TIOL-DDT 892 · 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"><strong><font color="#663399" face="Verdana, Arial, Helvetica, sans-serif">TIOL-DDT 892 </font></strong><font face="Verdana, Arial, Helvetica, sans-serif"><strong></strong></font></font><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif"><strong><br> 23.06.2008 <br> Monday </strong></font></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Fear of arrest costs an assessee Rs 16 Crores – reduced to 8 Crores by Supreme Court. </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">An assessee is charged with availing an exemption notification wrongly. The assessee is afraid that he would be arrested and categorically states that the Armed Guards are waiting at his residence to take him into custody. He is in writ petition before the High Court. The High Court orders deposit of Rs. 16 Crores and furnishing of bank guarantee of an equal amount. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">All this, without even a Show cause Notice! Please see <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=7312" target="_blank">DDT 867 - 16.05.2008</a> for more details of this case. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now the matter is before Supreme Court. The Apex Court has directed deposit of Rupees Eight Crores! </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">For fear of arrest, the assessee is ending up paying Rs. 8 Crores! </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The moral of the story is: - IT IS NOT ALWAYS SAFE TO RUN TO High Courts even before a Show cause Notice is issued. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">When Central Excise officers arrest somebody, they don't keep armed guards at his residence; they simply go ahead and arrest him. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Panic reaction will ultimately make you poorer by a few Crores. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">For the Supreme Court order <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=50&filename=legal/sc/2008/2008-TIOL-126-SC-CX.htm" target="_blank">Click here </a></strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=50&filename=legal/sc/2008/2008-TIOL-126-SC-CX.htm">. </a></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CBEC graciously agrees with Delhi High Court order. </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In <strong>K P POUCHES (P) LTD Vs UNION OF INDIA & ANR - </strong></font><font size="1" face="Verdana, Arial, Helvetica, sans-serif"><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=33&filename=legal/hc/2008/2008-TIOL-240-HC-DEL-CX.htm" target="_blank">2008-TIOL-240-HC-DEL-CX</a></strong></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> , the Delhi High Court observed, <font color="#FF6633">“ To obviate any similar situation from arising in future, we are of the opinion that in its adjudication order the adjudicating authority under the Act should explicitly state the options available to the Assessee under Section 11AC of the Act. Once the choices are made known to the Assessee and it still does not take advantage of the first proviso to Section 11AC of the Act, it will be entirely at its own peril. Therefore, it would be beneficial, both from the point of view of the Revenue as well as the Assessee, if the options available to the Assessee are mentioned in the adjudication order itself.” </font></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Board's attention has been drawn to this order and the Board observes, </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The first and second proviso to section 11AC of the read as follows; </font></p> <blockquote> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">"Provided that where such duty as determined under sub-section (2) of section 11A , the interest payable thereon under section 11AB , is paid within thirty days from the date of communication of the order of the Central Excise Officer determining such duty, the amount of penalty liable to be paid by such person under this section shall be twenty-five per cent. Of the duty so determined: </font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Provided further that the benefit of reduced penalty under the first proviso shall be available if the amount of penalty so determined has also been paid within the period of thirty days referred to in that proviso:" </font></p> </blockquote> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is seen that these proviso to section 11AC of the Act have been specifically inserted to ensure speedy recoveries of the disputed amount. It is an incentive given to the assessee that if he pays the duty amount along with interest, the penalty is reduced to 25% of the duty. This provision is beneficial to the Department as well as the assessee as rightly pointed out by Delhi High Court and therefore, the assessee should be made aware of the option available to him. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So the Board has decided that in all the cases, wherein penalty under section 11AC of the Act is imposed,<font color="#FF6633"> <strong>the provisions contained in first and second proviso to section 11AC should be mandatorily mentioned in the Order-in-original itself by the adjudicating authority. </strong></font></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/2008/11ac.htm" target="_blank">CBEC's F. No. 208/07/2008- CX -6 Dated : May 22, 2008 </a></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Processing of returns of A.Y. 2007-08 - Steps to clear the backlog – CBDT instructions </strong></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CBDT has decided that:- </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. All CCsIT ( CCA ) should redeploy officers and staff to clear the backlog in high pendency charges keeping in view the overall workload, including pendency of scrutiny cases. Concerned CCsIT may take recourse to outsourcing of data entry as per standing instructions of the Board/Directorate of Systems on the subject. For this purpose, necessary funds would be placed at the disposal of the CCIT ( CCA ) for outsourcing of data entry. CCsIT ( CCA ) should send proposals to the Directorate of Income-tax (Systems) for outsourcing of data entry. