TIOL-DDT 2590 · the untouched capture
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<p><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 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=23157"><img width="300" hspace="5" height="148" border="0" align="right" alt="DDT in Limca Book of Records - Third Time in a row" src="http://www.taxindiaonline.com/RC2/image/stories/limca_book2015_1.jpg" /></a></font></strong></font></strong></font></strong></font></strong></font></strong></s></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></s></font></strong></font><font color="#663399" size="3" face="Verdana, Arial, Helvetica, sans-serif">TIOL-DDT 2590</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><br /> 05 05 2015<br /> Tuesday</font></strong></p> <p align="center"><font color="#006600" size="3" face="Georgia, Times New Roman, Times, serif"><strong><em>Dealer Registration mandatory for transit sale, says Chief Commissioner - Ease of Doing Business? <br /> </em></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>BY</strong> Notification No. 8/2015-C.E. (N.T.), dated 1st March 2015, the following proviso is added to Rule 11(2) of the Central Excise Rules, 2002. </font></p> <blockquote> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">"Provided also that if the goods are sent directly to any person on the direction of the <font color="#FF0000"><strong>Registered</strong></font> dealer, the invoice shall also contain the details of the registered dealer as the buyer and person as the consignee, and that person shall take Cenvat credit on the basis of the registered dealer's invoice". </font></em></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DDT</strong> was informed by a netizen that the field formations are of the view that whoever orders goods on the manufacturer and directs the manufacturer to send the goods to ultimate user directly are required to take "Dealer's" Registration </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We carried the mail sent by the netizen in <strong>DDT 2584</strong> under the caption -<em> <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=23448" target="_blank"><strong>CBEC - Please Listen; Please spare us of 'registration' - Rule 11 of CER, 2002</strong></a>.</em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Incidentally, we had also carried an <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=23366" target="_blank"><strong>article</strong> </a>on the aforesaid issue in our ST se <em>GST tak</em> column. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DDT </strong>was under the impression that the field formations have been taking such a view without any official backing. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">For once, we were wrong. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We are made to understand that there is a letter <strong>F.No. IV/16-Tech-15/CCO/MCX-I/2012</strong> dated 21st April, 2015 addressed to the <em>All India Non-Ferrous Metal Industries Association</em> by the Joint Commissioner, Office of the Principal Chief Commissioner of Central Excise, Mumbai Zone-I in response to their seeking an urgent clarification as to "<font color="#FF0000">Whether in case of direct/transit sale by a trader from the Manufacturer to the end-user - Do a trader required to be registered as a dealer"</font>. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The letter clarifies as below - </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif" style="background-color:#FFFF00" span="span">1. The CENVAT credit will be available on Registered Dealers Invoice, hence registration of Dealer with Central Excise is must from 01.03.2015. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif" style="background-color:#FFFF00" span="span">2. Requirement of Godown has not been done away, and it is necessary, if the Registered Dealer wants to store the goods. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif" style="background-color:#FFFF00" span="span">3. Any amendment in the format of Dealer's invoice can be done only by the Central Board of Excise and Customs. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif" style="background-color:#FFFF00" span="span">4. There is no provision for availing CENVAT credit on the strength of Manufacturer's invoice when the goods are sold through a non-registered dealer. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif" style="background-color:#FFFF00" span="span">This issues with the approval of the Chief Commissioner, Central Excise, Mumbai Zone-I. </font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is high time that the CBEC intervenes and comes out with a clarification lest this issue should snowball into a major controversy which will, in the final run, not fetch any revenue to the government but certainly assist Consultants and Advocates laugh all the way to the bank. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Was the amendment beneficial or was it one more method of harassing the assessees? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">If this is called "Ease of doing business", so be it…and we are supposed to migrate to GST by this time next year! </font></p> <p align="center"><font size="3" face="Georgia, Times New Roman, Times, serif"><strong><em><font color="#006600">New Judicial Members in CESTAT </font></em></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IT</strong> is learnt that the Government of India has appointed the following Judicial Members to the CESTAT: - </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Mr.Shyam Sunder Garg has been posted to CESTAT, Mumbai. Mr.Garg is a Practicing Advocate in Tax Matters at Chandigarh and had earlier been a Member of the Railway Claim Appellate Tribunal. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Ms. Sulekha Bibi has been posted to CESTAT, Delhi. Ms.Bibi is a Practising Advocate in Tax Matters at Cochin. