TIOL-DDT 2400
21.07.2014
Monday

THERE was total confusion as to whether the Budget 2014 was passed in the Lok Sabha on Friday. Some reported that the Finance Bill has been passed, while some others reported that the "Appropriation Bill" was passed, while the fact is that none of these was passed. What was actually passed was the Appropriation Bill pertaining to the excess over grants for the year 2011-12.

What is the sanctity of the Demand for grants and Appropriation Bill if the Government can spend money in excess of the grants voted by Parliament?

Let us see the Constitutional provisions:

Article 114 of the Constitution deals with Appropriation Bill, which reads as:

Appropriation Bills

(1) As soon as may be after the grants under article 113 have been made by the House of the People, there shall be introduced a Bill to provide for the appropriation out of the Consolidated Fund of India of all moneys required to meet

(a) the grants so made by the House of the People; and

(b) the expenditure charged on the Consolidated fund of India but not exceeding in any case the amount shown in the statement previously laid before Parliament.

As per Article 115(1)(b), the President shall - if any money has been spent on any service during a financial year in excess of the amount granted for that service and for that year, cause to be laid before both the Houses of Parliament another statement showing the estimated amount of that expenditure or cause to be presented to the House of the People a demand for such excess, as the case may be.

So obviously the Government can spend money out of the Consolidated Fund of India in excess of the grants sanctioned by Parliament and such excess spending will be approved by the Parliament in an appropriation bill.

It was one of such bills pertaining to the year 2011-12 which was passed by Lok Sabha on Friday.

Arun Jaitley's first budget is likely to be passed next week or the week after that.

Any economy, which can enact retrospective tax and say this applies 40 years earlier, destabilises businesses - FM

REPLYING to the discussions on the Budget in Lok Sabha on Friday, the Finance Minister Arun Jaitly said,

A defining moment against us, both to the domestic investors and international investors, was the idea of a retrospective tax. Any economy, which can enact a retrospective tax and say this applies 40 years earlier, destabilises businesses, and, therefore, the world was not willing to accept it.

When you say that it is your Budget, the retrospective tax mess was created by you. We have tried to substantially resolve the problem. The whole regime of tax terrorism where civility had to be added to it, the problem was created by you. How can the two be similar? So, as far as taxation is concerned, we have said that there will be no retrospective tax as far as the future is concerned. We have given a cushion that we would not tax people retrospectively creating fresh liabilities. We are trying to create an environment where GST be enabled in this country. We have taken a radical step by saying that the facility of advance ruling will be available when Indians invest in business in India. The non-residents were entitled to it.

There are not many occasions where the limit has been raised by Rs.50,000 even. My friend Dr. Shashi Tharoor is not here. He asked: "Why should it not be Rs.5 lakh?" I wish, his Party had done even half of it. But then this is the beginning.

One of my only regrets is that we do not have enough money in our pocket to make it to that figure. But it is not this alone. When I said that savings have come down from 33 per cent to 30 per cent, the 80C exemption being raised from Rs.1,00,000 to Rs.1,50,000, it is to encourage small tax payers and all tax payers to save more. When they deposit it in their savings, that money goes in for national development and infrastructure building. It goes into banks; it goes into provident fund; and it goes into several other securities. There also I have raised it by Rs.50,000.

Importers issuing Cenvattable invoices - Triple registration?

WE received this mail from a Consultant -

"I have decided to advise my clients to take three registrations in one godown:

• One as a ‘Manufacturer's Depot'
• Another as a ‘Dealer'; and
• The third one as an ‘Importer'

Do you have any information as to whether the Board is considering this matter? It is going to create unnecessary work load and also prone to mistakes at clerical level. If the Board is likely to resolve it, I would like to still hold on for some days ."

DDT has been relentlessly highlighting this issue in its columns but unfortunately there has been no response, as yet, from the Board. See DDT 2385 , 2342 & 2306.

Is this what is meant by "Minimum Government, Maximum Governance"?

