TIOL-DDT 810 · the untouched capture
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<p><font size="2"><strong><font color="#663399" size="3" face="Verdana, Arial, Helvetica, sans-serif">TIOL-DDT 810 </font><font color="#663399" face="Verdana, Arial, Helvetica, sans-serif"></font><font face="Verdana, Arial, Helvetica, sans-serif"><br>
22.02.2008 <br>
Friday </font></strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>All summons under Customs Act between 13.07.2006 to 20.02.2008 illegal? </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Remember the draconian Taxation Laws (Amendment) Act, 2006 which came into effect from 13.7.2006? By this Act, Section 108 of the Customs Act was amended. The Section before its amendment read as, </font></p>
<blockquote>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>SECTION 108. Power to summon persons to give evidence and produce documents. </strong>– (1) Any Gazetted officer of Customs shall have power to summon any person whose attendance he considers necessary either to give evidence or to produce a document or any other thing in any inquiry which such officer is making xxxxxxxxxxxx </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">By the amending Act, this has been amended to read as, </font></p>
<blockquote>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>SECTION 108. Power to summon persons to give evidence and produce documents. </strong>– (1) Any Gazetted officer of Customs <strong><font color="#660066">duly empowered by the Central Government in this behalf</font> </strong>, shall have power to summon any person whose attendance he considers necessary either to give evidence or to produce a document or any other thing in any inquiry which such officer is making xxxxxxxxxxxxxxxxxxxxxxxx </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Please note the difference. Before 13.7.2006, any gazetted officer of Customs had the power to summon but after 13.7.2006, <strong><font color="#990000">only those gazetted officers</font> duly empowered by the Central Government </strong>, have this power. And the good government had forgotten to empower the gazetted officers for this purpose for nearly two years. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now the government has notified that all gazetted officers are empowered. This notification is issued on 20 th February, 2008. This means till yesterday, there was no empowered gazetted officer who had the power to summon persons under the Customs Act. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This is the problem with callous legislation. The Section provides that a gazetted officer empowered by the government shall have the power to summon and now the government has empowered all gazetted officers to summon. What was the need to specify that all officers <strong>empowered </strong> by the government should have the power and then to notify all the officers to have the power ?. They could have simply kept it as, “all gazetted officers shall have the power to summon… ”. But then complicating the laws is how the babu thrives in his glorious confusion spreading! </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now all the summons issued by the Customs officers during the period 13.7.2006 to 19.02.2008 are patently illegal and without authority and consequently all the statements recorded under these summons are also illegal and so not admissible evidence. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>What is the position in Central Excise? </strong>Perhaps it is the import of the provisions of the Central Excise Act into the Customs Act that caused the damage. Section 14 of the Central Excise Act reads as, </font></p>
<blockquote>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#990000">Power to summon persons to give evidence and produce documents in inquiries under this Act .-</font> </strong> (1) Any Central Excise Officer duly empowered by the Central Government in this behalf, shall have power to summon any person whose attendance he considers necessary either to give evidence or to produce a document xxxxxx </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And this empowerment had been done by the Notification No. 9/99 CENT dated 10.02.1999 on “ All Central Excise Officers not below the rank of a Superintendent of Central Excise.” </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So, on the Central Excise side, there is no problem, but on the Customs side, the action is yet to start! Interesting days ahead !. All the consultants in the country should thank the Board for ensuring their successful survival. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=24&filename=notification/custom/2008/cnt08_008.htm" target="_blank">Notification No. 8/2008 Cus ., ( N.T. ), Dated: February 20, 2008 </a></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Deduction for interest paid on borrowed capital –Supreme Court judgement </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We couldn't resist the temptation of carrying this important judgement of the Supreme Court today. Holding it for the weekend would have really suffocated us. So we bring you this order of the Supreme Court dated 19 th February 2008. