TIOL-DDT 2428
02.09.2014
Tuesday

THE CESTAT Registrar has issued a Circular stating that:

As there is confusion of adjustment of CENVAT credit against mandatory penalty, clarification have been sought from the Competent Authority. (Again the mysterious Competent Authority - who is the Competent Authority to clarify the Registrar's doubt?)

In the absence of any clarificatory circular on the issue, he has directed the Registry officials to register the appeals received on or after 06.08.2014 in the following cases:

1. If the mandatory deposit of duty or penalty has been made in cash and evidence is produced at the time of filing the appeal.

2. If the mandatory deposit of duty confirmed is made from CENVAT account and evidence thereof is produced. (He doesn't tell his staff as to what percentage of duty is to be the mandatory pre-deposit)

3. If the appellants have made deposit of the duty during investigation and if the same is more than the mandatory deposit as stipulated in the amendments.

Wherever further clarification is required the same will be issued after getting clarification from the Competent Authority.

What will he do if the pre-deposit of penalty is made from the CENVAT account? Will such appeals be not accepted by the Registry? Can the registry take such a decision? Should the appellant go to the High Court to get a direction to the Registry to register the appeal ?

CESTAT Circular in F. No. 15/CESTAT/General/2013-14, Dated:August 28, 2014

Every Departmental Officer is not an Advance Ruling Authority

SHOULD you take the Department's help in clarifying your doubts about taxation? Are the departmental officers competent and knowledgeable to clarify your doubts?

In a recent case before the CESTAT, the Assistant Commissioner of Service Tax was gracious enough to drop the penalty against an assessee, though his language was far from graceful.

The learned AC observed,

"…….. and in the recognition of the fact that the appellant is a small service provider having a small liability 'I do not hope' that the appellant is well equipped with the Rules & Regulations of the Finance Act, 1994; that several similarly placed service providers had expressed unawareness of provisions of the Act"

And on going through in other similar cases, he was satisfied that there was a reasonable cause for the appellant not depositing service tax in time. For this reason, the Assistant Commissioner dropped penalties under section 77 of the Act. However, penalty under Section 78 was imposed while confirming service tax demand for Rs. 1,59,068/-.

Naturally, no Commissioner would tolerate such impudence on the part of a junior officer like the AC in giving an order in favour of the assessee and so the matter was taken in appeal to the learned Commissioner (Appeals).

The learned Commissioner (Appeals) observed:

a doubt on the part of the appellant regarding its taxability to service tax is not relevant;

in case the appellant has a doubt about taxability of the service 'the appellant should have approached the department for clarification' but failed to do so and therefore the appellant had deliberately avoided payment of service tax, suppressed the fact of non-payment of service tax and therefore imposition of penalty under Section 78 is valid.

At the Stay stage, the Tribunal waived pre-deposit and took up the appeal for final disposal.

The Tribunal had some good words for both the lower authorities. The Tribunal observed,

On a careful and detailed consideration of the primary and appellate order we are satisfied that the contradictions in the primary order are compounded by the incoherences in the appellate order as well.

The order of the appellate authority is equally misconceived as there is no provision for an assessee to seek advisory opinion from departmental officers nor is any statutory provision brought to our notice which authorises departmental officers to provide advice on interpretation of provisions of the Act; assessment of transactional facts qua the provisions of the Finance Act, 1994 and provide guidance on taxability or otherwise.

The perception of the learned appellate Commissioner that every departmental officer is a sui generis advance ruling authority is a misconception that has no legislative basis.

In the facts and circumstances, since the primary authority had clearly recorded the finding that the appellant was under bona fide misconception as to the liability to tax and had dropped penalty under Section 77 for that reason, that finding equally covers the case in favour of the assessee both with regard to imposition of penalty under Section 78 as well initiation of proceedings by invoking the extended period of limitation.

Please see 2014-TIOL-1555-CESTAT-DEL

Former CJI as Governor - improper?

THE news that a former Chief justice of India is being made Governor of Kerala raises several questions of propriety, protocol and politics.

In the hierarchy the CJI ranks fourth after the President, Vice-President and Prime Minister. A State Governor is far below the line. In fact the CJI installs the President in office and takes over as President in the absence of the President and Vice-President. Should such a person seek sojourn in a Raj Bhavan? And are we setting a bad precedent? Is it a threat to the independence of the judiciary when the judges know that if they are in the good books of the Government, they can get appointment as governors after retirement? How does it look when a person who was sworn in as CJI by the President of India is sworn in as Governor by the Chief Justice of the State High Court?

Justice Fatima Beevi, a former Supreme Court Judge who was appointed as Governor of Tamil Nadu found the Raj Bhavan too hot and had to resign; maybe the Raj Bhavan is not exactly a cool place for former judges.

RBI's Simplified KYC Measures

THE Reserve Bank of India has released a note along with a poster and a booklet comprising a few common questions relating to Know Your Customer (KYC) norms for opening bank accounts. The objective of this is to bring awareness among the general public about the KYC simplification measures taken by the Reserve Bank in the recent times with a view to helping the common man in opening a bank account.

