TIOL-DDT 2333
15.04.2014
Tuesday

QUITE often the Revenue officers sit on refund claims hoping that some miracle will happen and they will be spared from the ignominy of actually giving a cash refund to an unscrupulous assessee who has the audacity to claim refund. And some uninitiated assessees have the temerity to claim interest if the refund claims are delayed by a couple of decades for genuine and understandable reasons and for no fault of the dedicated officers of the tax department.

If refund is taboo, interest on delayed refund is sacrilege and no revenue officer would ever dare to grant refund with interest, especially in indirect taxes. They go all out - to any means - mostly foul, to avoid payment of interest. One modus operandi of these clever officers is to blackmail the assessees into giving an undertaking that they voluntarily forego interest and they would be more than happy if the refund is granted to them without interest.

How far is this legal?

In a recent case before the Tribunal, an assessee filed refund claims in 2005 and due to reasons known only to the Department, the refund claims were not finalized in time and were kept pending. Sometime in the year 2008 the Jurisdictional Central Excise Authority woke up to the pendency of these refund claims and also to the possibility having to pay interest for the period of delay beyond the period of three months from the date by filing of refund claim.

In 2008, the assessee wrote to the Assistant Commissioner that since they are interested in getting the amount involved in the refund claim urgently, they will not claim interest which may be due to them on account of delay in sanction of the claims.

And the Assistant Commissioner sanctioned the refund without interest!.

Later the assessee filed appeals before the Commissioner (Appeals)to claim to interest under Section 11BB, for the period of delay beyond the period of 3 months from the date of filing of the claims.

The Commissioner (Appeals)dismissed the appeals on the ground that when the Appellant themselves have given up their claim on interest for the period of delay, they cannot raise this issue at the appellate stage.

And the assessee approached the Tribunal.

The Tribunal found the decision of the Commissioner (Appeals) to be absolutely incorrect and contrary to the Law. Right conferred under the statute cannot be given up on the basis of concession made by any party to the lis. Just because the appellant by the letters addressed to the Jurisdictional Assistant Commissioner had given up their claim for interest on the amount of refund for the period of delay in sanction of the refund claims, they would not be estopped from challenging the denial of interest and claiming the same when they are entitled for the same under the statutory provisions of Section 11BB. The impugned order is set aside and the Department is directed to pay the interest in terms of the provisions of Section 11BB.

Next time your Assistant Commissioner asks for that letter renouncing the claim for interest, happily give it to him, take your refund and go in appeal.

In this case, now, perhaps the assessee can demand interest on the illegally held up interest from 2008 to 2014. That will be another case.

We will bring you this interesting case tomorrow.

Merger/Amalgamation/de-merger - CBDT wants Chief Commissioners to protect Revenue

CBDT has noticed that in a recent case of proposed amalgamation,the scheme of amalgamation was designed seeking amalgamation with retrospective dates so as to claim set off of losses of loss-making Companies against the profits of profit making Companies of the group and thus impacting adversely the much needed public revenue.

This fact of proposed amalgamation was not brought to the notice of Income Tax Department either by the Ministry of Corporate Affairs (MCA) or Registrar of Companies (ROC). The Department had to file an intervention application opposing such amalgamation before the High Court which was rejected on the ground that the Department had no locus standi in the matter and that Regional Director, MCA has been delegated power in this regard.

In this connection Circular No. 1/2014 dated 15.01.2014 has been issued by MCA to Regional Directors which lays down that while furnishing any report regarding reconstruction or amalgamation of companies under the Companies Act, comments and inputs from the Income Tax Department may invariably be obtained so as to ensure that the proposed scheme of reconstruction or amalgamation has not been designed in such a way as to defraud the Revenue and consequently being prejudicial to public interest. It has further been said that the Regional Directors would invite specific comments from the Income Tax Department within 15 days of receipt of notice before filing response to the Court.

The MCA Circular also emphasized that it is not for the Regional Director to decide correctness or otherwise of the objections/views of the Income tax Department of other Regulators. While ordinarily such views should be projected by the Regional Director in his representation, if there are compelling reasons for doubting the correctness of such views, the Regional Director must make a reference to this Ministry for taking up the matter with the Ministry concerned before filing the representation under Section 394A.

CBDT now emphasises that this is the only opportunity with the Department to object to the scheme of amalgamation if the same is found prejudicial to the interest of Revenue and therefore, it is desired that the comments/objections of the Department are sent by the concerned CIT to Regional Director, MCA for incorporating them in its response to the Court, immediately after receiving information about any scheme of amalgamation or reconstruction etc.

CBDT F.No. 279/Misc/M-171/2013-IT; Dated: April 11, 2014

Provisional Anti Dumping Duty on Cast Aluminium Alloy Wheels

ON the recommendation of the Designated Authority, the Government has imposed provisional anti dumping duty on Cast Aluminium Alloy Wheels or Alloy Road Wheels used in Motor Vehicles, whether or not attached with their accessories, of a size in diameters ranging from 12 inches to 24 inches, falling under heading 8708 of the First Schedule to the Customs Tariff Act, originating in, or exported from the People's Republic of China, Korea RP and Thailand and imported into India.

The anti-dumping duty imposed under this notification shall be levied for a period not exceeding six months (unless revoked, amended or superseded earlier) from the date of publication of this notification in the Gazette of India and shall be paid in Indian currency.

What will happen if they forget after six months? Government can retrospectively amend anything to cause misery to its Citizens.

