TIOL-DDT 890 · 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 size="3" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399">TIOL-DDT 890 </font></strong><strong></strong></font><font face="Verdana, Arial, Helvetica, sans-serif"><font size="2"><strong><br> 19.06.2008 <br> Thursday </strong></font></font></p> <p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">Officers of DG, Audit to be Central Excise officers – Why? </font></strong></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>How are they authorised to visit HOs of assessees? </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In<a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=7434" target="_blank"> DDT 886 on 13.06.2008</a><strong>, </strong> we had reported that the officers of the DG, Audit were appointed as Central Excise officers. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Why? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The CBE C explains:- </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The audit of Multi Locational Units has been revamped in order to yield better results. MLU broadly refers to an assessee having factories at different places in which similar items are manufactured. As per the revised procedure, the zonal ADG ( Audit) has been authorised to obtain the consolidated Balance Sheet, Profit and Loss Statement and other financial documents of the company from the Head/ Corporate office for scrutiny. They have also been entrusted with the responsibility to clearly understand the role played by the Head office in the conduct of business by individual units, which requires the officers of the zonal unit to visit the said office. Further, the zonal unit is required to send out their staff to the said registered office/corporate office, in case the jurisdictional audit teams have identified certain issues that require any verification. Therefore, notification No. 28/2008- CE( NT) dated 05.06.2008 has been issued to empower the officers of Directorate General of Audit accordingly. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As pointed by us earlier, the DG, Audit officers have been visiting the Corporate offices of MLUs , which was perhaps illegal! </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Even, now what is the authority for the DG, Audit or for that matter any Central Excise officer to visit the Head Office of an assessee? As per Rule 22 of the Central Excise Rules, the officers have access to the registered premises of an assessee. The registered premises are usually the factories and not the Head Offices. Under what authority can the Central Excise officers visit the Head Offices of the assessees without a warrant? </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=31&filename=notification/excise/2008/excircular872.htm" target="_blank">CBEC Circular No. 872/10/2008- C X ., Dated: June 17, 2008 </a></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>India and the ADB </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Finance Minister Chidambaram told a meeting of the Parliamentary Consultative Committee attached to his Ministry that </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. India became a member of the ADB as a founding member in 1966 and started borrowing ordinary capital resources only in 1986. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. India has a permanent seat in the ADB whose membership today has risen to 67. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. Since 2004, we have encouraged ADB and the World Bank to deal directly with the States except the special category States. The lendings are provided on back to back basis and we play a catalyst role between the lending institutions and the State Governments. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. ADB's another arm is its lending to private sector for infrastructure development through public-private partnership mode. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">5. The private sector would have to play a more important role in the development of the Asia and Pacific region. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">6. However, it is our belief and experience that the bulk of the resources for infrastructure will still have to be found through the public sector. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">7. Hence, a portfolio restructuring plan for ADB to increase the private sector's share of annual loans to 50% will be consistent with the continued need for a vibrant public sector and this twin strategy will succeed only if total loan approvals and/or disbursements are enhanced significantly. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">8. The fundamental role of ADB as a multilateral development bank should not be diluted by an overemphasis on non-sovereign loans at the cost of sovereign loans. </font></p> <p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">Direct Tax Collection – the boom continues; </font></strong></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>And refund without TDS verification – Cost of collection – 0.54 percent </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Net direct tax collections in the first two months of the present fiscal stood at Rs.22 ,840 crore , up from Rs.13,335 crore , registering a growth of 71.28 percent. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The robust growth in direct taxes has been achieved despite larger refund payouts at Rs.9,014 crore in the first two months of this fiscal as against Rs.5,037 crore during the first two months of last fiscal. In spite of manpower shortage, refunds were issued to over 48 lakh taxpayers last fiscal (2007-08) compared to about 44.5 lakh refunds in the previous fiscal (2006-07). It is the endeavour of the Income Tax department to provide better taxpayer services, particularly in the area of issuance of refunds. Therefore, the criteria for issuance of refunds to taxpayers without verification of TDS instruments has been further relaxed to gross TDS claims of up to Rs.5 lakh and net refund claim of Rs.25,000 per taxpayer. Under the relaxed criteria, about 92 percent of the refund claims for fiscal 2007-08 will be settled without asking the taxpayers to produce the TDS certificates / challans in cases of mismatch. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Direct tax collections have been witnessing high growth due to better tax compliance by the taxpayers and an improved tax administration. </font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>The cost of collection, on the other hand, declined to an all-time low of 0.54 percent during 2007-08, among the lowest in the world. </strong></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Money Laundering – RBI's Indicative List of Suspicious Activities </strong></font></p> <p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Transactions Involving Large Amounts of Cash </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. Exchanging an unusually large amount of small denomination notes for those of higher denomination; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. Purchasing or selling of foreign currencies in substantial amounts by cash settlement despite the customer having an account with the bank; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. Frequent withdrawal of large amounts by means of cheques, including traveller's cheques; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. Frequent withdrawal of large cash amounts that do not appear to be justified by the customer's business activity; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">5. Large cash withdrawals from a previously dormant/inactive account, or from an account which has just received an unexpected large credit from abroad; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">6. Company transactions, both deposits and withdrawals, that are denominated by unusually large amounts of cash, rather than by way of debits and credits normally associated with the normal commercial operations of the company, e.g. cheques, letters of credit, bills of exchange etc.; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">7. Depositing cash by means of numerous credit slips by a customer such that the amount of each deposit is not substantial, but the total of which is substantial. </font></p> <p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Transactions that do not make Economic Sense </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. A customer having a large number of accounts with the same bank, with frequent transfers between different accounts; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. Transactions in which assets are withdrawn immediately after being deposited, unless the customer's business activities