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. In order to clear the backlog of I-T returns for AY 2007- 08 in networked stations, 2D based AST Software would continue to be used for processing the returns in ITR 1, 2, 3, 4. For non-networked stations, TMS Software would continue to be used. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. Non-networked stations using TMS Software would be provided CDs with OLTAS data as was done previously by the RCC so that the Assessing officers could verify tax payments. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. In all I-T returns for AY 2007-08 where the aggregate TDS claim does not exceed Rs. 5 lakh and where the refund computed does not exceed Rs.25,000 /-, the TDS claim of tax payer should be accepted at the time of processing of returns. In all remaining returns, the Assessing officer shall verify the TDS claim from the deductor or assessee as the case may be, before processing the return. In all cases selected for scrutiny, all TDS claims should be verified. In all cases where PAN was earlier found to be duplicate or bogus and in cases where TDS certificates were tailed for processing returns for the AY 2006-07 but were not produced, the credit for TDS shall be given after full verification. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">5. A time bound TDS drive is launched to make those deductors who have not filed their TDS returns for F.Y. 2006-07 do so. The CsIT in charge of TDS functions are requested to follow up cases where TDS returns were filed but PAN of some deductors were not reported in TDS returns even though the TDS deducted from such deductees exceeded Rs.1 lakh . Information relating to such deductors / deductees will be provided by DIT (Systems). This drive is to be an intensive two month campaign which is to be monitored weekly by the Board and has to be completed by <strong><font color="#FF6633">31.8.2008</font>. </strong>This drive should be followed up by a concerted effort in improving TDS compliance. Proforma of sending compliance report after TDS verification shall be sent separately by DIT (Systems), New Delhi . </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=67&filename=notification/cbdt/2008/instruct0806.htm" target="_blank">CBDT INSTRUCTION NO. 6/2008 , Dated: June 18, 2008 </a></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>FM's anguish at oil prices </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Speaking at the Energy Ministers' Meeting in Jeddah, Mr. P. Chidambaram said, <br> <br> I represent a country that has over 1.1 billion people; that began a long and arduous journey of development; and that has, in recent years, rediscovered its inner strengths and acquired the capacity to end poverty. I speak for a country that, along with 189 nations, adopted the Millennium Declaration and set 2015 as the year for achieving the Millennium Development Goals. </font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>I speak with great anguish because the goals that we have set for ourselves are in grave peril. </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Oil prices threaten to wipe out the economic gains made by developing countries in recent years. The irrational escalation in oil prices is the cause of diversion of scarce resources from education, health and other social sector schemes. Three weeks ago, India passed on barely 9 per cent of the required price increase to consumers: the result is that inflation measured by wholesale prices has crossed 11 per cent. We are sorry to note that even oil producing countries such as Indonesia , Russia , Saudi Arabia and Venezuela face double-digit inflation rates ranging from 10.5 per cent to 29.3 per cent. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">How did this situation come about? And how may we overcome what appear to be formidable challenges? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Questions have been raised about the fundamentals of the oil industry. There is a need for the oil industry to re-assert its leadership in price formation and not remain passive spectator of speculation and paper trading in oil. The global hydrocarbon community must address this situation through appropriate supply-side responses and calm the oil markets. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Today, the vulnerability of the supply chain to temporary supply disruptions stands exposed. Global oil consumption grew by 1.1% or 1,000,000 barrels per day in 2007 whereas the global oil production fell by 130,000 barrels per day. Spare capacity, across the supply chain, has dwindled considerably. This has added to risks and uncertainty. Hence, the need to fast-track development of oil resources. <br> <br> </font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per the estimates of the International Energy Agency ( IEA ), our future oil and gas needs call for massive investments of the order of US$ 10 trillion by the year 2030. Such fund mobilization can be achieved. Fresh investments are not materializing perhaps because of anticipated fall in demand. This is plainly wrong. The cyclical behaviour of oil markets is amply established and we know that oil production provides attractive returns in the long run. High oil prices have improved the balance sheets of oil-producing nations and companies. It would be reasonable, therefore, to expect oil producers to fund capacity expansion. <br> <br> </font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Respectfully, we reject the suggestion that rising demand is the cause of spiraling oil prices. Surely, demand and supply dynamics cannot explain what has happened over the last 12 months. How is it that oil prices were US$70 a barrel in August 2007 and how is it that they have doubled when there has been no dramatic change in demand? The causes for the current pandemonium in oil prices lie elsewhere: in unregulated over-the-counter markets and futures trading in oil. