North East Exemption - The 1999 notification and 2003 Retro Amendment - Issue with Commissioner (A) via Supreme Court
TIOL-DDT 2438
16.09.2014
Tuesday
WITH a view to provide necessary impetus to the development of industries in the north-eastern region, a new Industrial Policy Resolution was notified by the Government of India on 24.12.1997. In pursuance of the said policy, the Finance Ministry issued two notifications 32/99-CE and 33/99-CE both dated 08.07.1999 exempting goods manufactured in the North Eastern States. The exemption worked by a system of refund of the duty paid from PLA (Cash - not including the CENVAT Credit availed).
Government realised that this scheme was being misused. CBEC in its Budget Circular gave an example of misuse:
Suppose duty payable on the goods was Rs. 100/- and the duty paid on inputs for the manufacture of said goods is Rs. 20/-. What the Notification 32/99-C.E. and 33/99-C.E. envisage is that the manufacturer will utilize the full credit in respect of inputs and pay only Rs. 80/- in cash, which would be subsequently refunded to him. However, there are cases where a manufacturer did not utilize the input credit and paid the entire duty of Rs. 100/- in cash. The credit of Rs. 20/- was being kept by him in reserve to be utilized on some other goods not covered under the exemption notifications. There were also situations when the assessee was manufacturing two goods, one covered under the above notifications, and the other outside. What they were doing was to utilize the entire input tax credit for payment of duty on the product not covered under the exemption notification, and paying full duty on the exempted goods and getting back full refund .
As usual, the notifications did not translate the thoughts of the Board into written language. And whenever the Board makes a mistake, they go to Parliament and get a retrospective amendment.
So they amended the notifications by Notification No. 61/2002-C.E., dated 23-12-2002 to provide that the refund allowable under these notifications shall not exceed the amount of duty paid less the amount of the CENVAT credit availed of, in respect of the duty paid on the inputs used in or in relation to the manufacture of goods cleared under the corresponding exemption notification.
After some time in Budget 2003, the Government amended these notifications to make the 2002 amendment retrospectively valid from the original date of the notifications that is 08.07.1999. The Finance Act 2003 also had a provision that the excess refund or unpaid duty has to be recovered within thirty days from the enactment of the Finance Bill.
Naturally disputes arose. In one such dispute an Assistant Commissioner issued an order directing an assessee to pay an amount of Rs. 2.2 crore consequent to this retrospective amendment.
This order was challenged in the High Court on the ground that the Assistant Commissioner's order without a notice and hearing was not valid. The High Court decided the issue on merits without considering the question of natural justice. And the matter reached the Supreme Court. The Attorney General argued that as recovery was to be done within thirty days, notice and hearing were not required. He consented to consider a hearing after the assessee paid up the demand!
The Supreme Court did not decide this issue but as the appeal against the Assistant Commissioner's order lies with the Commissioner (A), the Supreme Court directed the assessee to deposit an amount of Rs. 2.5 crore and file an appeal with the Commissioner (A).
This is what the Apex Court mentioned while directing the assessee to make the deposit -
"It is borne out from the record that the assessee-appellant had furnished a bank guarantee amounting to Rs.2,20,18,124/- for obtaining an order of stay. In our considered opinion it would not be appropriate to give an opportunity to the appellant to prefer statutory appeals and allow it to enjoy the benefit of stay of recovery on the basis of a bank guarantee. Therefore, we would direct the assessee to deposit Rs.2.5crores before the adjudicating authority within six weeks and after the said deposit is made and the receipt obtained, the appeal would be entertained within the said period. On an appeal being filed, the Commissioner (Appeals) shall deal with the matter on merits."
The case has come full circle. And the trudge begins all the way to the Supreme Court…once again!
We bring you this Supreme Court Order.
Please see 2014-TIOL 76-SC-CX
Companies (Corporate Social Responsibility Policy) Rules - Amended
RULE 4(6) of the Companies (Corporate Social Responsibility Policy) Rules reads as:
Companies may build CSR capacities of their own personnel as well as those of their Implementing agencies through Institutions with established track records of at least three financial years but such expenditure shall not exceed five percent. of total CSR expenditure of the company in one financial year .
