TIOL-DDT 2396
15.07.2014
Tuesday

THE letter D.O. F.No. 334/15/2014-TRU dated 10.07.2014 in Annexure III under the head 'Clarifications - Central Excise' mentions the following against Sr. no. 4 -

4) All goods falling under any Chapter supplied against International Competitive Bidding (ICB) are fully exempt from excise duty [Sl.No.336 of notification No. 12/2012-CE dated 17.3.2012], subject to the condition: “If the goods are exempted from the duties of customs leviable under the First Schedule to Customs Tariff Act 1975 and the additional duty leviable under Section 3 of the said Customs Tariff Act when imported into India". A doubt has been raised whether the excise duty exemption under this notification is available to sub-contractors who supply goods to the main contractor who has won the ICB contract. It is clarified that the said exemption is also available to sub-contractors for manufacture and supply of goods for or on behalf of the main contractor (who has won the bid for the project through ICB) for execution of the said project, subject to compliance of conditions specified, if any.TE

As mentioned, the aforesaid clarification appears in the TRU letter but it would have been more prominently known had it been issued as a Circular and also referred to the following Tribunal decisions which held so -

KENT INTROL PVT LTD - 2014-TIOL-211-CESTAT-MUM

UNIQUE INDUSTRIAL HANDLERS PVT LTD - 2014-TIOL-408-CESTAT-MUM

We can assume that the clarification has retrospective effect.

Retrospective Legislation - sovereign right of Government - unquestionable

THIS is what the FM said in his Budget Speech on Retrospective Legislation:

The sovereign right of the Government to undertake retrospective legislation is unquestionable. However, this power has to be exercised with extreme caution and judiciousness keeping in mind the impact of each such measure on the economy and the overall investment climate. This Government will not ordinarily bring about any change retrospectively which creates a fresh liability. Hon'ble Members are aware that consequent upon certain retrospective amendments to the Income Tax Act 1961 undertaken through the Finance Act 2012, a few cases have come up in various courts and other legal fora. These cases are at different stages of pendency and will naturally reach their logical conclusion. At this juncture I would like to convey to this August House and also the investors community at large that we are committed to provide a stable and predictable taxation regime that would be investor friendly and spur growth. Keeping this in mind, we have decided that henceforth, all fresh cases arising out of the retrospective amendments of 2012 in respect of indirect transfers and coming to the notice of the Assessing Officers will be scrutinized by a High Level Committee to be constituted by the CBDT before any action is initiated in such cases. I hope the investor community both within India and abroad would repose confidence on our stated position and participate in the Indian growth story with renewed vigour.

Short Term Hiring of Aircraft brought under Service Tax Net - Blow for Airlines in India

THE already burdened and loss making aviation sector was given another shock treatment by the finance Minister in this Budget, by an innocuous amendment to Place of Provision of Services Rules, 2012.

When an Indian airlines company hires a foreign aircraft upto a period of one month, there was no liability to pay Service Tax as the Place of Provision of Service would be the location of the service provider as per Rule 9(d) of the Place of Provision of Services Rules, 2012. Now this is amended to exclude aircrafts and vessels from the purview of Rule 9(d). Now aircrafts will fall into Rule 3 where the Place of Provision of Service is the location of the recipient - India irrespective of the period of hiring.

The TRU letter explains:

Service consisting of hiring of Vessels (excluding yachts) and Aircraft is being excluded from rule 9(d). Accordingly, hiring of vessels, or aircraft, irrespective of whether short term or long term, will be covered by the general rule, that is, the place of location of the service receiver .

SIONs reinstated

THE Director General of Foreign Trade has reinstated the SIONsA1143 (Phosphorous Trichloride), A1170 (Soda Ash), A3627 (Glass Vials, phials etc.) and K134 (Glass Mosaics) suspended vide Public Notice No. 30 (RE: 2013)/2009-2014 dated 4th October 2013. Amendments have also been made to the import items listed against SIONsA3627 and K134.

Public Notice 66/(RE: 2013) /2009-2014, Dated: July 11, 2014

CBEC Chief not consulted on GST?

IT is not the States alone that have complaints against the big brother attitude of the Central Revenue Department, but even the Chairperson of the CBEC feels that her team had been ignored by the Revenue Administration. The Indian Express reported that she told the newspaper in an interview - "We did not even get the recent re-revised draft of the Constitutional Amendment Bill from the department of revenue."

