TIOL-DDT 624 · the untouched capture
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<p align="justify"><font size="3" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#663399">TIOL-DDT 624</font></b><b></b></font><font face="Verdana, Arial, Helvetica, sans-serif"><font size="2"><b><br>
30.05.2007<br>
Wednesday</b></font></font></p>
<p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>CAG objections on Service Tax</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The CAG’s recent report to Parliament had some interesting snippets. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>No scrutiny of returns:</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The scrutiny of returns is the most important element of the enforcement strategy of tax administration. The overriding aim of such scrutiny/verification is to provide a creditable deterrence to willful suppression of actual assessable value as well as to realise correct Government revenues. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Are the returns required to be scrutinised?</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Prior to 10 September 2004, Section 71 of the Finance Act, 1994, provided for verification of the correctness of the tax assessed by the assessee, on the basis of information contained in the returns filed by the assessee. But this Section has been omitted with effect from 10 September 2004. Afterwards, no departmental instructions for scrutiny of ST-3 returns have been issued. While superintendent of Central Excise need not verify the return after 10 September 2004, the DGST in his Performance Report for the year 2005-06 spoke of the need to streamline the scrutiny of the returns. There is, therefore, contradiction in the policy of the Board/Government and perception of the DGST on the issue of scrutiny/verification of returns. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The information furnished by 46 commissionerates, however, revealed that the commissionerates continued to check returns as before although the pendency of the returns remaining unchecked increased considerably after 10 September 2004. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Eight per cent of returns for the period up to 2003-04 were pending for verification. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Twenty five per cent of returns for the period 2004-05 were not checked after 10 September 2004.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Rs. 5.30 lakh was recovered as a result of scrutiny of 29,231 returns for the period from 2002-03 to 2004-05.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Not even a cursory look.</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Some ST -3 returns duly verified/checked by department were scrutinised in audit. Cases of short payment of service tax on the basis of information contained in ST -3 returns which had escaped notice of department came to light indicating that even basic checks with reference to the rate of service tax and interest payable for delayed payment, etc. were not exercised. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Increase in tax rate not implemented:</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Rate of service tax was revised upward from eight per cent to 10 per cent with effect from 10 September 2004. Education cess was also levied with effect from 10 September 2004 at the rate of 2 per cent on service tax payable. However, in 16 cases, assessees continued to calculate service tax at lower rate. This resulted in short payment of service tax to the tune of Rs.20.42lakh besides interest of Rs.2.98lakh. <font color="#663399">DDT had recently pointed out that a Commissionerate had a huge board outside its office that Service Tax rate is 10%. The Board is still there heckling the administration.</font></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Audit’s Recommendation</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Board may consider putting in place a mechanism for checking/verification of returns on regular basis. This checking may be reinforced by detailed scrutiny of selected cases on scientific representative sample basis after proper risk analysis. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>And the Board’s response:</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Responding to the recommendation, the Ministry stated (January 2007), that it was working on the issue and once ACES is implemented, the risk management system in service tax will be implemented along with the selection on scientific basis for detailed scrutiny. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Till then? It’s an open game.</font></p>
<p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Exchange rates announced !</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Yesterday’s DDT mentioned,</font></p>
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<td><p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Exchange Rate Notifications – yet to be issued</b></font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">We received a call from a worried netizen wanting to know why we had not carried the exchange rate notifications. We would have gladly carried them if they had been published by the ministry. We also know the numbers of the notifications, 52 and 53 0f 2007- only the notifications are not released. Maybe we will be able to bring them to you later in the day. And be sure that the notifications will be dated 28<sup>th</sup> May or earlier as Notification No. 54 is dated 28<sup>th</sup> May.</font></p></td>
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<p align=justify><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As predicted by us, the Notifications are dated 28<sup>th</sup> May 2007</font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Notification Nos. <u><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=24&filename=notification/custom/2007/cnt07_052.htm" target="_blank">52/2007</a></u><b><u> and </u></b><u><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=24&filename=notification/custom/2007/cnt07_053.htm" target="_blank">53/2007-Cus., (N.T.), Dated May 28, 2007</a></u> fix the exchange rates for imports and exports respectively with effect from 1<sup>st</sup>May, 2007. Notifications 32 and 33/2007-NT-Customs, dated the 25<sup>th</sup> April, 2007 are superseded.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><u><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=24&filename=notification/custom/2007/cnt07_052.htm" target="_blank">Notification Nos. 52</a> <strong>&</strong> <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=24&filename=notification/custom/2007/cnt07_053.htm" target="_blank">53/2007-Cus. (N.T.), Dated April 25, 2007</a></u></font></p>
<p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>DRI in the Dock?</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It
is unfortunate that the premier investigation agency of the Customs is in
the news for all the wrong reasons. They arrest a powerful builder and hand
him over the Police and before they can say DRI, he is released by a night
magistrate. Now first of all, why did the DRI hand over the powerful builder
to the police? They could have as well kept him under their custody and produced
him before the competent court, which could have surely granted remand. And
was the magistrate right in releasing him? Can a magistrate who is not competent
to try the case release an accused on bail? Now can DRI appeal for cancellation
of the bail? Will they?</font></p>
<p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Seven wonders of the world – Taj on its way out?</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Will the TajMahal go out of the list of <st1:place w:st="on">Seven wonders of the world</st1:place>? Most likely and especially as the government is perhaps not aware or not bothered about a new scheme to determine the new wonders of the world. But you can help, Go to <a href="http://www.new7wonders.com/">http://www.new7wonders.com</a> and vote for the Taj. Government is not bothered, but we should be concerned. Please vote for the Taj!</font></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Tomorrow with more DDT</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"> vijaywrite@taxindiaonline.com</a></font></p>
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