Now this is amended to read as:
Companies may build CSR capacities of their own personnel as well as those of their Implementing agencies through Institutions with established track records of at least three financial years but such expenditure including expenditure on administrative overheads, shall not exceed five percent of total CSR expenditure of the company in one financial year .
Ministry of Corporate Affairs Notification, Dated: September 12, 2014
Even if an order is in your favour, please read it carefully - otherwise you may lose what you have won
MORAL of the story: Even if an order is in your favour, please read it carefully and ensure that there are no apparent mistakes in the order - otherwise you may lose what you have won.
The story: As per Section 35B(2) of the Central Excise Act, an appeal by the Department to the Tribunal against an order of a Commissioner (Appeals) has to be authorised by a Committee of two Commissioners.
In this particular case, the assessee alleges that Revenue has filed the appeal without the approval of the Committee of Commissioners. But instead of mentioning the Committee as "Committee of Commissioners", the Counsel mentioned it as, "Committee of CHIEF Commissioners".
The Tribunal accepted the plea of the Counsel and noted that:
After carefully considering the above contention of the learned advocate, we fully agree with the same. As per the law prevalent on the date of filing of appeal, the order in appeal was required to be placed before a committee of two Chief Commissioners. The said committee was required to form an opinion about the said order being legal and proper and it is only after the formation of opinion, directions were to be given to the Central Excise Officer to file an appeal their against before the Tribunal. In the present case there is no review order by the Committee of Chief Commissioners and the appeal stands filed by Commissioner himself. As such, we are of the view that the same being contrary to the legal position is not maintainable.
And so the Tribunal dismissed the Revenue appeal.
This was an apparent mistake. Both the Counsel and Revenue mentioned Chief Commissioners instead of Commissioners . Apparently, the assessee kept quiet as they had won the case. But did they?
It was eureka for the Revenue and they rushed to the High Court with the question of Law;
"Whether Customs, Excise and Service Tax Appellate Tribunal was right in dismissing the appeal preferred by the Commissioner of Central Excise, Delhi-1 on account of non-compliance of Section 35B of the Central Excise Act, 1944 as the committee did not consist of two Chief Commissioners of Central Excise?"
And the High Court answered the question of law in favour of Revenue - rightly so, as Review by two Chief Commissioners was not required and only review by two Commissioners was required.
However, the matter has been remanded to the Tribunal.
Now, what will happen? Can the revenue win the case before CESTAT?
Please see 2014-TIOL-1564-HC-DEL-CX
Tariff Value of Gold, Silver reduced - steep reduction in oils
THE Government has decreased the Tariff value of Gold from 420 USD to 400 USD per 10 gms. The tariff value of Silver has decreased from 645 to 609 USD per kilogram. Tariff Values of oils have also been reduced. Tariff value of Brass scrap has been decreased. However, the Tariff value of Poppy Seeds and areca nuts remain unchanged. The Tariff values as on 29.08.2014 and with effect from 15.09.2014 are as under:
Table 1
|
S. No.
|
Chapter/ heading/ sub-heading/tariff item
|
Description of goods
|
Tariff value USD (Per Metric Tonne)
from 29.08.2014
|
Tariff value USD (Per Metric Tonne)
from 15.09.2014
|
(1)
|
(2)
|
(3)
|
(5)
|
(6)
|
1 |
1511 10 00 |
Crude Palm Oil |
743
|
722
|
2 |
1511 90 10 |
RBD Palm Oil |
752
|
728
|
3 |
1511 90 90 |
Others - Palm Oil |
748
|
725
|
4 |
1511 10 00 |
Crude Palmolein |
771
|
731
|
5 |
1511 90 20 |
RBDPalmolein |
774
|
734
|
6 |
1511 90 90 |
Others -Palmolein |
773
|
733
|
7 |
1507 10 00 |
Crude Soyabean Oil |
890
|
845
|
8 |
7404 00 22 |
Brass Scrap (all grades) |
4077
|
4060
|
9 |
1207 91 00 |
Poppy seeds |
3429
|
3429 (No change)