Supplementary invoices & the Six month embargo in availing CENVAT credit

NOTIFICATION 21/2014-CE (NT) inter alia did immense damage to rule 4 of the CCR, 2004 and is to take effect from 1st September, 2014. Inasmuch as it has imposed a "six month" embargo in availing CENVAT credit on the strength of any of the documents specified in sub-rule (1) of rule 9 of CCR, 2004 in respect of ‘inputs' & ‘input services'.

What this amendment has also indirectly done is to bring within its ambit "supplementary invoices" issued by a manufacturer and/or a service provider.

There is a school of thought that the six-month computation in case of a ‘supplementary invoice' would be from the date of issuance of the ‘parent invoice' i.e. the supplementary invoice ought to have been raised within six months from the date of issuance of the ‘parent invoice' and that any invoice issued thereafter would not be considered as a ‘document' prescribed under rule 9 of the CCR, 2004.

You have to hand it to the officers for coming out with such a radical interpretation!

But then, unless such interpretations are nipped in the bud, the clamour for raising such objections grows and soon it will gain monstrous proportions to be accommodated in a LAR Half Margin or a DAP!

The Pre-deposit computation

IN our Budget analysis, every third article had something or the other regarding the trials and tribulations associated with the proposal in the Finance (No.2) Bill, 2014 of prescribing a mandatory pre-deposit.

The proposed section is extracted below -

"35F. The Tribunal or the Commissioner (Appeals), as the case may be, shall not entertain any appeal,-

(i) under sub-section (1) of section 35, unless the appellant has deposited seven and a half per cent. of the duty demanded or penalty imposed or both, in pursuance of a decision or an order passed by an officer of Central Excise lower in rank than the Commissioner of Central Excise;

(ii) against the decision or order referred to in clause (a) of sub-section (1) of section 35B, unless the appellant has deposited seven and a half per cent. of the duty demanded or penalty imposed or both, in pursuance of the decision or order appealed against;

(iii) against the decision or order referred to in clause (b) of sub-section (1) of section 35B, unless the appellant has deposited ten per cent. of the duty demanded or penalty imposed or both, in pursuance of the decision or order appealed against:

Provided that the amount required to be deposited under this section shall not exceed rupees ten crores:

Provided further that the provisions of this section shall not apply to the stay applications and appeals pending before any appellate authority prior to the commencement of the Finance (No.2) Act, 2014.

Whereas some quibbled over the usage of the word "another" in the TRU letter 334/15/2014-TRU dated 10.07.2014 as being a figment of imagination of the author and that the said usage would imply that an appellant would be required to pay 7.5 % + 10 % = 17.5% when they prefer an appeal before the Tribunal in the second stage of appeal proceedings, others said that in the second stage of appeal, the appellant should be paying only 2.5 % of the duty or penalty as 7.5 % has already been paid.

The Board prefers to maintain a stoic silence over the issue and perhaps is laughing at all these interpretations because it wants the bill to be enacted in the first place.

Be that as it may, some experts also feel that there is a grey area in the matter of the amount of compulsory pre-deposit for entertainment of second appeal when the first appellate authority grants relief on one count but confirms order of the adjudicating authority on another count. The question being asked is - Whether pre-deposit would be determined on the basis of demand confirmed in the original order or that confirmed in the order-in-appeal?

DDT feels that the usage of the words - "in pursuance of the decision or order appealed against:" in all the three clauses clinches the issue.

Suffice to say that the "duty or penalty" confirmed in the order-in-original or the order-in-appeal is what determines the quantum of pre-deposit when an appeal is preferred before the Commissioner (Appeals) or the CESTAT respectively.

Revenue (CBDT and CBEC) could not spend money given to them

IF you think the Revenue Department is lavish in spending money, you are mistaken. As per the Outcome Budget released by the Finance Ministry, during the Financial Year 2012-13, against a budgetary provision of Rs. 3654.98 crore including supplementary grant, there was an expenditure of Rs. 3486.38 crore during the year resulting into savings and surrender of Rs. 168.60 crore We were under the impression that the premier Academy NACEN is not given enough funds, but during last year, they could not spend over Rs. 5 Crores; The reason stated is, "Saving was due to joining of less number of probationers, less submission of medical claims for reimbursement to the employees and less domestic/ foreign tour undertaken by the staff and the officers.!"