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Mr.P.K.Choudhary has been posted to CESTAT, Chennai. Mr.Choudhary is a Practising Advocate at Dhanbad and is the brother of Mr. Anil Choudhary, a sitting Member of the CESTAT, Mumbai. </font></p> <p align="center"><font size="3" face="Georgia, Times New Roman, Times, serif"><em><strong><font color="#006600">Foreign Trade Policy - No import of Raw Sugar under DFIA </font></strong></em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>GOVERNMENT</strong> has amended Para 4.25 of Foreign Trade Policy 2015-20, to stipulate that <em>Duty Free Import Authorisation Scheme shall not be available for import of raw sugar</em>. </font></p> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/notDesc.php?MpoQSrPnM=MTgwMTY=" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DGFT Notification No.05/2015-20, Dated: May 1, 2015 </font></strong></a></p> <p align="center"><font size="3" face="Georgia, Times New Roman, Times, serif"><strong><em><font color="#006600">Foreign Trade Policy - CIF value increased for border trade between India and China </font></em></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DGFT</strong> has amended 2.07 (a) (iv) of Handbook of Procedures (2015-2020) which lists categories of importers or exporters exempted from obtaining Importer-Exporter Code(IEC). </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">For border trade between India and China, the CIF value per consignment is being increased from Rs.1,00,000/- to Rs.2,00,000/- in case of Nathula, while for Gunji and Namgaya Shipkila, the existing CIF value limit of Rs.25,000/- is being enhanced to Rs.1,00,000/-. </font></p> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/notDesc.php?MpoQSrPnM=MTgwMDg=" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DGFT Public Notice No.07/2015-20, Dated: May 1, 2015 </font></strong></a></p> <p align="center"><font size="3" face="Georgia, Times New Roman, Times, serif"><strong><em><font color="#006600">Foreign Trade Policy - Raw Sugar - Export Obligation Period under Advance Authorizations</font></em></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DGFT</strong> has amended the Appendix- 4 J of the Handbook of Procedures 2015-20: </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Pre-import condition shall be mandatory for import of "raw sugar" under Advance Authorisation scheme. Export obligation period for "raw sugar "imported under Advance Authorisation has been reduced to six months from the date of clearance of each consignment by customs authority. </font></p> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/notDesc.php?MpoQSrPnM=MTgwMTc=" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DGFT Public Notice No.08/2015-20, Dated: May 1, 2015 </font></strong></a></p> <p align="center"><font size="3" face="Georgia, Times New Roman, Times, serif"><strong><em><font color="#006600">Foreign Trade Policy - Allocation of quantity for export of sugar to EU </font></em></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DGFT</strong> has allocated a quantity of (i) 10,000 MTs (Ten thousand metric tons) of white sugar for export of CXL Concessions sugar to European Union (EU) for the period October, 2014 to September, 2015 and (ii) 8424 MTs (Eight thousand four hundred and twenty four metric tons) of raw sugar (at 98 degree pol), out of non-levy (Free Sale) quota for export under Tariff Rate Quota (TRQ) to USA for the US fiscal year 2015 (October 1, 2014 to September 30. 2015). </font></p> <p align="justify"><a href="http://www.taxindiaonline.com/RC2/notDesc.php?MpoQSrPnM=MTgwMTg=" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">DGFT Public Notice No.09/2015-20, Dated: May 1, 2015 </font></strong></a></p> <p align="center"><font size="3" face="Georgia, Times New Roman, Times, serif"><em><strong><font color="#006600">EA 2000 Audit - some facts - Where is risk review? </font></strong></em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>WE</strong> got this mail from a concerned Netizen: </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">During the year 2011-12, 22534 units were audited and total recovery (including under protest) is 1243 crores. This data is based on the report released by Directorate General of Audit. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">100 Commissionerates, each one having audit wing, collecting 1243 Crores per year (including under protest) means 12.43 Crores per Commissionerate per year. This is mere 0.21 percent of the total indirect tax collection of Rs. 6 lakh crores. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This could be assumed that 99.80 % collection is coming in spite of the audits. If the registered assessees are paying 99.80% of the tax due, it is appreciable and must not be subjected to this mechanical audit each year without any risk to revenue. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Recovery per assessee audited, comes to an abysmal Rs. 5 lakh in a year. This suggests that there is no "risk based audit" but actually mechanical audit without any risk/desk review. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Audit staff in a Commissionerate could be 20 persons comprising inspectors and superintendents plus DC, JC, and may be commissioner. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Out of 22534 (if not all), at least half will be issued SCNs. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Ripple effect on litigation machinery including CESTAT, Commissioner Appeals, Range Staff and all the assessees, lawyers. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Tons of paper will be used for audit reports for each assessee, issuing SCN, reply to SCN, filing appeals with Commissioner Appeals, CESTAT and in few thousand cases to the High Courts and Supreme Court. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Audit Report - 22500 reports, at least comprising 6 pages, 5 copies = 6,75,000 pages which equals to 1700 reams of paper. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">SCN - 12000 * 10 pages each * 5 copies = 1500 reams of paper </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Reply to SCN - 12000 * 20 pages * 5 copies = 3000 reams of paper </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Order-in-original - again 3000 reams of paper </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Appeal to CA - at least equal to reply to SCN plus OIO plus annexures, conservatively - 12000*20 SCN pages plus 20 OIO pages plus 20 pages of annexures * 5 copies = 9000 reams </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Appeal to CESTAT - at least equal to CA - again 9000 reams </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">If half of these cases landed at HC/SC - again 5000 reams </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Total paper consumption could be - 1700+1500+3000+3000+9000+5000 = 23200 reams of paper </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This is exclusive of the printed data sheets which will be prepared by the assessee during audit and the documents submitted to audit department before and after the audit. Few correspondences between audit and assessee, audit and range, notices, personal hearings, additional submissions and so on.. