw, his right to take credit of the duty already paid to the Government. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> + CENVAT credit is available to a manufacturer upon purchase of inputs which are duty paid. It is the duty element which the assessee has already suffered which is credited to his CENVAT credit account available to him for adjustment for payment of excise duty liability upon clearance of the finished product. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> + By no stretch of imagination, the restriction imposed under sub-rule (3A) of rule 8 to the extent it requires a defaulter irrespective of its extent, nature and reason for the default to pay the excise duty without availing CENVAT credit to his account can be stated to be a reasonable restriction. It leads to a situation so harsh and a position so unenviable that it would be virtually impossible for an assessee who is trapped in the whirlpool to get out of his financial difficulties.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> + Insisting on an assessee in default to clear all consignments on payment of duty would be a perfectly legitimate measure. However, to insist that he must pay such duty without utilising CENVAT credit, which is nothing but the duty on various inputs already paid by him, would be a restriction so harsh and out of proportion to the aim sought to be achieved, the same must be held to be wholly arbitrary and unreasonable. </font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Incidentally, the CESTAT in the cases of <em>Meenakshi Associates </em>(para 15 and 16 in <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=34&filename=legal/cestat/2012/2012-TIOL-587-CESTAT-DEL.htm" target="_blank"><font size="1">2012-TIOL-587-CESTAT</font></a></strong>), <em>Baba</em> <em>Viswakarma Engg Co </em>(para 11, 12 and 13 in - <a href="http://www.taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=ODk4NDc=" target="_blank"><strong><font size="1">2011-TIOL-2010-CESTAT-DEL<font size="2">)</font></font></strong></a> and <em>Bactolac Formulations </em>(para 5 of<font size="1"><strong> <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=34&filename=legal/cestat/2012/2012-TIOL-970-CESTAT-BANG.htm" target="_blank">2012-TIOL-970-CESTAT-BANG</a></strong></font>) had <font color="#CC3300">allowed CENVAT credit to be used even during the period of default thus putting to naught the restriction sought to be imposed by rule 8(3A) of CER, 2002. </font></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>Nonetheless, the erstwhile sub-rule (3A) to rule 8 would be remembered (next only to rule 6 of CCR, 2004) for its ability to generate a mountain of litigation during its lifetime and one would have wished for such a decision to have come earlier. </em></font></p> <blockquote> <p align="center"><font face="Georgia, Times New Roman, Times, serif"><font size="3"><em><font color="#006600"><strong>Exemption under Section 5A of Central Excise Act, 1944 to SEZs - Omission to omit reference to SEZ in Sec 5A is legislative oversight - HC </strong></font></em></font></font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>INITIALLY</strong>, duty leviable on goods cleared from SEZs into DTA was excise duty as per the proviso to Section 3 of the Central Excise Act, 1944. The quantum of duty is the aggregate duties of Customs leviable on like goods imported. But with a separate SEZ Act coming into effect, all this has changed and the reference to SEZ from levy of excise duty under Section 3 of the Central Excise Act was omitted. But they continued the reference to SEZs in Section 5A of the Central Excise Act. A SEZ unit claimed exemption from CVD in respect of goods cleared in DTA, based on a Central Excise exemption notification, but the Specified officer denied it as SEZs are excluded from Section 5A. The High Court held the omission to omit reference to SEZ in Sec 5A is only a legislative oversight and quashed the order. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Please see <a href="http://www.taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=OTc3OTc=">Breaking News</a></strong></font></p> <p align="center"><font face="Georgia, Times New Roman, Times, serif"><em><strong><font color="#006600" size="3">Not making mandatory deposit u/s 129E of Customs Act, 1962 - appeal dismissed </font></strong></em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>VIDE</strong> an Order-in-Original no. dated 07/05/2014 passed by the<em> Commissioner of Customs (Export), Nhava Sheva</em>, a penalty of Rs.1.17 crore was imposed on the appellant. Against this order, the appellant filed an appeal before the CESTAT on 11/09/2014. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It seems that no deposit, as mandated by the substituted section 129E of the Customs Act, 1962, was made by the appellant in the matter of penalty imposed.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So, when the appeal came up for hearing recently, the Division Bench observed and held -<font color="#663399"><em> As per the provisions of Section 129E of the Customs Act, as amended by the Finance Act, 2014, the appellant is required to make a pre-deposit of 10% of penalty imposed while filing the appeal. The appellant has not made such a pre-deposit. Therefore, the appeal is dismissed as non-maintainable for non-compliance with the provisions of Section 129E of the Customs Act, 1962.