Notification No. 15/2014-Customs (ADD);Dated: April 11, 2014

Just because assessee is liable to pay Value Added Tax on sale involved in supply of goods at canteen, it cannot be held that it is not liable to payment of service tax: HC

DOES the sale of Roti or idly in a canteen involve service and is Service Tax payable. There are many consultants (especially the non-black-coat-variety) who believe that once you pay VAT, you need not pay Service Tax at all.

Coming closely on the heels of the Bombay High Court judgement in the Indian Hotels and Restaurant Association case reported in 2014-TIOL-498-HC-MUM-ST, the Allahabad High Court last week held that The charge of tax in the cases of VAT is distinct from the charge of tax for service tax. Entry 54 of the State List to the Seventh Schedule to the Constitution empowers the state legislatures to impose a tax on the sale of goods. Article 366 (29A) was introduced by the Forty Sixth Constitutional Amendment so as to provide a deeming definition of the expression ‘sale' to comprehend situations within the purview of its several sub-clauses including the sale of goods involved in the execution of a works contract. The charge of service tax is not on the sale of goods but on a taxable service provided. Unlike a tax which is imposed on the sale of goods, the charge of service tax is on the provision of a taxable service provided by the assessee. Hence, the fact that the assessee may be paying VAT on the sale of goods on the supply of food and beverages to those who consume them at the canteen, would not exclude the liability of the assessee for the payment of service tax in respect of a taxable service provided by the assessee as an outdoor caterer.

So, he is liable to Service Tax, not with standing VAT.

Please see Breaking News

CBI Cashier in CBI Net

HAVE you ever seen policemen chasing policemen?

The CBI has arrested a cashier in one of its offices for alleged cheating and misappropriation of government money to the tune of Rs.45 Lakhs (approx). A lowly cashier could embezzle Rs. 45 lakhs in a CBI office without anyone noticing it for long.

CENVAT Credit on inputs contained in scrap generated during manufacture of exempted goods - Assessee is entitled to credit - waste and scrap are 'final products' - Supreme Court Dismisses Revenue Appeal

IN ALBERT DAVID VS COMMISSIONER OF CENTRAL EXCISE - 2013-TIOL-621-HC-ALL-CX the Allahabad High Court held, in view of the fact that the waste and scrap is final product and exciseable item, taking into consideration the scheme of CENVAT Credit, it is but obvious that the appellant is entitled to claim CENVAT Credit on the inputs of plastic granules proportionate to the waste and scrap.

The Revenue was not happy and took the matter in SLP to the Supreme Court.

The Supreme Court on Friday dismissed the SLP.

Please see 2014-TIOL-36-SC-CX

Jurisprudentiol - Wednesday's cases

Central Excise

Valuation - cylinder testing charges are not includible in assessable value of liquid chlorine: CESTAT

THE respondent assessees are manufacturers of Caustic Soda, Liquid Chlorine,S.B.Petc. chargeable to Central Excise duty under various Headings of Chapter 28 of the Central Excise Tariff. The liquid Chlorine is sold by them to their customers in their own cylinders called Tonners, and also in the cylinders/Tonners brought by the customers. Some quantity of liquid chlorine is also supplied through pipeline. The Tonners are required to undergo periodical Hydraulic testing as per the provision of Gas Cylinder Rules, 1981.

The audit officers in course of examination of the respondents records for the period from 2000-2001 to 20001-2002, pointed out that while the respondent are collecting the charges from their customers for testing of Tonners, they are not including these charges in the assessable value of Chlorine being sold by them. Accordingly two Show Cause Notices were issued for demand of Central Excise duty of Rs. 94,264/- and 67,792/- for the period from 01.07.2000 to 29.02.2004. The Show Cause Notices were adjudicated by the Assistant Commissioner by a common Order-in-Originaldt.09.09.04 by which the duty demands, as mentioned above, were confirmed along with interest and penalty of equal amount was imposed on the Respondent under Rule 25(1) of the Central Excise Rules.

Income Tax

Whether provisions of Sec 10A enlarge ambit of term 'computer programme' by including process of management of electronic data - YES: ITAT

THE assessee is a 100% export oriented unit under the STP Scheme. It filed its Return of Income claiming deduction of section 10A. The Return of Income filed by the assessee was picked up for scrutiny. During the course of assessment proceedings the AO disallowed the claim of deduction of section 10A on the ground that assessee was engaged in providing BPO services, which services neither amounted to manufacturing nor services as envisaged in section 10A.

Aggrieved with the order of the AO, the assessee filed appeal before the CIT (Appeal) and contented that the claim of the assessee was fully tenable in view of the Board Circular. However, the CIT (Appeal) affirmed the order of the AO.

The issue before the Bench is - Whether the provisions of Sec 10A enlarge the ambit of the term 'computer programme' by including the process of management of electronic data. And the answer favours the assessee.

Central Excise/Service Tax

CENVAT Credit - cash refund of - Rule 5 of CCR - Interest for delayed payment of refund - assesse gives up right to claim interest before Adjudication authority - Assessee is not barred from claiming interest at appellate stage - No estoppel against law: CESTAT

THERE is no estoppel in law against an assessee in taxation matters.

Besides this, the Apex Court in case of Union of India Vs. Madhumilan Syntex Ltd. reported in 2006-TIOL-160-SC-CX has held that right conferred under the statute cannot be given up on the basis of concession made by any party to the lis. Therefore, just because the appellant by the letters addressed to the Jurisdictional Assistant Commissioner had given up their claim for interest on the amount of refund for the period of delay in sanction of the refund claims, they would not be estoppel from challenging the denial of interest and claiming the same when they are entitled for the same under the statutory provisions of Section 11BB.

See our Columns Tomorrow for the judgements

Until Tomorrow with more DDT

Have a nice day.

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