The Directorate of Publicity and Publicity and Public Relations saved 2.37 crores due to requirement of less funds towards advertisement in electronic and print media. Even Commissionerates saved and surrendered over 21 Crores.

In the case of CBDT, against a budgetary provision of 4110.79 crore including Supplementary Grant, an expenditure of 3710.07 crore was incurred during the year resulting in a saving of 400.72 crore. But out of this 300 crores was for a ‘civic centre' which is postponed. Here also the Commissionerates saved 47 crores.

Chairperson unhappy with Officers not opting for Training Programs of WCO

THE Chairperson of the Central Board of Excise & Customs has drawn the attention of all "officers" to the opportunities available for specialization and career advancement through the Capacity Building Directorate (CBD) of the World Customs Organization.

It is emphasized that attending such programs improves the officers' career profile and helps in developing a large pool of expertise within the department; it also enables officers to seek further opportunities under the WCO and other multi-lateral organizations; Officers who are accredited as Experts are not only resource persons in the country but are also deputed by WCO for training missions in other countries; there is always a requirement for such accredited experts and professional associates by developing countries.

The Chairperson encourages all officers to be on the look-out for letters inviting applications for such courses and benefit from the opportunities available.

The reason for this dollop of advice lies in the penultimate paragraph which reads -

"Presently there is a call for a one year Masters' Degree program in Strategic Management and Intellectual Property Rights (IPR) at the Aoyama Gakuin University (AGU), Tokyo, Japan for the year 2015 - 16. Though the program was circulated on May 28th , 2014, willingness has been received only from one officer."

Quite possibly, the officers concerned are more worried about the Cadre Review prospects - training can wait, as of now!

F.No. 21000/29/2014-IC(ICD) dated 18th July, 2014

Jurisprudentiol – Tuesday's cases

Service Tax

Appellant, a country liquor manufacturer, enters into selling agency agreement with HUF allowing them to use brand name 'Pahili Dhar' - No Service Tax is payable under 'Intellectual Property Services' - Appeal allowed: CESTAT

THE applicant is a manufacturer of sugar and molasses. The applicant is also manufacturing country liquor under their brand name "Pahili Dhar" which is approved by the State Excise authority. The applicant had entered into selling agency agreement with M/s Talreja Trade (HUF) with intention to obtain higher returns on their investments in their country liquor plant by increasing the sale of country liquor of their brand "Pahili Dhar".

The contention of the Revenue is that the applicants have allowed M/s Talreja Trade (HUF) to use their brand name "Pahili Dhar" in selling the products and hence they are liable to pay Service Tax under the category "Intellectual Property Services".

Income Tax

Whether when MAT liability of assessee is found out only because of alertness of AO, levy of penalty u/s 271(1)(c) is legitimately warranted - YES: HC

THE assessee company runs a hotel business. It filed its return disclosing "nil" income. It had admitted income from business at Rs.1,51,92,970/- and the same was set off with carried forward loss of the earlier years. In the course of the scrutiny proceedings, it was seen that the assessee was liable to tax u/s 115JB. The AO was of the view that the assessee was liable to pay MAT u/s 115JB. The adjusted book profit for working out the MAT payable u/s 115JB was calculated by the AO. Thereafter proceedings for levy of penalty u/s 271(1)(c) was initiated for the failure of the assessee to compute the book profit and the MAT payable u/s 115JB.

THE issue before the Bench is - Whether when the MAT liability of the assessee is found out only because of the alertness of the AO, the levy of penalty u/s 271(1)(c) is legitimately warranted. And the HC's answer is YES.

Central Excise

Despite receipt of directions from department, appellant failed to discharge excise duty liability - they also did not submit details sought by department and continued to drag issue by prolonged correspondence - suppression of information on part of appellant is clearly established: CESTAT

THE appellant is a manufacturer of bakery products such as biscuits and cakes and also manufactures ice-creams. The appellant was availing the benefit of small scale exemption. However, on crossing the exemption limit, the appellant did not discharge excise duty liability. The appellant also did not take any registration nor did they file any statutory returns or maintain records.

See our Columns tomorrow for the judgements

Until tomorrow with more DDT

Have a nice day.

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