TIOL-DDT 2415
12.08.2014
Tuesday

ADDRESSING the Chief Commissioners yesterday, the Chairperson said that CBEC had approved a major project for CENVAT Credit verification at invoice level, which will help in plugging revenue leakage through misuse of credit facility. Madam, CENVAT Credit is not a facility - it is a right granted by the statute. You have introduced this to avoid the cascading effect of taxation to ensure that the prices of goods and services are not abnormally high which would make them unaffordable and so nobody would buy them and then you will not get your revenue. Section 3(1)(a) of your Central Excise Act states, “There shall be collected ….A duty of excise to be called the Central Value Added Tax (CENVAT)”. Your duty itself is called CENVAT. But unfortunately, right from the day that MODVAT was introduced, there was a feeling among the departmental officers that they are showering some unjust enrichment on the wily businessmen of this country and all efforts are made to somehow deny the credit on some pretext or other. If there is misuse, certainly punish the guilty, but please don't make life miserable for every assessee on the assumption that the credit facility is misused.

It is heard that the Board is about to embark upon a great adventure of allowing credit only after it is verified that the input manufacturer or the input service provider has paid the duty/tax. This will involve verification of millions of invoices and as duty/tax is not paid on each invoice, how on earth are you going to verify whether duty is paid on each invoice? Will you ask for a certificate from the Superintendent of origin? You could have done this efficiently if you could have properly used your ACES and other software games on which you sunk thousands of crores of the poor taxpayers' money. What are you doing with ACES? You have 20 lakhs returns pending scrutiny, you don't process refund claims through ACES, you don't issue Show Cause Notices through ACES, and you don't accept replies to SCNs by mails though you insist on a soft copy at the time of adjudication. You don't deliver your orders online and YOU DON'T VERIFY CENVAT CREDIT through any software. You can devise something like the Income TAX TDS 26AS for CENVAT Credit and as soon as an input or service supplier pays/or issues invoice, the eligible CENVAT CREDIT should get updated in the accounts of the manufacturer/service provider. Without a proper electronic system in place, if you attempt verification of invoices, you can have another cadre review and have two Assistant Commissioners for each factory, but you will not get more revenue.

Netizens may remember that once upon a time there was something called "Annexure-D" verification and we all know what happened to it - more facilitation and more avenues for corruption!

FM wants CBEC Chief Commissioners to be facilitators and achieve Revenue Targets

LET me reproduce here what I reported yesterday on the FM's speech at the conference of Chief Commissioners (to be held) yesterday.

It is a routine practice for the Finance Ministers to exhort the Chief Commissioners to meet the Revenue targets; to be facilitators and not enforcers; to make procedures simple.

This is exactly what the FM asked the Chief Commissioners. Even the Revenue Secretary asked the Chief Commissioners to play a facilitating and non-adversarial role. Every measure of facilitation has resulted in adversarial action causing immense misery to the trade which is facilitating the huge revenue collections of the Department.

The facilitation of 30% interest imposed on delayed payment of Service Tax will kill the service providers. The Chairperson of CBEC Shanti Sundharam said that the newly introduced provisions for pre-deposit would expedite the dispute resolution process. Certainly yes, because many small assessees who are handed out ridiculous adjudication orders will not have the money to pay the 7.5% or 10% or 17.5% or whatever pre deposit you want on every silly order you make. It is nearly a week since the Finance Bill has been enacted and you have not yet clarified whether your officers will be prevented from recovering the demand, interest and penalty when the appeal is pending. Maybe you want the Supreme Court to clarify that after twenty years of litigation! You ask your facilitating Assistant Commissioners how fast they are in denying genuine refunds on unfair reasons. After the budget, several doubts were raised and not a single one has been clarified so far. Some facilitation this!

No Credit/refund on unsigned Computerised Invoices?

LAST month, in a RAC meeting of the Mumbai Central Excise Zone -1, the following issue was raised:

The invoices of Service Providers are computer generated and these documents therefore do not bear any signatures or official seals. It seems their repeated efforts to impress upon their service providers to provide signed and sealed invoices for mandatory submission to the office of Central Excise have not yielded the desired results till date. Thus, inability on their part to submit such invoices with signature and seal has come in the way of settlement of their claims for refund of genuine and legitimate service tax paid on input services as the documents do not have party's signature and official seal.