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CLAIMING</strong> deduction for interest paid on borrowed capital, advanced interest-free to a sister concern, has for long been a matter of fierce contention between the Revenue and the industry. Conflicting interpretations by the various judicial forums had further added to the woes of both the parties. However, in the latest ruling the Apex Court has clarified that Sec 40(b )( iv) is not a stand-alone Section. It is rather a corollary to Sections 30 to 38. Sec 36(1)(iii) allows deductions for business purposes but Sec 40 puts limitation on the quantum of deduction an assessee is entitled to. Disagreeing with the views of the assessee-company's counsel the erudite Bench held that for claiming deductions under Sections 30 to 38 an assessee is first required to prove that it is entitled to it and then also establish that it is not disentitled to such deductions as per the applicability of Sec 40(b )( iv). Although the Revenue lost this case because of the peculiar facts involved but the arguments of the Addl SG were found to be logical and more in tune with the scheme of things envisaged in the Income Tax Act. The Bench further held that the Sec 40 begins with a non-obstante clause, and even if an allowance comes within the purview of Sections 30 to 38, the assessee could lose the benefit of deduction if the case falls under Section 40 . </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=6859" target="_blank">See our breaking news today. </a></font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Bilateral
pact between India & Russia on combating drug trafficking </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The
Union Cabinet yesterday gave its ex-post-facto approval for the Bilateral
Agreement signed on 12th November 2007 at Moscow between India and Russian
Federation on cooperation to combat illicit trafficking in narcotics, psychotropic
substances and their precursors. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><br>
The Agreement will help in mutual cooperation in the regulation of narcotic drugs and psychotropic substances for medical and scientific use and in combating drug trafficking. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><br>
Such bilateral agreements have already been executed with various countries such as the USA , Afghanistan , Mauritius , Russian Federation , Myanmar , Zambia , UAE , Egypt , China , Iran , Bulgaria , Romania , Italy , Tajikistan , Turkey , Lao PDR, Israel , Bangladesh and Kuwait . </font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Sunday
is Central Excise Day or is it today? </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">February 24 th is Central Excise Day, but this year it falls on a Sunday, a closed holiday for the department and people are not ready to celebrate the day on a holiday. So in many parts of the country, the day is being celebrated today. Will they celebrate Independence Day and Republic Day on the previous days, if those days fall on holidays? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">May
be they should declare that Central Excise Day is the first working day before
24 th February. And how far is it legal to close the offices today afternoon
to celebrate the CE Day? If you really can't get your people to celebrate
it on the Day which it is supposed to be celebrated, is there any need for
such celebration? After all 24 th February has significance and you can't
advance it just because it happens to be a Sunday! </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We
are told that in Mumbai, an unofficial half day holiday has been announced
for the CE officers to attend the grand function at the grand Birla Matoshree
sabagruha , but most of the officers are going to have this extra half day
added to their weekend bash. We are also told that the Chief Commissioner
is going to sing a Hindi song to the music of Captain. In
Pune and Hyderabad also, the celebrations are slated for today, while Pondicherry
will celebrate it on Monday, the nearest ascertainable equivalent to the
DAY. But nobody is celebrating on Sunday the actual, Excise Day. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It's their day; let's wish them a nice time. </font></p>
<p align="justify"><strong><font color="#000099" size="4" face="Verdana, Arial, Helvetica, sans-serif">DDT wishes all the members of the Central Excise family </font></strong><font color="#000099"><strong><font size="4" face="Verdana, Arial, Helvetica, sans-serif">a
Happy Central Excise Day </font></strong></font></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">Jurispruden</font><font color="#FF6633" size="5"> tiol </font> <font color="#006600">– Monday' s cases </font><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 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 size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><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 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 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"><b><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><strong><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></strong></b></font></b></font></b></font></b></font></b></font></b></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong><b><strong></strong></b></font></b></font></b></font></b></font></b></font></b></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Income Tax </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">It's not a good IDEA - Re assessment cannot be ordered if the assessee had placed all material before the AO and the AO chose to ignore certain issues : Bombay High Court </font></strong></font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THIS</strong></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong> </strong>petition filed by Idea Cellular Ltd., impugns a notice dated 26.3.2007 issued by the Income Tax Department under Section 148 of the Income Tax Act, seeking to re-open the petitioners' assessment for the assessment year 2001-2002. It also impugns a further order dated 13.12.2007 issued by the Department rejecting the objections raised by the petitioner to the re-opening of the assessment. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">On 30.10.2001 the petitioner filed a return in respect of the assessment year 2001-2002 which indicated a loss of Rs.133,91,49,737 /-. In the computation annexed to the return, the petitioner had disclosed that a company named Tata Cellular Limited had amalgamated into the petitioner w.e.f . 1st January 2001. In the balance-sheet and in Schedule 2 thereof, the petitioner had disclosed that a sum of Rs.9984.15 lakhs was credited to the "Amalgamation Reserve" account under the head "Reserves & Surplus". In note 4(a) of Schedule 19 to the audited accounts, the petitioner had given full details as to how the said sum of Rs.9984.15 lakhs was arrived at. It explained that the assets and liabilities of Tata Cellular Limited had been accounted for in the accounts as per the "Pooling of Interest method" prescribed in the Accounting Standard on Accounting for Amalgamations (AS-14) as issued by the institute of Chartered Accountants of India . It was explained that the said sum of Rs.9984.15 lakhs was the difference between the net book value of the assets and liabilities so acquired and the share capital to be issued there-against. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Deputy Commissioner passed an assessment order dated 31.3.2004 in which he computed the petitioner's loss at Rs.75 ,04,02,061 /- after making several additions and disallowances. However, he did not make any addition in respect of the said amalgamation reserve of Rs.9984.15 lakhs. In the order he made a specific note of the fact of the amalgamation of Tata Cellular Limited with the petitioner and disallowed the expenses incurred by the petitioner on the amalgamation. </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Customs </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">Warehoused goods – no re-export of surrendered goods : Supreme Court. </font></strong></font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THIS</strong></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong> </strong>is the case of a persistent assessee – he had been through the legal corridors for the last 12 years and in the Supreme Court twice – all to re export the goods imported by him because he could not pay the duty! </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">On 6.3.1996 the respondent Shakti LPG Ltd. imported 1714.5 MT of boiler steel plates worth Rs. 4.79 Crores claiming that the said goods would be utilized for the extension of their storage terminal at Kakinada . As the said import could be entitled to a concessional rate of duty on the production of the appropriate certificates which were then not available with the importer, the goods were warehoused in one of the bonded godowns of the Central Warehousing Corporation on 30th May 1996 for an initial period of one year. The respondent thereafter applied for the extension of the warehousing period which was allowed by the Commissioner, Customs on 5th September 1997 upto 31st March 1998. A security deposit of about Rs. 10 ,00,000 /- and an advance customs duty of about Rs. 98, 00,000/- were deposited with the department on 31st March 1998 but the goods were still not cleared. From 1998 till 31st January 2001, several notices were sent to the respondent to clear the goods or to pay the duty and during this period the warehousing period was extended six times with the last extension expiring on 31st January 2001. As the respondent sought no further extension thereafter, the aforesaid period came to an end. Several notices were thereafter issued to the respondent under Section 72(1) of the Customs Act, 1962 raising a demand of duty etc. As no reply was forthcoming, a notice under section 72(2) of the Act was issued to the respondent on 3rd December 2001 for sale of the goods by auction so as to recover of the outstanding dues. Interestingly, however, the respondent vide his letter dated 31st December 2004 also surrendered the goods with the result that it ceased to have any claim over them. </font></p>
<p align="justify"><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>Refund of unutilized Cenvat credit – Deemed Exports are not physical exports - Since appellant has not physically exported goods but merely supplied goods to 100% EOU , provisions of Rule 5 of Cenvat Credit Rules, 2004 are not applicable : Tribunal </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">THE appellants cleared excisable goods viz. packing materials to 100% EOU under CT-3 certificate without payment of duty. Since the goods were cleared without payment of duty, they could not utilize the Cenvat credit availed on the inputs used in the manufacture of goods cleared without payment of duty under CT-3 certificate. They accordingly filed a refund claim under Rule 5 of the Cenvat Credit Rules, 2004 in respect of the unutilized Cenvat credit balance for the quarter 01.01.2006 to 31.03.2006. The claim for refund was rejected on the grounds that the description of the goods supplied by them and the description of the goods on the export documents of 100% EOU did not match and further the export documents did not indicate the size of the packing material used in the manufacture of export goods. <strong><font color="#FF6633">Additionally,</font> </strong> it was also held that supplying goods to 100% EOU does not amount to export and in view of the same the provisions relating to refund of unutilized Cenvat credit under Rule 5 are not applicable to them. </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>See our columns Monday for the judgements </strong></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 <a href="mailto:vijaywrite@taxindiaonline.com"></a></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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