TIOL-DDT 631 · 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 align="justify"><font color="#663399" size="2"><b><font size="3" face="Verdana, Arial, Helvetica, sans-serif">TIOL-DDT 631</font></b><font face="Verdana, Arial, Helvetica, sans-serif"><b></b></font></font><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif"><b><br> 08.06.2007<br> Friday</b></font></font></p> <p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Abatement on medicaments – cosmetic changes</b></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per Notification No. 2/2005-Central Excise (N.T.), dated the 7<sup>th</sup>January, 2005, medicaments falling under Chapter 30 will get an abatement of 42.5% from the RSP. Now this Chapter 30 is changed to 3003 or 3004. </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=30&filename=notification/excise/2007/exnt07_29.htm" target="_blank">Notification No. 29/07-Central Excise (Non Tariff) dated 6<sup>TH</sup> JUNE, 2007</a></u></font></p> <p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Export of red sanders – bar temporarily lifted</b></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Export of 354.98 MT of A, B, C and D grades of Red Sanders Wood, in the form of log obtained from Government of Andhra Pradesh through auction, will be allowed for a month with effect from the date of issue of export licence. </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=45&filename=notification/dgft/2007/dgft07not007.htm" target="_blank">DGFT NOTIFICATION NO. 7 (RE-2007)/2004-2009 dated 5<sup>TH</sup> JUNE, 2007</a></u></font></p> <p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Customs Adjudication – CAG raps – cases pending for 46 years!</b></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The CAG report No. 7 of 2007 to Parliament indicted the Customs department for its callous adjudication mechanism. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Can you believe that? </font></p> <blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#663399">The data provided/maintained by the department regarding adjudication cases and revenue involved therein was incomplete, inconsistent, inaccurate, un-reconciled and hence unreliable. In the absence of accurate data regarding the numbers and revenue involved, the assurance that the Board is monitoring these cases effectively is minimal.</font></b></font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Cases pending adjudication increased by 89 per cent as on 31 March 2005 compared to 1 April 2002, when a time limit of six months/one year for completing adjudication was brought in. During 2002-03 to 2004-05, only 24 to 57 per cent cases were finalised within six months or one year.</b></font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Revenue of Rs.448.67crore was locked up in 1,173 pending adjudication cases for period ranging between one to 46 years. Of these, 17 cases each having revenue implication of Rupees one crore and above were awaiting adjudication from two to eight years.</b></font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Files in 165 cases involving demand of duty of Rs.26.48crore apart from interest and penalty of Rs.89.81lakh were reported missing in four commissionerates.</b></font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>An amount of Rs.962.32crore was confirmed in adjudication after a delay of one to nine years in 152 cases. However, recovery details could be ascertained only for Rs.3.69crore.</b></font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Fourteen cases remanded back for denovo adjudication (revenue implication of Rs.16.25crore) were pending adjudication with a delay of 13 to 66 months. In 22 other cases, denovo adjudication was completed after a delay of 12 to 151 months.</b></font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>The Board had issued a circular in December 1999 in consultation with Ministry of Law stating that corrigendum to order in original tantamounts to review of the decision and is not legally sustainable. Corrigendum was issued to orders in original in eight cases which had caused risk to revenue realisation of Rs.30.98crore.</b></font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Appeals filed by the department in 33 cases were either dismissed on grounds of delay or the department could not stake its claim owing to belated action/non submission of proper evidence, leading to non realisation/loss of revenue of Rs.160.38crore.</b></font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Failure of the department to consolidate all cases to take a unified action to effect recovery by getting the stay orders vacated according to orders of the Board, resulted in non realisation of revenue of Rs.33.32crore in 65 cases.</b></font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>The CAG had some interesting findings and recommendations</b></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>1. Inconsistent/unreliable macro data</b></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Revenue involved in adjudication cases was not furnished by <st1:City w:st="on"><st1:place w:st="on">Delhi</st1:place></st1:City> (I & G), Tughlakhabad (ICD), Chennai (Sea), Trichy, Chennai (Air) and Tuticorin commissionerates in 2002-03 and Tuticorin in 2003-04 and 2004-05. </font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">These are the wise commissioners. The best way to deal with Audit is – Don’t furnish information</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Arithmetical inaccuracies were noticed even in the number of cases during 2003-04 in, Bhubaneshwar (CE & Cus), Mumbai (Imports) and during 2004-05 in Mumbai (Imports) and Pune commissionerates.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A comparison of the data provided by the commissionerates could not be made with those collected in audit since CC Appeals, Cochin, Commissionerate of Central Excise and Customs, Cochin, CC Appeal I and II, Delhi did not provide the requisite data. Some other commissionerates did not provide complete data for the period under study.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Additionally, absence of revenue involved in SCNs issued in few commissionerates, indicates weak monitoring mechanism.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CAG has concluded that in the absence of accurate data regarding the numbers and revenue involved, the assurance that the Board is monitoring these cases effectively is minimal.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><i>Recommendation No.1 – Reconcile your balance sheet</i></b></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><i>The Board should verify and reconcile the number and amount involved in pending SCNs as a first step to effectively monitor the disposal of these cases.</i></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Age wise analysis of pendency in 31 commissionerates.</b></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It was noticed in audit that data of seven out of 31 commissionerates was arithmetically inaccurate either with regard to number or money value involved and the pendency over five years includes <b>the pendency upto 46 years</b>.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><i>Recommendation No.2 – fix a time frame</i></b></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><i>Government may consider </i></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><i>(i) reviewing the time limit of six months/one year of disposing SCNs with ‘wherever possible to do so’ rider and fix a realistic time frame without exceptions and </i></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><i>(ii) make provisions for recording and/or justifying reasons for going beyond prescribed time limit and obtaining orders from superior authorities to do so. This would also help in monitoring the adjudication process more easily at the top management level.