Measures taken for simplification:

1. Single document for proof of identity and proof of address. There is now no requirement of submitting two separate documents for proof of identity and proof of address. If the officially valid document submitted for opening a bank account has both, identity and address of the person, there is no need for submitting any other documentary proof. Officially valid documents (OVDs) for KYC purpose include: Passport, driving licence, voters' ID card, PAN card, Aadhaar letter issued by UIDAI and Job Card issued by NREGA signed by a State Government official. To further ease the process, the information containing personal details like name, address, age, gender, etc., and photographs made available from UIDAI as a result of e-KYC process can also be treated as an 'Officially Valid Document'.

2. No separate proof of address is required for current address. Since migrant workers, transferred employees, etc., often face difficulties while submitting a proof of current address for opening a bank account, such customers can submit only one proof of address (either current or permanent) while opening a bank account or while undergoing periodic updation. If the current address is different from the address mentioned on the proof of address submitted by the customer, a simple declaration by her/him about her/his current address would be sufficient.

3. No separate KYC documentation is required while transferring accounts from one branch to another of the same bank. Once KYC is done by one branch of the bank, it is valid for transfer of the account to any other branch of the same bank. The customer would be allowed to transfer her/his account from one branch to another branch without restrictions and on the basis of declaration of his/her local address for communication.

4. Small Accounts: Those persons who do not have any of the 'officially valid documents' can open 'small accounts' with banks. A 'small account' can be opened on the basis of a self-attested photograph and putting her/his signature or thumb print in the presence of an official of the bank.

Banks are still against opening accounts for the small and weak customers as seen from my secretary's experience (DDT 2372 - 11.06.2014). And my complaint to the RBI had no effect.

RBI Press Release, Dated: August 26, 2014

Jurisprudentiol - Wednesday's cases

Service Tax

Construction of Residential Complex service - Construction undertaken after transfer of undivided share of land - Case of appellant is prima facie covered by Circulars dated 01.08.2006 and 23.08.2007 - Tribunal was not justified in ordering pre-deposit - Appeal restored to Tribunal: HC

THIS is an appeal by the assessee against the order of Tribunal dismissing their appeal for non-compliance with the order of pre-deposit. The appellant is engaged in construction of Residential Complexes and vide Misc order 2013-TIOL-1938-CESTAT-MAD held that the appellant has no prima facie case and ordered pre-deposit of Rs 4.5 crores and dismissed the appeal for non-compliance with the same. The assessee is before the High Court.

Income Tax

Whether when assessee being manufacturer of beer and liquor, advances loan to sister concern for setting up new line of business, such assistance can be characterised as expenditure incurred wholly and exclusively for business of assessee - NO: HC

THE assessee is a public limited company carrying on the business of manufacture and sale of beer and liquor. The case of the asessee is that it established a subsidiary company M/s.U.B.Resorts Ltd. which was also incorporated as a Company and registered with the Registrar of Companies, with a view to extend the business of the assessee-Company. In 2001, they informed the Registrar of Companies to strike off the name of M/s.U.B.Resorts Ltd. under Section 560 of the Companies Act, 1956 for the reasons that the subsidiary Company could not do any business or commercial activity as laid down in the memorandum of association and that the same had become defunct. M/s.U.B.Resorts Ltd. was a wholly owned subsidiary of the assessee. Till the financial year 1997-98, all the expenditure incurred on the executives of the subsidiary Company were absorbed by the assessee as the employees were on the rolls of the assessee Company.

The issue before the Bench is - Whether when assessee being a manufacturer of beer and liquor, advances loan to sister concern for setting up a new line of business, such assistance can be characterised as expenditure incurred wholly and exclusively for business of assessee. And the verdict goes against the assessee.

Customs

Recovery proceedings against assets of another unit of Group Company of importer is not permissible under Section 142 of Customs Act, 1962 in absence of evidence that entire import was at instance of Group Companies - Writ Petition allowed: HC

BY this Writ Petition the Petitioners, M/s Surlux Diagnostic Ltd are praying for a writ of mandamus or any writ, order or direction of that nature under Article 226 of the Constitution of India directing the Assistant Commissioner of Customs to withdraw the letter dated 29.05.2013.

Vide the letter dated 29.05.2013 addressed to the Secretary of the Chhadva Premises Coop Society Limited, the Assistant Commissioner prohibited the Society from transfer of property of rights in the Flat owned by the Petitioner in the Building.

The Petitioner is a public limited company and the Petitioner Nos.2 and 3 are the purchasers of a flat which belongs to the Petitioner No.1.

It is the case of the department that there are some dues adjudged against one M/s Surlux Medicare and these units are under common management called Surlux Group of Companies and there is interconnection among different units and that Group Companies have together defaulted in payment of the Government dues.

See our Columns Tomorrow for the judgements

Until Tomorrow with more DDT

Have a nice day.

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