</em></font></font></p> <p align="justify"><em><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">Should it be 7.5%?</font></em></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#000000">See </font><font color="#0000FF" size="1"><a href="http://www.taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=OTc3OTg=">2014-TIOL-2442-CESTAT-MUM</a></font></strong></font></p> <p align="center"><font face="Georgia, Times New Roman, Times, serif"><em><strong><font color="#006600" size="3">We are becoming more transparent - Modi effect?</font></strong></em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>YESTERDAY'S</strong> DDT on a pessimistic note mentioned - <em>many are waiting with bated breath to know whether the country has slipped a few notches below its present 94th rank (with a paltry score of 36 out of 100) in the global clean ranking. </em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Thankfully, we were wrong in our assessment. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In fact, India improves its rating on global corruption index. This year, it ranks 85th among 175 countries as against 94th last year, according to graft watchdog Transparency International India (TII). Sri Lanka joins us at this ranking. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Denmark was happy that it retained its position as the least corrupt country in 2014 with a score of 92. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">North Korea and Somalia are the most corrupt. They shared the last place, scoring just 8. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As for our neighbours - Pakistan and Nepal were at 126th position. Bangladesh was 145th and Bhutan 30th in the ranking. Interestingly, in spite of a lot many corrupt men & women being sent to the gallows, China moved to 100th place, down from 80th last year. </font></p> <p align="center"><font face="Georgia, Times New Roman, Times, serif"><em><strong><font color="#006600" size="3">IRS Officers Resign</font></strong></em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN</strong> a written reply in the Lok Sabha yesterday, the Minister of State for Personnel, Public Grievances & Pensions, Dr. Jitendra Singh informed that <strong>15 IRS </strong>officers resigned from service during the last three years on personal grounds and none of them have taken up jobs in private sector; the number of officers tendering resignation is within the normal limit. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In terms of Rule 26 of All India Services (Death Cum Retirement Benefits) Rules, 1958, for officers who retire from service, prior permission of Government is required if they wish to accept post retirement <strong><em>commercial employment </em></strong> before the expiry of one year from the date of their retirement.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Perhaps these officers might have waited for the cooling period to get over and then taken up commercial employment or ventured on their own as Advocates or Tax Consultants or may have been appointed as Counsels for the Revenue. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Some wanted to serve the people, so founded political parties, others joined political parties and now have become Hon'ble Members of the Parliament or Hon'ble Members of Legislative Assemblies. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">For more see <strong>DDT </strong><a href="http://www.taxindiaonline.com/RC2/NewsDesc.php?MpoQSrPnM=MjA0Mjc=" target="_blank"><strong>2353</strong></a>, <strong>DDT </strong><a href="http://www.taxindiaonline.com/RC2/NewsDesc.php?MpoQSrPnM=MjA0NTE=" target="_blank"><strong>2355</strong></a>, <strong>DDT </strong><a href="http://www.taxindiaonline.com/RC2/NewsDesc.php?MpoQSrPnM=MjIwMTU=" target="_blank"><strong>2479</strong></a> & also <strong>DDT </strong><a href="http://www.taxindiaonline.com/RC2/NewsDesc.php?MpoQSrPnM=NDgzNw==" target="_blank"><strong>534</strong></a>. </font></p> <p align="center"><font face="Georgia, Times New Roman, Times, serif"><em><strong><font color="#006600" size="3">Remittance of Assets - Submission of Auditor's certificate</font></strong></em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN</strong> terms of Foreign Exchange Management (Remittance of Assets) Regulations, 2000, Authorised Dealer Category-I (AD Category-I) banks were required to submit certificates in the formats prescribed by Central Board of Direct Taxes, Ministry of Finance, Government of India specified in their Circular No.10/2002 dated October 9, 2002.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> CBDT vide its notification dated September 2, 2013 has revised the instructions regarding furnishing of tax declarations and submission of Form 15CA and 15 CB.