This piquant situation was being explained to various authorities of Central Excise, time and again, but without any favourable response. The excise authorities are still insisting that the exporter should furnish invoices with signatures and official seals for ready acceptance. The Service Providers, on their part, strongly maintain that as the invoices are computer generated, they need not have signature and or seals. In view of the current prevailing situation of this digital age, you are requested to give your written opinion that the Computer Generated Invoices and other documents of Service Providers do not require any signatures or official seals for claiming refund of Service Tax in the larger interest of the trade, if otherwise found to be in order. This is somewhat like an electronically generated receipt, which need not carry any signature, and these are accepted universally.

The Department replied:

Provisions of Section 4A of the Service Tax Rules, 1994 provide that the provider of Service shall issue an invoice which shall contain details as mentioned in the said Section including signature of the service provider or his authorized agent. In view of the said provisions, suggestion to accept e-bills which do not contain signature of the service provider/his agent, cannot be acceded to. However, since the issue raised by the Association involves all India ramifications it was decided to forwarded the said issue to CBEC for examination and appropriate decision.

Sir, there is no Section in the Service Tax Rules! This reply must have been prepared by some Inspector and approved by all his superiors right up to the Chief Commissioner. Okay it is a small mistake. But how do you solve the real problem? Is it mandatory that a computer generated invoice has to be printed and signed? You don't want any signature on your e-filed returns - why do you want signature on an e-invoice?

In any case when will the Board think of some facilitation and clarify this doubt?

Liberalised Remittance Scheme for resident individuals - RBI clarification

BY Circular No. 5 dated July 17, 2014, RBI had clarified that under the Liberalised Remittance Scheme, Resident Individuals can acquire immovable property outside India upto a value of 1,25,000 USD. Banks have been allowed to remit up to USD 125,000 per financial year, under the Scheme, for any permitted current or capital account transaction or a combination of both. Now RBI clarifies that the requirement of post facto reporting stipulated stands withdrawn.

RBI/2014-15/171 A. P. (DIR Series) Circular No. 19, Dated:August 11, 2014

Corruption in Judiciary

THERE was a Judge in a High Court who had a very bad reputation about his integrity, and on this account was transferred to Allahabad High Court. Later with passage of time he became very senior and Acting Chief Justice of Allahabad High Court.

Some people started demanding that he be made Chief Justice of some High Court, and later brought to the Supreme Court.

The then Chief Justice of India, Justice Kapadia, had received several complaints about this Judge that even at Allahabad he was indulging in corruption and Justice Kapadia requested me to find out the true facts about that Judge.

At that time I had to go to Allahabad, my home town for attending a function, and while there I contacted some lawyers I knew, and got 3 mobile numbers of the agents of this Judge through whom he was taking money. On returning to Delhi I gave these 3 mobile numbers to Justice Kapadia, and suggested that he get these numbers tapped through intelligence agencies.

About 2 months thereafter Justice Kapadia told me that he had done as I had suggested, and the conversations tapped revealed the corruption of this Judge.

After this, Justice Kapadia should have called this Judge to Delhi and asked for his resignation, failing which he would refer the matter to Parliament for impeachment, but he did no such thing,(though he did not allow the Judge to become Chief Justice of any High Court or a Supreme Court Judge)

Most Chief Justices of India are reluctant to expose corruption in the judiciary thinking that this will defame the judiciary, and so they prefer to bury corruption under the carpet, not realizing that the bulge under the carpet will show.

Some think that exposing corruption defames the judiciary. My reply to such people is: Does corruption by Judges defame the judiciary, or does exposing such corruption defame it ?

I may give another example. When I was Acting Chief Justice of Allahabad High Court I went to Delhi and met Justice Lahoti, the then Chief Justice of India, and gave him a chit containing names of 5 judges of Allahabad High Court who were doing shocking things. Justice Lahoti asked me what should be done? I replied that if he permitted, I would solve the problem in 24 hours. He asked, how?

I replied that I was going back to Allahabad by the night train, and on reaching there would call the Registrar General and tell him to telephone these 5 Judges, and tell them that the Chief Justice had instructed that they would not be allowed entry into the High Court premises. Police was being posted at the gate of the High Court with instruction from me that these judges were not to be allowed entry. Their chambers had been locked, and they will receive their salary checks at home, and they need not come to the High Court. I did not want to see them inside the High Court premises as they had disgraced the High Court.