|
Table 2
|
S. No.
|
Chapter/ heading/ sub-heading/tariff item
|
Description of goods
|
Tariff value USD
from 29.08.2014
|
Tariff value USD
from 15.09.2014
|
|
|
|
|
|
1 |
71 or 98 |
Gold, in any form in respect of which the benefit of entries at serial number 321 and 323 of the Notification No. 12/2012-Customs dated 17.03.2012 is availed. |
420 per 10 grams
|
400 per 10 grams
|
2 |
71 or 98 |
Silver, in any form in respect of which the benefit of entries at serial number 322 and 324 of the Notification No. 12/2012-Customs dated 17.03.2012 is availed. |
645 per kilogram
|
609 per kilogram
|
Table 3
|
S. No.
|
Chapter/ heading/ sub-heading/tariff item
|
Description of goods
|
Tariff value USD (Per Metric Tons)
from 29.08.2014
|
Tariff value USD (Per Metric Tons)
from 15.09.2014
|
1 |
080280 |
Areca nuts |
2017 |
2017 No change
|
Notification No. 76/2014-Customs (NT), Dated: September 15, 2014
Jurisprudentiol - Wednesday's cases
Central Excise
Lower authorities have not understood provisions of CENVAT Credit Rules, 2004 in true spirit and, therefore, have denied credit - B/E in name of Head Office endorsed in name of appellant is valid document for taking credit in terms of rule 9 of CCR, 2004 - Appeal allowed: CESTAT
THE appellant imported certain inputs/capital goods and Bills of Entry were in the name of their Head Office in all the six cases but in one case the address of the appellant itself was mentioned in the Bill of Entry. All the Bills of Entry were endorsed in the name of the appellant by their Head Office and the lorry receipt shows that the goods were delivered in the premises of the appellant only but the lower authorities denied CENVAT Credit on inputs/capital goods on the premise that the Bills of Entry were in the name of the Head Office but are not in the name of the appellant.
Income Tax
Whether interest received on account of enhanced compensation of acquired property by State is liable for taxation in year of receipt - YES: SC
THE assessees are individuals. They had inherited a land property from their father. Subsequently, a part of the said land was acquired by the State Govt. and they were accordingly paid compensation. The amount of compensation was however enhanced and additional compensation was awarded to them along with interest. Thereafter, the assessees filed their return claiming themselves to be "individual". However, the AO passed the assessment order by treating them as "Association of persons" (AoP). The AO also refused to spread the interest income over the years and treated it as taxable in the year of receipt. Ultimately, the High Court had decided that these persons were to be given the status of 'individual' and assessed accordingly and not as AoP and that the interest income was to be spread over from the year of dispossession of land, that was the assessment year 1987-88 till the year of actual payment which was received in the assessment year 1999-2000 applying the principles of accrual of income. It was in this backdrop that the Revenue approached the Apex Court challenging the decision of the High Court.
The issue before the Bench is - Whether interest received on account of enhanced compensation of acquired property is liable for taxation in the year of receipt . And the answer is YES.
Service Tax
CENVAT credit is admissible on towers and cabins used by appellant as Passive Telecom Infrastructure for providing output service namely ‘Business Auxiliary Service': CESTAT
THE appellants sought clarification from the department as to whether the activity of Passive Telecom Infrastructure comprising of tower/masts/pole, shelter, battery banks, DG Sets etc. attracts service tax under the category of Business Auxiliary Service. It was informed vide letter dt. 20.9.2005 that appellants are liable to pay service tax under the category of ‘Business Auxiliary Service'.
After conducting audit in June 2009, the Department objected to availment of CENVAT Credit on parts of Towers, BTS Cabins etc.
See our Columns Tomorrow for the judgements
Until Tomorrow with more DDT
Have a nice day.
Mail your comments to vijaywrite@tiol.in