furnish a plausible reason for immediate withdrawal. </font></p> <p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Activities not consistent with the Customer's Business </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. Corporate accounts where deposits or withdrawals are primarily in cash rather than cheques; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. Corporate accounts where deposits & withdrawals by cheque/telegraphic transfers/foreign inward remittances/any other means are received from/made to sources apparently unconnected with the corporate business activity/dealings; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. Unusual applications for DD/ TT /PO against cash; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. Accounts with large volume of credits through DD/ TT /PO whereas the nature of business does not justify such credits; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">5. Retail deposit of many cheques but rare withdrawals for daily operations. </font></p> <p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Attempts to avoid Reporting/Record-keeping Requirements </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. A customer who is reluctant to provide information needed for a mandatory report, to have the report filed or to proceed with a transaction after being informed that the report must be filed; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. Any individual or group that coerces/induces or attempts to coerce/induce a bank employee not to file any reports or any other forms; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. An account where there are several cash deposits/withdrawals below a specified threshold level to a avoid filing of reports that may be necessary in case of transactions above the threshold level, as the customer intentionally splits the transaction into smaller amounts for the purpose of avoiding the threshold limit; </font></p> <p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Unusual Activities </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. An account of a customer who does not reside/have office near the branch even though there are bank branches near his residence/office; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. A customer who often visits the safe deposit area immediately before making cash deposits, especially deposits just under the threshold level; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. Funds coming from the list of countries/ centers which are known for money laundering; </font></p> <p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Customer who provides Insufficient or Suspicious Information </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. A customer/company who is reluctant to provide complete information regarding the purpose of the business, prior banking relationships, officers or directors, or its locations; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. A customer/company who is reluctant to reveal details about its activities or to provide financial statements; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. A customer who has no record of past or present employment but makes frequent large transactions; </font></p> <p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Certain Suspicious Funds Transfer Activities </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. Sending or receiving frequent or large volumes of remittances to/from countries outside India ; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. Receiving large TT /DD remittances from various centers and remitting the consolidated amount to a different account/ center on the same day leaving minimum balance in the account; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. Maintaining multiple accounts, transferring money among the accounts and using one account as a master account for wire/funds transfer; </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Certain Bank Employees arousing Suspicion </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. An employee whose lavish lifestyle cannot be supported by his or her salary. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. Negligence of employees/ willful blindness is reported repeatedly; </font></p> <p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Some examples of suspicious activities/transactions to be monitored by the operating staff- </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. Large Cash Transactions </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. Multiple accounts under the same name </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. Frequently converting large amounts of currency from small to large denomination notes </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. Placing funds in term Deposits and using them as security for more loans </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">5. Large deposits immediately followed by wire transfers </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">6. Sudden surge in activity level </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">7. Same funds being moved repeatedly among several accounts </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">8. Multiple deposits of money orders, Banker's cheques, drafts of third parties </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">9. Transactions inconsistent with the purpose of the account </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">10. Maintaining a low or overdrawn balance with high activity </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=wnew/rbi_notification.htm" target="_blank">RBI's RP C D. C O.RRB.No . B C . 77/03.05.33 (E)/2007-08 Dated: June 18, 2008 </a></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Jurispruden<font color="#FF6633" size="5"> tiol</font> – Tomorrow's cases</strong></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><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 color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><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"></b></font></strong></font></strong></font></strong></font></strong></font></strong></font></strong></font></font><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>Good reason for revenue to smile – Lager Bench resolves an important Central Excise valuation issue in Department's favour . </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Central Excise – valuation – goods cleared by the job worker to the principal manufacturer on payment of duty under Rule 8 of the C entral Excise Valuation Rules –while arriving at the cost of manufacture of goods by the job worker whether 10% addition made to the intermediate goods supplied by the principal manufacturer has to be included – question answered in favour of the revenue. </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 color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Assessee deals in sale and purchase of land - plants trees on land to be developed in future - Since expenditure incurred was for developing new asset, it is capital expenditure- High Court </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CAN expenditure incurred towards the plantation of eucalyptus trees be treated as revenue expenditure, and the same can be treated to be expenditure on agricultural operation? This was the question before the High Court which applied the simple test suggested by the Apex C ourt that whether an expenditure is incurred to preserve and maintain an already existing asset or is to bring a new asset into existence or to obtain a fresh advantage. Let's go to the facts of the case before an answer is found to this question. </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>Inputs burnt in fire - No appeal filed against order of Insurance authorities rejecting claim on ground that fire insurance not taken by company - No cause for reversal of CENVAT credit: Tribunal </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Tribunal observed that Revenue had accepted the fact that the Insurance company had rejected the claim of the respondent on the ground that loss due to fire was not covered under the insurance policy. As for whether the company had preferred an appeal against this order of the insurance company, since the assessees representative had positively stated that no such appeal had been filed, the matter ends there, more so since the order of the lower appellate authority was challenged on this sole ground. </font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>See our columns Tomorrow for the judgements </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><font color="#FF6666">Until Tomorrow with more DDT </font></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> </body> </html>