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">There is ample evidence that large financial institutions, pension funds, hedge funds etc. have channelized billions of dollars – nay, trillions of dollars - into commodity investments and commodity derivatives. It is common knowledge that these financial transactions are unregulated and highly opaque. The demand for oil generated by these funds is purely speculative demand. In our view, the time has come for producers - especially OPEC - and consumers to wrest control over oil trading from the hands of the speculators. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The only way forward is for the both producers and consumers to find common ground. We have a proposal that will instil mutual confidence. We propose that we adopt a Price Band Mechanism. Consuming countries must guarantee that oil prices will not fall below an agreed level and producing countries must guarantee that oil prices will not rise above a guaranteed level. In the band between these two levels, let prices be determined by market forces. This is the only way to shelter the world from volatility and unpredictability in oil prices. </font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>I appeal to you in the name of development; I appeal to you on behalf of all developing countries to seize the moment. Let us put our heads together and find the way forward to normalize the oil markets and to move towards a future in which energy is available, accessible and affordable for all on a sustained basis. </strong></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></strong></font><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"> – Tomorrow's cases </font></strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><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">Income Tax </font></strong></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>The mere fact that some enduring advantage results by incurring of expenditure does not mean that expenditure must be treated as capital in nature: ITAT </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is common knowledge that the models and design of passenger cars in the present days are changing frequently depending upon the taste of the customers and the competition. Therefore, a particular design or removal of a particular defect in the design of the cars cannot be said to confer any enduring advantage to the assessee company. Even assuming that there is some enduring advantage, the advantage is in the revenue field and not in the capital field. The cars are the stock-in-trade of the assessee. They are not part of the plant. The stock-in-trade must be made more attractive and safe from the point of view of the customers and any expenditure towards this end can only be regarded as revenue expenditure. Thus, the enduring benefit, if any, is not in the capital field. It is well settled that every expenditure that confers some enduring advantage cannot be regarded as capital expenditure. </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>Setback for EOUs : CESTAT rules Education Cess is payable on DTA clearances in addition to duties computed under relevant Notifications </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> first order on the dispute is out. And it went in favour of the revenue. In a significant judgement, which will have wide ramifications, the Tribunal upheld the order of Commissioner (Appeals) confirming the demand of education cess on DTA clearances made by the EOUs . Let us see why this dispute arose in the first place. </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 color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Gold seized in 1984 - sentenced to 2 year imprisonment - appeals to Supreme Court - appellant dies - late application by heirs - Appeal abates on death of appellant: Supreme Court </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>ON</strong> 11-11-1984 , on conducting a search by the officials of the Central Excise and Customs on the strength of a search warrant, they recovered and seized on such search primary gold, gold ornaments and gold weighing apparatus, besides gold of foreign origin weighing 3170.800 grams valued at Rs. 4 ,09,971.95 paise besides the containers. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The appellant, Hari Prasad Chopolia was convicted for offences punishable under Sections 135(b)(1) of the Customs Act and Section 85 (ii), (iii), (viii) and (ix) of the Gold (Control) Act, by the trial Court. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The High Court by the impugned order set aside the conviction and sentence for the offence punishable under Section 135(b)(1) of the Customs Act while upholding the conviction for the offence punishable under Section 85 of the Gold Act. The sentence under the Gold Control Act was R.I. for two years and to pay a fine of Rs. 2,000/. </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 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> </body> </html>