</i></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><i>Non-adjudication</i></b></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Audit scrutiny revealed that adjudication process has not been completed in 1,142 cases in 18 commissionerates, even after delay ranging between one to 46 years. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Test check of records in two commissionerates viz West Bengal (Preventive) and Kolkata (Air), revealed that 43 seizure cases effected between 1972 and 2003, involving goods of perishable and hazardous nature (photographic films, cell and batteries, patent and proprietary medicines, liquors etc.) and valued at Rs.34.30lakh, remained un-adjudicated for two to 33 years. Further scrutiny of records of seizure shed, currency shed and appraising disposal (sale shed) in these commissionerates revealed that 346 seizure cases involving goods valued at Rs.2.43crore seized between 1960 and 2003 (electronic goods, cellular phones, ball bearings, zip fasteners, textiles etc. that are prone to rapid depreciation in value due to rapid changes in <st1:PersonName w:st="on">techno</st1:PersonName>logy and design) were awaiting adjudication for a period of two to 45 years. Non adjudication of these cases resulted in non disposal of goods that are already in a state of deterioration and depreciation in quality and value.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><i>Recommendation No.3 – fix a time limit for adjudication</i></b></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><i>Government may consider prescribing an appropriate time limit in the Customs Act for adjudication of cases relating to search/seizures.</i></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><i>Recommendation No.4 – priority adjudication</i></b></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><i>Board should issue instructions to its field formations to take old cases involving substantial revenue for priority adjudication.</i></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><i>Loss of revenue due to missing files</i></b></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Scrutiny of records revealed that in four commissionerates, 165 case files of demands involving duty of Rs.26.48crore, apart from interest and penalty of Rs.89.81, lakh were missing. Improper maintenance of records had led to risk of non realisation of revenue, as adjudication in these cases are pending.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><i>Recommendation No.5- find those missing files and their officers</i></b></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><i>Board should investigate the reasons for which these files went missing and based on the result of probe, fix responsibility and initiate appropriate action.</i></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><i>Recommendation No.7 – look at those remand cases</i></b></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><i>Board should strengthen its internal control mechanism for monitoring denovo adjudication cases so that these cases are adjudicated within six months/one year, having been adjudicated/examined/extensively earlier by consuming much time/human resources.</i></font></p> <blockquote> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>While DDT is not exactly a fan of the CAG, and believes that CAG is responsible for half the ills of the department, it is appalling that there is such callous neglect of an important activity of the department. We will bring you more from the CAG in these columns in the coming days. </b></font></p> </blockquote> <p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>From our Legal Corner</b></font></p> <p align=center><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><b><b><img src="http://www.taxindiaonline.com/RC2/image/stories/ddt_31.gif" alt="Legal Corner Icon" width="191" height="160" hspace="5" border="0" align="left"></b></b></b></font></p> <p align=center><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#006600">Port services mean any service rendered by anybody in the port area.</font></b></font></p> <p align="justify"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b></b></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Revenue would love to have such a definition, but fortunately for us, that is not case, at least as of now. But even without such a definition, Revenue officers believe that this ought to be the definition and Show Cause Notices have been flying around. The Tribunal has emphatically concluded that anybody licenced by the port is not a port and everything done in a port is not port service. You will have to wait till Monday for the judgement. We had carried incisive articles on the issue. Before Monday, have a look at these articles </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=2853" target="_blank">Service Tax on Port Services</a></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And </font></p> <p align="justify"><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=5596" target="_blank">TAX ON PORT SERVICES: WHY TO SPARE PEST CONTROL AGENCIES?</a></font></p> <p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Entire profits of a foreign company cannot be taxed in <st1:country-region w:st="on"><st1:place w:st="on">India</st1:place></st1:country-region> – Hyundai wins it big!</b></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Apex Court has held in the case of Hyundai Heavy Industries Ltd that not the entire profits of a foreign company from its business operations in India - PE, would be taxable but only that part of it which can be attributed to the economic nexus with the PE. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As regards the quantum of profits since the assessee had not furnished the details of its activities, the CIT (A) decision to estimate taxable profits at 10% of the gross profits u/s 44BB was upheld.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">See our Columns on Monday for this landmark judgement. </font></p> <p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>DRI visit to Reliance - what happened?</b></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Last Monday there was a visit of a few DRI sleuths to Reliance Jamnagar. Was it a raid? Was it a visit? Nobody seems to be willing to talk. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">WHO is the real inheritor of DhirubhaiAmbani's legacy, not only the economic empire but also other positive traits? The general perception is that it is Mr <st1:PersonName w:st="on">Mukesh</st1:PersonName>Ambani! And that is how he commands a lot of news value. Of late he has been in the news for his much-cherished SEZ projects. In fact, two of his SEZs - the <st1:City w:st="on"><st1:place w:st="on">Jamnagar</st1:place></st1:City> petroleum refinery and the Navi Mumbai SEZ - have recently hit the newspaper headlines with huge controversy-value! Though the TV Channels and print newspapers did report about the Customs sleuths visiting the Jamnagar plant for some alleged SEZ-related violations but most of the newspaper reports left quizzed expressions on the face of their readers as none had access to the actual case and the details of what happened after the Ahmedabad DRI sleuths visited the plant. Rather it was left to TIOL to quench the thirst of the inquisitive lot of netizens, asking us about the case and the Navi Mumbai SEZ issue. Wait till Monday for the report prepared on the basis of inputs gathered by our correspondents from various agencies.</font></p> <p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Monday with more DDT</font></p> <p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a nice Weekend.</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> </body> </html>