When I said this Justice Lahoti said, "Please do not do this, because then the politicians will get a handle, and then they will set up a National Judicial Commission". I replied that since he was not permitting me to do this, I would not, but he may take whatever action he thought fit.

Later some of the 5 judges whose names I gave were transferred to another High Court.

But is transfer a solution? Such corrupt judges should be sacked, but this is not done to 'avoid defaming the judiciary'. I again ask: does corruption by Judges defame the judiciary, or does exposing such corruption defame it?

From Justice Markandey Katju's Blog - SATYAM BRUYAT

So, judges, like the rest of the world are human - and corrupt. It is not as if they are corrupt only as sitting judges; some of them find their way into post retirement jobs and earn more corrupt money!

Jurisprudentiol - Wednesday's cases

Service Tax

Canvassing/promoting business of insurance company prima facie comes within the purview of BAS and the liability to pay ST is on the service provider and not on the recipient - even if the ST liability was discharged by the recipient same cannot compensate or obliterate appellant's liability: CESTAT

AGAINST the appellant a Service Tax liability of Rs.1.74 lakhs under the category of 'Business Auxiliary Service' was upheld by the Commissioner (A). Aggrieved by the same, the appellant is before the CESTAT.

It is submitted that they have been authorized to act as a corporate agent for procuring or soliciting insurance business; that the service tax liability has been discharged by Oriental Insurance Co. Ltd. on reverse charge basis and, therefore, the appellant is not liable to pay service tax and hence, stay should be granted.

Income Tax

Whether when a private limited company is converted into partnership firm and interest-free loans are advanced out of reserves of erstwhile company in the same ratio as profit-sharing, it flouts proviso (f) to Sec 47(xiiib) and the assessee is not entitled to the benefit of Sec 47 - YES: ITAT

THE assessee firm, Aravali Polymers, LLP, came into existence with effect from August 2010, once the private limited company by the same name was converted into a limited liability partnership under the provisions of sections 56 and 58 of the Companies Act.

The entire undertaking of Aravali Polymers Pvt. Ltd. was dissolved and all its moveable and immovable property, tangible and intangible assets, besides rights and liabilities were transferred to the assessee firm. The assessee had also received the Reserves and Surplus of the dissolved company. The main assets of the dissolved company were shares of East India Hotels which were also transferred to the assessee. The assessee sold these shares, which were offered to tax as long term capital gains and claimed exemption under section 47(xiiib). The assessee had also given interest free loans to its partners, the erstwhile shareholders of the dissolved company, in the same ratio as their profit sharing.

The AO invoked section 47A(4) for computing the capital gains tax adopted the market value of the shares of East India Hotels and after reducing the cost of acquisition, arrived at a higher computation of capital gains. The AO also disallowed the assessee's claim under section 47(xiiib).

The issues before the Bench are - Whether when a private limited company is converted into a partnership firm and interest-free loans are advanced out of the reserves of the erstwhile company in the same ratio as the profit-sharing, it flouts proviso (f) to Sec 47(xiiib) and the assessee is not entitled to the benefit of Sec 47. YES is the Tribunal's answer.

Customs

No prudent businessman, where the goods are available at lower price shall buy goods & be ready to pay duty on higher value - sale, time of delivery and place of importation are necessary ingredients to determine the AV and have to be read in conjunction - correct AV is invoice price plus demurrage charges: CESTAT

INITIALLY the goods were shipped by M/s. Intercon Holdings Ltd., Hong Kong to some importers in India declaring the price @ USD 938 PMT in the month of September 2008. Those importers did not take the delivery of the goods and no payments towards the supply of the goods were made by the importers. Thereafter, the supplier of the goods entered into the agreements with the appellants on 06.11.2008 to supply the said goods on the price prevailing in the international market. Thereafter they reached an agreement for purchase of the goods in question @ USD 442 PMT or USD 445 PMT. The appellants were required to pay demurrage charges on the goods as till the date of contract these demurrage charges were payable by the supplier of the goods being owner of goods. While filing bills of entry the appellant declared the transaction value @ USD 442 PMT or USD 445 PMT for clearance of goods.

The assessing authority objected to the price declared as the original importer had imported the goods at price of USD 938 PMT.

See our Columns Tomorrow for the judgements

Until Tomorrow with more DDT

Have a nice day.

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