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> Accordingly, Reserve Bank has amended the Principal Regulations through the Foreign Exchange Management (Remittance of Assets) (Amendment) Regulations, 2014 with respect to submitting certificates on tax payments.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> Authorised Dealer banks are required to refer to the instructions contained in A.P (DIR Series) <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=280&filename=notification/rbi/2013/rbi13cir151.htm" target="_blank"><strong>Circular No. 151 </strong></a> dated June 30, 2014 and the conditions stipulated therein are to be complied with while making remittances.</font></p> <p><a href="http://www.taxindiaonline.com/RC2/notDesc.php?MpoQSrPnM=MTczMTY=" target="_blank"><font face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2">Circular 43/RBI, Dated: December 2, 2014 </font></strong></font></a></p> <p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="3" face="Georgia, Times New Roman, Times, serif"><em><strong><strong><font color="#006600">Jurispruden</font></strong></strong></em><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><em><font color="#FF6633" size="4">tiol<font color="#006600" size="3">-</font></font></em></strong></font></strong></font><em><strong><strong><font color="#006600">Friday's cases</font></strong></strong></em></font></strong></font></p> <p align="left"><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" 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>Application for waiver of pre-deposit filed on 06.08.2014 - in view of substituted provisions of s.35F of CEA, 1944 as enacted by Finance Act, 2014 requiring mandatory deposit of duty/penalty, and applicant having paid 7.5% of duty confirmed, Stay application is dismissed as infructuous - CESTAT. </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CONSIDERING</strong> the fact that the Finance Act, 2014 has been introduced on 06.08.2014 and stay application is not required to be filed by the applicant, as they are required to make a mandatory pre-deposit of duty/penalty. In these circumstances, the application for waiver of pre-deposit of impugned demands has become infructuous. Accordingly, same is dismissed as infructuous.</font></p> <p><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Income Tax </strong></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Whether amount paid to RBI/IDBI under Industrial Development Bank of India Bill Rediscounting Scheme can be excluded from discounting amount earned by assessee bank on such bills from its borrowers - Whether there is direct nexus/correlation with payment made to RBI/IDBI and what was received from borrower - Whether amount paid to RBI/IDBI under rediscounting scheme can be considered as part of chargeable interest under Section 2(7) of Interest Act</strong></font></p> <p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2">THE</font></strong><font size="2"> assessee bank is a subsidiary of the State Bank of India and is in the banking industry for the last several years and is involved in the activity of advancing money and receiving money from various persons. The assessee discounted various bills of its constituents (borrowers) and the discount earned on such bills was credited to discount account. The contention of the bank was that some of these bills were passed on to the RBI/IDBI for re-discounting and on such passing of the bills, the bank had to pay discount to the RBI/IDBI thus the discount earned by the bank would be the discount minus re-discount charges paid to RBI/IDBI and thus amount paid was allowable as a deduction out of the total amount earned and only net was to be considered as chargeable under the Interest Tax Act.</font></font></p> <p><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Service Tax</strong></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Rejection of VCES declaration on ground that issue was detected from audit of third party unit conducted before cutoff date - As on date when application was filed by petitioner, there was no audit as against petitioner unit- Rejection order set aside: HC </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN</strong> this case, the assessee filed VCES declaration after receiving an intimation dated 07.03.2013 from the Range Superintendent about their liability. The declaration was rejected on the ground that the issue was detected in audit of another assessee (third party) which was initiated much before the cutoff date, i.e., 01.03.2013 and Show Cause Notice was issued to the assessee on 31.07.2013, based on the audit report and hence they are not eligible for VCES. The assessee filed an appeal with the Commissioner (Appeals), but the same was dismissed as not maintainable. </font></p> <p><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>See our Columns Friday for the judgements</strong></font></p> <p><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Friday with more <strong>DDT</strong></font></p> <p><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a nice day.</font></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"><strong><a href="mailto:vijaywrite@tiol.in">vijaywrite@tiol.in </a></strong></font></p> </body> </html>