It is out in the open - the FM has a serious problem - the Revenue Administration must have convinced him that GST can be brought in without CBEC . As such CBEC managing GST would be a disaster, but handing it over to the Revenue Department without CBEC would be a calamity. It is heard that recently the IAS officers in the Revenue Department tried to make a presentation to the FM on GST which turned out to be a misadventure (the presentation, not GST), as they could not answer the simple questions posed by the FM.

Lady Clerk in Mumbai Customs Convicted in 2 Crore refund fraud

THIS is a story of glamour, low salary, high living, fraud involving husband, family drivers and even a priest.

This lady Dona was a lowly clerk in Mumbai Customs, but her monthly expenses on drivers alone amounted to around Rs. 40,000/-. CBI got scent of her lavish living and raided her in 1998 for possessing assets disproportionate to her known sources of income. Then the fraud came out that she had issued 85 cheques as refund from the Customs totaling about Rs. 2 crores to her husband, relatives, friends and a priest.

Now, a CBI Court in Mumbai has sentenced her and another accused to five years in jail and 10 other accused to three years imprisonment. Her husband who was also an accused died recently and so the case against him abated.

Imagine 2 crore rupees sixteen years ago!

Jurisprudentiol - Wednesday's cases

Service Tax

CENVAT - Distribution of service tax through ISD is only facility provided under the Rules and does not deal with recovery - Therefore, credit, if taken wrongly, has to be recovered from the person who has taken credit - Pre-deposit ordered: CESTAT

THE appellant was denied CENVAT credit of Rs.1.31crores by CCE, Raigad on the ground that the credit is attributable to trading activities undertaken by the appellant. Penalties have also been imposed along with interest.

Before the CESTAT, the appellant took the following stand -CENVAT credit has been taken on the strength of the invoices issued by their Head Office, which was registered as an Input Service Distributor (ISD) with the department and, therefore, without putting the ISD to notice, the impugned demand could not have been confirmed.

Income Tax

Whether facts relating to AY 2005-06 can be assumed to be known to Revenue when it came to be known only in AY 2009-10 that interest on which deduction was claimed u/s 57 was infact related to home loan but same was diverted to purchase debentures - NO: HC

THE assessee had claimed deduction u/s 57 as "Interest paid to HDFC" as Rs.53,65,251/- for the AY 2005-06. The AO reopened the assessment for this AY on the ground that such interest was paid on home loan and so no deduction should have been allowed u/s 57. The AO recorded in the reasons for reopening of assessment as that during AY 2009 - 10, various loan documents, including loan application from the assessee and sanction letter by the HDFC Ltd,., was called for. From these, it was observed that the assessee had taken this loan in FY 2002-03, but that this loan was a Home Loan (under Adjusted Rate Home Loan Scheme- ARHL) taken for the purpose of purchasing a residential property.

The issues before the Bench are - Whether facts related to AY 2005-06 were already known to the Revenue when it was only during the assessment proceedings of AY 2009-10 it was revealed that interest expenditure on which deduction was claimed u/s 57 was infact related to home loan; Whether the theory of consistency can be applied, when each assessment is a separate assessment unit; Whether the obligation of the assessee to comply with the provisions of the Income Tax Act have to be complied with in each AY and Whether when the assessee may be able to satisfy the AO that reopening of the assessment was not justified, the assessment cannot be reopened, although the reasons recorded do indicate that there was prima facie evidence to form a reasonable belief of income escaping assessment. And the verdict goes against the assessee.

Customs

Revocation of CHA licence or dropping of proceedings under CHALR cannot be said to be an order passed by Commissioner as an adjudicating authority - in absence of specific provision in CHALR, 1984, Revenue cannot appeal against such order before Tribunal: CESTAT

AN inquiry was initiated against the CHA with regard to their involvement in evasion of Customs duty on the import of electrical and electronic goods of foreign origin. The investigation revealed that the said CHA had filed Bill of Entry and had failed to give factual description, brand and country of origin. Further, the value of goods were declared as Rs.10,03,690/- whereas on physical verification, the value was found to be Rs.77,10,000/-. The CHA had admitted to attending the clearance work in respect of the said consignment and also admitted to introducing the importer to the overseas suppliers and bankers for financial assistance. They had also admitted to misdeclaring the value.

See our Columns Tomorrow for the judgements

Until Tomorrow with more DDT

Have a nice day.

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