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Besides the documents asked before the audit includes photocopies of the following documents for last three years (during each audit). </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Balance sheet, Trial Balance, Income Tax audit report (3 CB), Cost audit report, sales tax returns, income tax returns, GLs, Registration Certificate/ copies of returns/ intimations/ permissions and many other documents. In some cases this may contain a full load of index file (400 - 500 pages). </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Cost of audit and litigation could be more than the amount collected, leave aside the man-days lost for assesses and burden on the courts/tribunals plus the space required to stores these mountain of papers in the offices across the country. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This is high time to review the EA audit process and requirement. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In fact audit must be based on the "actual risk review" and the DG Audit should be accountable for the number of audit conducted <em>vis-à-vis</em> the recovery. If the recovery is few lakhs of rupees from an assessee, means that the "risk review" is farce and audit is without real objective but ……… </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">There is no departmental audit in income tax and the collection is much more than the indirect taxes collectively. There is no departmental audit in VAT and collection is notches higher than the excise, customs and excise duty. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Introduce a process similar to income tax and VAT where annual audit report from an independent chartered accountant is submitted to the department - Ease of doing business. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Depute the audit staff to look into "un-registered" category. </font></p> <p align="justify"><strong><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">Minimum Government - Maximum Governance - Go Green - <em>Swachh Bharat</em> </font></strong></p> <p align="center"><font size="3" face="Georgia, Times New Roman, Times, serif"><strong><em><font color="#006600">LPG Subsidy to be taxed? </font></em></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN</strong> the official amendment to the Finance Bill 2015 as passed by the Lok Sabha, a new clause is added to Section 2 (24) (which gives an inclusive definition of income) of the Income Tax Act. There are 17 sub-clauses for this clause and 18th one is now added which reads as: </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Income includes, </font></p> <blockquote> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">"(xviii) assistance in the form of a subsidy or grant or cash incentive or duty drawback or waiver or concession or reimbursement (by whatever name called) by the Central Government or a State Government or any authority or body or agency in cash or kind to the assessee other than the subsidy or grant or reimbursement which is taken into account for determination of the actual cost of the asset in accordance with the provisions of Explanation 10 to clause (1) of section 43;" </font></em></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This was supposed to have been done to clarify that subsidies are not capital receipts, but it may have a totally unexpected result that the subsidy given to LPG cylinders may now become taxable. LPG users now get a subsidy of over Rs. 400 per cylinder for 12 cylinders a year. Prime Minister Modi has requested those who can afford to, not to take the subsidy - well if you still take the subsidy, pay tax on that - maybe about one third of the subsidy will go back to the Government as tax. </font></p> <p align="center"><font face="Georgia, Times New Roman, Times, serif"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600" face="Georgia, Times New Roman, Times, serif"><em><font size="3">Jurispruden</font></em></font><font size="3" face="Georgia, Times New Roman, Times, serif"><em><font color="#FF6633" size="4">tiol-</font></em></font></strong></font></strong></font><font color="#006600" size="3"><strong> Recent SC Judgement </strong></font></em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF0000">Maharashtra Sales Tax - No provision under the Act for settlement of dues of a partner with the State Government - 30 year litigation ends in cost of 5 lakhs to the appellant:</font></strong> The litigation started sometime in 1977. The appellant claims that the State Finance Minister accepted his request for settlement of his sales tax dues in relation to the Firm in which he was a partner. The case travelled right up to the Supreme Court. Last week the Supreme Court held that under the Sales Tax Act, there was no provision for settlement at all and certainly no provision for settling the dues of one partner in a partnership firm. The Supreme Court held, "the <em>convoluted mesh of facts and the extremely protracted proceedings which span over three decades, at the instance of appellant, indicate that the basis of case made out by the appellant does not exist in either the statute law or, in fact, any law applicable to the present proceedings. The settlement, if any, reached between the appellant and the State Government for part payment of tax liability by the partner of an assessee-Firm would not fall under the four corners of the Act or the Rules as has been claimed by the appellant since the beginning of the proceedings under the Act.</em>" </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Supreme Court reiterated that <em>there is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied</em>. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The appellant was imposed a cost of Rs. 5 lakhs.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We bring you the case today.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Please see</strong> <strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=23528" target="_blank">Breaking News</a></strong>.</font></p> <p><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Tomorrow with more<strong> DDT </strong></font></p> <p><strong><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a nice day. </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>